I read on the news that the high level taskforce
responsible for advising government on solutions to food inflation has
recommended usage of railway wagons and labelled trucks to transport food items
as means to curb food inflation. My take is that how many states are linked
with railways, barely a few, and these railways connect to only few major
cities in these few states. This will mean food inflation is only targeted in
those cities. I still wonder if there are enough railway wagons to serve the
entire nation. Though, it is not a bad idea, but it is not holistic as it is intended.
The food inflation is not also triggered by
delay in transportation. It is understandable the price of diesel has surged,
which makes cost of transportation higher. The general inflation, currently at
18.3%, has reduced purchasing power of people’s income, and this is the major
problem the country is facing, as Nigerian real GDP has lost billions of Naira.
People now spend close to or more than 80% of their income on food alone, which
would have been somewhere around 50%. This increased the poverty prevalence in
the country. What I was expecting to come out from this high level taskforce
were more of a pragmatic outlook and perspectives. Therefore, I would suggest
the followings:
Inefficiencies in food supply chain has
contributed in the food inflation, where poor or inefficient agricultural
systems still dominate the sector. Improving the viability and agricultural yields
will help, and this can be achieved through output optimisation, crop
diversification and large scale production without necessary need for land
expansion. This applies to animal rearing and transportation. There should be a
holistic agricultural roadmaps indicating gaps and stipulated intermediate and
long term targets. Immediate investment in agricultural optimisation is
something to consider, if some intervention exists, then they are not impacting
yet. Majority of farmers cannot access agricultural extension services or
information or improved seeds and approaches to optimise output. Most farmers
incur extra ordinary and unnecessary costs in crop production, and this affect
the price. Mechanisms must be in place to actualise minimum cost of production,
like adequate extension services, improved and mechanised system of farming for
all.
I still don’t think the banning of rice importation
through land borders is the right decision, it ended up in creating cartel, and
over a year, the price has not come down to its potential level. Human beings
are rational, if they can skip local rice for foreign rice, then there must be
a reason for that. In a competitive market, you don’t distort the market,
products are allowed to sell themselves. May be people prefer foreign rice
because it is cheaper, available, and qualitative. So, if you want them to buy
local rice, then you have to first make the local rice competitive by making it
available, affordable or even cheaper, and qualitative, and at that time,
people will make their own decision to buy local rice, without enforcement.
Production subsidy in the agricultural sector can be an option too. Rice as a major
food item is significant as demand of its best alternatives can be
oversaturated when price of rice increased.
Cost of transport has contributed to the food
inflation. The petroleum subsidy has to be revisited and perhaps reintroduced
in some selected sectors and in different approach. Even when cost of subsidy
was claimed to be overwhelming on government shoulders, there could have been a
better review and reintroduction of it as emergency measure. I once suggested a
comprehensive study on the pattern of petroleum consumption in the country,
which will give information on how much in reality need to be spent on required
petroleum consumption subsidy devoid of the corruption. Fuel consumption in
agricultural distribution segment can be conveniently subsidised. Therefore,
Limited Petroleum Subsidy on agricultural sector can be applied, where food
wholesale and retail distribution are strategically subsidised.
Immediate development of agric-market
database can be developed to document and disseminate accurate information
about what was produced, traded and at what price. This will avoid exploitation
and information asymmetry, and will set uniform prices, and track acute price
hike and its cause for immediate redress.
Any barrier in the market must be removed, as
competition is the measure for ensuring market stability and lower prices, and
this re-emphasize the need to expand competition scope in food supply sector.
Any sort of cartel or possible collusion or distortion has to be traced and get
rid of. It is important to note that the general inflation has caused agric
suppliers to aim for higher profit to enable them afford other inflated goods
and services. So, you cannot tackle food inflation in isolation, measures to
address general inflation has to key in as well.
Food inflation can be a reflection of the
general inflation, so in addressing food inflation, we have to consider
measures to curb general inflation. The Central Bank may consider reducing
interest rate, because most of the inflations are triggered by high average
cost, not by saturation of demand.
Federal and State governments should lower taxes, but not increase wages
yet (not as a first measure, maybe in the future). This will reduce cost of
production for the suppliers and increase purchasing power of individual
incomes. The government should spend more on infrastructures that ease
production or direct investment subsidies.
Instead
of sharing stipends to individuals, investments can be made through targeted
subsidy and improved power supply, which will enable these individuals to
cheaply start productions or businesses. These stipends have low value now, and
will not make difference in the lives of the beneficiaries due to the
inflation. So, instead of quantitative interventions, we should go for
qualitative ones. Though social welfare is good, but basic infrastructural
development is paramount.
For us to have agric based economy, we have
to begin fighting the agricultural apathy among the people, many latent energy
and output are not harnessed due to the indifference and agrarian nature of the
farming system. So, people must be sensitised to have pride for agro-allied ventures,
because, if there is no motivation, all investments will not impact.
Finally, instead of setting “high level”
taskforces, the government should be able to tap from the intelligence of
others that are not on the “high level” table. Government must be able to see
various perspectives to enable it make informed decisions, and this can be
achieved through inclusive consultations and participations in governance.
Petroleum Economist and Development Expert,
First-Ever Global President of Commonwealth Youth Council,
University Lecturer (Economics), Umaru Musa Yar’adua University,
Katsina.
08034458189.
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Having Economist like You in the Economic team will definately make things better, probably we may lift out of the current recession affecting the country.
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