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Market Digest Nigeria

Finance

CBN plans 60% importation cut

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Wheat scarcity, price inflation set to hit Nigerians as CBN plans 60% importation cut.

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Nigerian may soon find it difficult to purchase wheat, as the importation of the product will soon be reduced by the Central Bank of Nigeria (CBN). The apex bank said the decision was to support smallholder farmers within Africa’s largest economy.

The CBN governor, Godwin Emefiele, said the importation of wheat will be cut by 60 percent, as “the bank is committed to improving local production of wheat and reducing importation by 60 percent over the next two years.”

He made this known while speaking in Gombe on Thursday, to kickoff the 2020 wet season harvest aggregation. He didn’t give a timeframe for the importation but.

How this decision will affect Nigerians

The reduction in wheat importation will be a huge blow to importers. As of second and third quarter, wheat was the second most imported item in Nigeria. About 98 percent of wheat consumed in Nigeria are imported.

Wheat consumption in Nigeria has risen beyond the production level in Nigeria, as the United States Department of Agriculture disclosed that even shortfall is filled with more importation. This shows how low production level is within the country.

Farmers produce only 2.06 percent of wheat consumed in the country, that’s about 60 tonnes of wheat. This was the production level in the past three years, while consumption during those periods was 4760, 4900 and 4319 tonnes respectively.

So with 98 percent contribution to consumption, the CBN wants to cut importation by 60 percent. While the reduction will see investment flow into local producers, it will cause inflation hike in wheat prices as experienced in rice, poultry foods and other items denied forex by the CBN.

Price of wheat going up will affect household income, especially the lower class. Prices will rise as there will be shortage, due to low capacity of farmers to meet demand.

Note that despite the ban on rice importation, Nigeria is yet to attain sufficiency, and foreign rice brand remain cheaper compared to local brand. This is because rice producers are at a competitive disadvantage when compared to the economies foreign brands come from.

The Nigerian government provides finance through loans, but it doesn’t provide basic amenities foreign brands enjoy in their countries. Neither do they experience the insecurity that affect transportation and local distribution of Nigerian farmers. These challenges will also be faced by local producers of wheat.

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