The organised private sector has warned against the lifting of the foreign exchange restrictions, the Central Bank of Nigeria placed on the importation of milk and dairy products, stating that it could result in the decline of local production within the country.
Members of the Organised Private Sector gave the warning on Wednesday, according to The Punch.
The National President, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, Dele Oye, expressed concerns as to the possible consequences of lifting the ban, amid 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 argued that lifting the ban would limit local production, since local producers could no longer compete with foreign producers due to the instability of the current fiscal regime, stating that a more sustainable approach was preferable.
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.”
Also, the Chief Economist of SPM Professionals, Paul Alaje, said the development meant that operators in the sector would be able to take advantage of official windows which might increase supply but it would also kill domestic 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 Central Bank of Nigeria is trying to encourage forces of demand and supply to determine 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,” he explained.
Meanwhile, in support of the above, a professor of Economics and Public Policy at the University of Uyo, Akwa Ibom State, Akpan Ekpo, argued 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.”
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 stated that the initiative aimed to stimulate domestic milk production.
However, 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.
