01 Jun 2008 Food Crises and Restrictive African Trade Practices, by Thompson Ayodele

Food prices have skyrocketed internationally.  In my own Nigeria, rice has epitomized the crisis after doubling in price since last year.

Riots happening around the world over food supplies are prompting panicked governments to find solutions to stem the crisis.  Whether they will bring about an abundance of food is debatable.

Nigeria, for example, is considering increasing rice imports and disbursing loans to domestic rice processors.  While this might provide brief improvement, it will not prevent future shortages or ensure food abundance.

Promotion and management of food imports in Nigeria in the past has bred abuse – so much so that the primary result is no longer the protection of local food producers.  Such actions do show the economic folly of allowing government to manage what private individuals could do better.

It’s not hard to link African food crises to inappropriate government agricultural policies that stifle the continent’s great agricultural potential.  Over the years, nothing has been done to address low crop yields.  To the contrary, government has seemingly gone out of its way to hamper production with policies that are often flawed from conception and ad hoc in nature.

According to the Rice Farmers Association of Nigeria, Nigeria fell 800,000 metric tons short of a five-million ton production target for 2006 due to inconsistent government policies.  Of the projected annual 4.64 million metric tons of national demand for rice, current local production stands at a meager 525,000 metric tons – requiring $267 million in imports.  Because most locally-produced rice is of low quality, its market potential is limited even within Nigeria.

By protecting local rice growers, the government shields them from competition by.  Farmers have no incentive to improve quality or yields nor are able to invest.  This naturally breeds reduced production.

Additionally, taxes starve the poor and needlessly drive up food costs.  With import taxes, or tariffs, averaging 33.6 percent, agricultural trade barriers within Sub-Saharan Africa are the highest compared with the rest of the world.  Since these costs show up in consumer prices and poorer people must spend a larger percentage of their income on food, this spells disaster.

In Nigeria, the tariffs on rice are at 55 percent, including a five percent levy for increasing local production.  In neighboring Benin, it is mere 35 percent.  That’s a whopping $200 per ton price advantage Benin imports have over Nigerian ones.

Fertilizer is yet another thing import tariffs put out of the reach of many – causing low yields and hard manual labor.  Distribution is additionally cumbersome and can be manipulated – with sizeable amounts ending up in the hands of politicians and their cronies who rake in profits at the expense of farmers.

Furthermore, efforts to promote and embrace biotechnology are thwarted by outside resistance on the part of relatively well-fed groups of largely western activists.

At different times, Nigeria has also banned the importation of staples including wheat, rice, maize and vegetable oil.  Such restrictions may protect local industry for a short time, but it punishes consumers and discourages production.  Protectionism allows local producers to hike prices and lower quality.  Relaxing restrictions does the opposite.

Hunger is an everyday problem in Africa.  What can be done about it?

For one thing, a better governmental infrastructure and incentives can stimulate production if done right.  Anything that would dampen competition, and thus lower the incentive to produce, should be avoided.  When these programs are instituted, they must be administered with professionalism and transparency.

To avert social unrest in the short term, food reserves can be tapped.  In the long-term, the solution still lies with increased, private productivity.

In ensuring food for all in Africa and elsewhere, government can help foster a solution once it decides to stop being a problem.

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Project 21 associate Thompson Ayodele is the executive director of Initiative for Public Policy Analysis, a public policy think-tank based in Lagos, Nigeria.  This commentary is an abridged version of what appeared in the Kigali New Times of Rwanda on May 19, 2008.  Comments may be sent to [email protected].

Published by The National Center for Public Policy Research. Reprints permitted provided source is credited. New Visions Commentaries reflect the views of their author, and not necessarily those of Project 21 or the National Center for Public Policy Research.