Members of the Organised Private Sector gave the warning on
Wednesday in separate interviews with The PUNCH.
The National President, Nigerian Association of Chambers of
Commerce, Industry, Mines, and Agriculture, Dele Oye, expressed concerns
regarding the potential ramifications of the suspension of the restriction,
especially against the backdrop of the naira’s current depreciation and the
inconsistencies observed in Customs duty payment.
He said, “The depreciation of the naira has already placed a
significant burden on importers, with the increased cost of foreign exchange
reflecting on the final prices of goods and services. The recent policy shift,
while potentially increasing competition and broadening market access, could
also exacerbate this burden, leading to higher retail prices for milk and dairy
products, ultimately affecting the end consumers.
“In addition, inconsistent Customs duty payments have been a
significant challenge for businesses in Nigeria. This inconsistency not only
hampers the ease of doing business but also creates an unpredictable trading
environment. A policy change of this magnitude requires a concomitant
strengthening of customs regulations to ensure that all stakeholders are on a
level playing field.
“We recommend a phased approach that would allow domestic
producers to adjust to the new competitive landscape while preserving the value
of the Naira. This approach should be coupled with a robust support system for
local dairy farmers to boost domestic production, thereby reducing
over-reliance on imports in the long term. Additionally, harmonising customs
duty payments to eliminate disparities and foster transparency will be critical
to ensuring the success of this policy.”
Oye asserted that the ban lift would restrict local
production as the local producers would be unable to compete with the foreign
producers because of the instability in the current fiscal regime, describing
that a more sustainable approach would have been better.
He added, “The Central Bank of Nigeria did not do
stakeholders meetings with the local producers to find out what the issues are.
Even if they want to import, why didn’t they empower the local ones?
“While we recognise the merits of liberalising the dairy
importation process, we strongly advocate for measures that safeguard the
stability of our national currency and promote fair trade practices. We are
keen to engage with the Central Bank of Nigeria and other stakeholders in
crafting a sustainable path forward that benefits the Nigerian economy and its
populace.”
Similarly, the Chief Economist of SPM Professionals, Paul
Alaje, said the development meant that operators within the sector would have
access to official windows, a situation that might boost supply, “but this
would also kill local producers.”
He said, “Naira is always susceptible to devaluation, in
recent history, for 38 years, naira has continued to suffer a lot of blows from
devaluation. If the market is open without building a local supply side, we
would see a huge shortage, and we are also destabilising our local producers.
“What this means is that it will induce local unemployment
and hurt pricing in the medium term. On the other hand, we need to check over
the years economic history and the consumption pattern, when we open up the
market without developing local producers, if we do not enhance their output to
grow, what we have seen over the years is that manufacturers would close their
shops.
According to him, the CBN is seeking to allow forces of
demand and supply to adjudicate prices, hoping that in the long run, the
country would be okay.
“However, the answer non-classical economic school provides
is that when exactly is the long run? I can tell you that it depends; it does
not exist in the real sense.”
Corroborating the above, a professor of Economics and Public
Policy at the University of Uyo, Akwa Ibom State, Akpan Ekpo, expressed that
while the ban might yield short-term benefits, it might not be advisable in the
long run.
He said, “The ban lift will affect domestic production of
dairy products, so those who produce locally will no longer have the incentive
to produce. The best approach would have been to encourage local production
rather than lifting the ban for imports to come in.”
Meanwhile, an economist at Nigerian Economic Summit Group,
Dr Ikenna Nwaosu, said the government needed a holistic plan to address the
issue.
He said, “The government should emulate the holistic
approach taken in the construction industry by convening a meeting with
investors in locally made production to ascertain their projected timelines for
meeting national demands.
“By gathering this information, the government can develop a
phased plan for lifting import bans, ensuring a smooth transition that allows
businesses to plan effectively. If local producers estimate they can meet
national production levels within five years, the government can consider
lifting the ban, thereby supporting local production while ensuring a steady
supply chain.
“The government must have concrete proof from the local
manufacturers that they can meet the national demand in five years.”
The Managing Director, Cowry Asset Management Limited,
Johnson Chukwu, said the restriction removal was a temporary measure to address
the food shortage in the country.
He said, “The ban lift is not so much of a tool to fight
inflation but just to fill the gap in the supply situation of the country.”
Recall that the Central Bank of Nigeria recently lifted
restrictions on the importation of milk and dairy products as seen in a recent
circular, Ref number ted/fem/pub/fpc/001/010, dated March 12, 2024, sent to
banks.
“Please be informed that the Central Bank of Nigeria,
through its circular, Ref noted/fem/pub/fpc/001/010 dated March 12, 2024, has
provided an update on eligible items for foreign exchange (non-valid for FX).
“In light of the foregoing, please note that the restriction
of FX for the importation of dairy products and its derivatives, to all
entities except selected companies has been lifted. Also, note that any entity
that meets the necessary extant regulation requirements is allowed to source
for FX at the Nigerian Autonomous Foreign Exchange Market for transactions
related to milk and dairy products,” the circular read.
In February 2020, the CBN restricted foreign exchange
allocation for milk importation exclusively to six designated companies within
Nigeria.
The companies included Nestle, FrieslandCampina WAPCO
Nigeria, Chi Limited, TG Arla Dairy Product Limited, Promasidor Nigeria, Nestle
Nigeria, and Integrated Dairies Limited. The CBN noted that the initiative
aimed to stimulate domestic milk production.
The new circular provides an update on eligible items for
foreign exchange, stating that the previous restriction on FX for the
importation of dairy products and its derivatives has been lifted for all
entities, except selected companies.
This decision marks a pivotal shift in Nigeria’s trade
policy, allowing any entity that meets the necessary extant regulation
requirements to source for FX at the Nigerian Autonomous Foreign Exchange
Market for transactions related to milk and dairy products.
The lifting of these restrictions is expected to have
significant implications for the dairy industry, potentially leading to
increased competition, improved availability of dairy products, and enhanced
market access for a broader range of businesses.
Nigeria spends about $1.5bn importing dairy products
annually, a report by the CBN indicated.
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