Import substitution has remained one of the FGN’s primary focus areas, with agriculture serving as a potential catalyst. Over the past eight quarters, the agriculture sector has posted uninterrupted growth.
Given Nigeria’s heavy dependence on food imports, there has been increased focus on local substitutes for food products. There are conflicting figures on Nigeria’s food import bill. A few sources suggest that the country’s annual food import bill was as high as N1.5trn (US$4.1bn) last year.
The latest inflation report also points towards a reduction in imported food items. The impact of the CBN’s stepped up fx interventions on parallel market rates has been a contributing factor to the latest decline in imported food price inflation which slowed to 14.2% y/y in June from above 21.0% throughout Q4 2016. Another data series from the CBN shows importation of food products accounted for 8.9% of fx utilisation in Q1 2017 compared with 9.5% recorded in the previous quarter.
There are a few investments within the sector which should drive sustainable local substitution of food. The rice segment has been a beneficiary. Based on industry statistics, annual rice consumption has risen from 5 million metric tons (mmt) to 7mmt with supply catering to less than half (39%) of the country’s annual demand.
The FGN has boosted rice paddy production, over that past two years annual paddy production has increased to 17mmt from 5mmt. Furthermore, the FGN is in the process of securing 200 rice mills, which it will supply at a discount. These mills could each handle between 10 and 100 metric tons (mt) per day, and are to be distributed to clusters of farmers across the country.
Investments within the rice segment led to the recent launch of the WACOT rice mill located in Kebbi State which has a milling capacity of 120,000mt. This mill is expected to engage at least 50,000 farmers over the next few years. Another development within the segment worth highlighting is the recent partnership between Lagos State and Buhler (a leading global rice milling firm situated in Switzerland). This partnership is expected to result in the construction of a 32 tons per hour rice mill in Lagos.
Chinwe Egwim
Macro Economist & Fixed Income Analyst at FBN Capital
Source: The Guardian, 7 August, 2017.
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