According to a USDA report, Nigerian wheat production fell by 10.5%, from 95,000 tonnes in 2011/12 to 85,000 tonnes in 2012/13. This followed “unfavorable local climatic conditions” and continued threats of Boko Harem activities in the main wheat growing belt.
Demand for wheat, however, remains high and is growing (projected at 4.2 million tonnes in 2013/14, up from 4.1 million tonnes in 2012/13). While changing consumer tastes are driving an expansion of demand for wheat, recent government tax changes (an increase in the import levy from 5 to 20%) are likely to see a 6.25% contraction in consumption in 2013/14.
The Nigerian government has announced plans to increase from 10 to 40% the statutory percentage of cassava flour to be blended with wheat flour in the bakery sector by 2015, in an effort to curb the rise in the wheat import bill. The introduction of these policy measures has seen “rising prices for wheat flour and other wheat based foods”. In terms of the Nigerian government’s cassava flour blending policy, USDA notes that “if cassava inclusion into bread was actually feasible, Nigeria would be unable to meet cassava demand due to the country’s inadequate cassava production.”
The huge and growing gap between production and consumption is met from imports, with the USA traditionally accounting for around 75% of imports, making Nigeria the third largest export market for US wheat. Rising prices as a result of government policy measures are leading importers to search for cheaper sources of supply.
Installed wheat milling capacity in Nigeria is 6.2 million tonnes, with 50% of capacity utilised in 2012/13. USDA suggests that the Nigerian government would be better advised to “strengthen its economy by exploring the constantly growing domestic and export markets for wheat flour and other processed wheat foods”. It argues that “considering the idle capacity of more than 3 million tons, the hungry domestic and regional markets, and the available ready-to-work unemployed labor…, flour milling and other wheat food processing industries can be developed quickly and [can] strongly contribute to the nation’s economy.”
Nigeria: Wheat production, consumption, imports and exports, marketing years 2011/12–2013/14 (tonnes)
|MY 2011/12||MY 2012/13||MY2013/14|
Source: USDA, ‘Nigeria – Grain and feed update’, GAIN Report, 24 October 2013 (see below)
In a context where domestic production of wheat accounts for between 2.1 and 2.7% of domestic consumption, and where major unutilised milling capacity appears to exist, the case for pursuing a policy that turns Nigeria into a manufacturing base for the production of value-added wheat products, for national and regional markets, appears strong. Potentially, such a policy could increase formal sector wage employment (in the transport, manufacturing and distribution of wheat-based products) and reduce the net foreign exchange cost of imports, as exports of value-added wheat products increase.
This type of policy approach underpins the trajectory for EU CAP reform, which seeks to shift the EU agro-food sector towards the production of quality-differentiated agricultural products and value-added food products for European and global markets. This uses both domestic and internationally sourced agricultural raw materials, with domestic production underpinned by high levels of public sector support to farm incomes. This needs to be seen against the background of agriculture accounting for 4.9% of the economically active labour force in the EU and 1.8% of GDP (comparable figures for the USA are 2.3% and 1.2%).
In a context such as that of Nigeria, where agriculture accounts for 70% of employment and 30.9% of GDP, the policy choices are more difficult, particularly if the logic favouring value-added processing is applied across a range of agricultural sectors (e.g. sugar and dairy).
They are further complicated by the fact that the share of manufacturing in GDP in Nigeria has shrunk from 6% in 1985 to 4% in 2011, suggesting that serious constraints on competitive manufacturing exist in Nigeria, including in the agro-food sector.
Nevertheless, questions remain regarding the efficacy of current wheat-sector-related policy measures, given the huge shortfall in production relative to consumption of wheat in Nigeria.