In November 2012, USDA published an Exporter Guide to Nigeria, providing a short review of Nigeria’s evolving food and agricultural trade, and associated trade policy. According to USDA, while ‘agriculture has shown some growth [in] the past years,…Nigeria remains a major importer of food and agricultural products’. Nigeria’s total food and agricultural imports are estimated to have increased by 25% in 2012, up from US$4 billion in 2011 to US$5 billion, and ‘imports are dominated by bulk/intermediate commodities such as wheat, rice and sugar.’
According to the Exporter Guide, the EU is the source of about 50% of Nigeria’s total food and agricultural imports, while the volume of imports from China, and also from South Africa, is growing. Cross-border smuggling levels (of goods produced in the region as well as imported) remain high, but import policy and port handling reforms are now ‘encouraging more formal trade’. This is being assisted by the partial implementation of the ECOWAS common external tariff (CET).
While the food processing sector has grown by some 10% per annum in the past 5 years, the review considers that ‘high cost and unreliability of electricity, weak infrastructure, a 45 per cent increase in raw material procurement cost, an increased cost of capital [and] multiplied taxation, among others’ are all holding back investment in Nigeria’s food processing and manufacturing sector. Substantial investment needs (estimated by the Nigerian Association of Food, Beverage and Tobacco Employers at US$510 billion over 15 years) have been identified to address underlying constraints on the competitiveness of the Nigerian manufacturing sector.
The review observes that the local food processing sector provides only a limited choice of products for consumers, resulting in a strong orientation towards imported products. In addition, the expansion of new consumption patterns linked to urbanisation and income growth, alongside growing consumer concerns over food safety, is leading to increased demand for high-quality products.
Some local processors are reportedly responding to this by developing and improving products. As a result, there is an increase in demand for imported high-quality food ingredients, the use of which enables local processors to differentiate their products on quality grounds from wholly domestically produced food products.
According to USDA, ‘imports of food and agricultural products should maintain the upward trend as Nigeria’s inadequate domestic food processing activities are unable to meet rising domestic demand.’ Nevertheless, USDA identifies the sorghum, maize, millet, cowpea, garri (fermented cassava starch), palm oil and rice value chains as potential areas for the development of local food processing industries.
The review adds that the retail sector remains dominated by traditional open-air markets (62%), followed by convenience stores and street shops (37%). However, multinational supermarket chains, such as the South African ShopRite and Dutch Spar chain, are beginning to penetrate the Nigerian market.
USDA maintains that the government of Nigeria ‘continues to pursue [a] trade protection regime, but remains under pressure to liberalize trade in conformity [with] its WTO commitments’. It is maintained that ‘Nigeria failed to abide [by] its [ECOWAS] CET agreement for total liberalization by 1 January 2008, and import bans on many products remain in place,’ including for poultry, beef and pork products (in part on SPS grounds). While some import bans have been lifted, the government ‘continues to implement protectionist agricultural trade policies’, including the use of levies, higher import duties and import bans. The Manufacturers Association of Nigeria (MAN) has expressed concerns over the impact of the proposed EPA with the EU and the current ECOWAS CET on the future of Nigeria’s food processing sector.
In the past, with institutional and infrastructural constraints, problems with the sequencing of policy measures have resulted in underfulfilment of Nigeria’s enormous agricultural potential. The current Agricultural Transformation Policy is intended to address these shortcomings. Issues of the sequencing of investment and trade measures remain central. However, similar problems of sequencing are arising under the key planks of this programme.
Sequencing issues can be seen as arising in current initiatives to promote cassava blending: higher import duties have been imposed on wheat imports (see Agritrade article ‘ Nigeria implements import duty reforms to promote cassava flour use’, 9 September 2012), but the necessary capital and human investments required to ensure the ready availability of high-quality cassava flour for blending purposes have only partially been made. For example, the processes of retooling and retraining necessary for the successful implementation of blending have hardly started. This may in part be linked to issues of policy consistency, arising from the failure of earlier similar blending initiatives (See Agritrade article ‘ Questions raised over Nigeria’s cassava blending and wheat tariff policy’, 18 November 2012).
Issues of policy consistency have also arisen in the rice sector, where industry stakeholders have complained about non-transparent use of tariff waivers undermining the high tariff policy designed to stimulate investment in increased local rice production (see Agritrade article ‘ Nigerian president hails success of government’s rice sector initiative’, 13 January 2013).
Given the institutional complexities and infrastructural and human resource constraints, the Nigerian government’s agricultural transformation policy agenda faces major challenges if it is to successfully reverse the upward trend in agro-food product imports highlighted in the USDA analysis.