Why you probably should not let foreign exchange dealers make agriculture policy

The Central Bank “as part of its developmental objective of employment generation and inclusive growth” is as at it again. The 41 items ban from the foreign exchange market worked so well that they have gone on to include “fertilizer” on the list of items effectively banned from the foreign exchange markets. What this means is essentially importers of fertilizer cannot buy foreign exchange officially, which is the Central Bank’s way of trying to restrict imports to boost local production.

But what is fertilizer? The answer depends on what you know about fertilizer. If you are a small scale subsistence farmer — which the majority of our farmers still are — or a casual observer, then fertilizer is just fertilizer. The stuff you add to the soil to make the crops grow better.

However, if you are a scientific farmer, or in other words a “farmer wey go farming school” then you know that fertilizer is not just fertilizer but there are a range of fertilizers of different types for different uses at different points in the life cycle of whatever crop you’re growing. There is NPK, which I learned means nitrogen, phosphorus, and potassium combined into one blended product. And even with NPK, there are different blends available: 15–15–15, 20–10–10, 6–24–24, etc. There is CalMag, DAP, MOP, MAP, SSP, Urea, and so on. All different fertilizers with different chemical components.

Of all these chemicals, which ones do we produce locally? As at now, only Nitrogen — the “N” in NPK. Some of this “N” is blended into NPK, and some is sold on its own as a product called urea. As for all the rest of those chemicals? We still import them. We still import phosphate which was the big part of deal with Morocco pushed via the Presidential Fertilizer Initiative. We have phosphate deposits in Nigeria, but they are not commercially viable so far. We still have to import DAP and SSP and all the other fertilizers. Even the blending plants in Nigeria still have to import all the other components of the NPK they produce, or rather blend, too. And all those imports are technically “fertilizers”.

If you are a small subsistence farmer, then you probably do not care. Fertilizer na fertilizer. But if you are a scientific farmer, you understand that just like humans need a combination of proteins, fats, and carbohydrates to grow and develop, plants also need a combination of nutrients to thrive. And if all but one of those nutrients is no longer readily available for your farm, then your life is going to become a bit more difficult, and a bit more expensive.

This is important because the challenge for Nigerian agriculture is to move from old school subsistence style farming to more scientific farming. Yields for most crops in Nigeria are amongst the lowest in the world because we still mostly do not do scientific farming.

From tomatoes…

…to rice ….

…. maize …..

… to soybeans ….

…. and even cassava which we are supposed to be the largest producer in the world….

… our yields are way behind other countries. A large part of that story is because we do not practice scientific farming. We are still doing the local “fertilizer na fertilizer” farming. The Central Banks policy which is trying to restrict the imports of other types of fertilizers which we do not, and in some cases cannot produce, is in essence trying to actively prevent farmers from becoming better more productive farmers.

Why would a Central Bank want to do this? Even before you get into the fact that fertilizer is a raw material and more fertilizer use means you are growing more crops, which presumably is a good thing. If you import fertilizer and use it to double your soybeans production then that is a good thing, regardless of where the fertilizer comes from. The agriculture sector, which is still currently a big employer of labour, is currently growing at its slowest pace in years and it is amazing that Central Bank officials would think that a smart thing to do is to restrict access to key raw materials, some of which we can’t even produce locally. This policy makes no sense.

This is an example for why you really should not let foreign exchange dealers make agriculture or trade policy. Hopefully the people at the ministry of agriculture and the ministry of industry, trade, and investment call the central bank to order.

NB: If you dig a little deeper there is no evidence that the 41 items policy has done anything other than channel profits to a few benefactors. So what gives? You think that a central bank which is theoretically supposed to be filled with economists would know how to measure impact but not these days. Oh well.

Also, thanks to all my farmer friends who helped explain this all to me. It’s a complicated business being a scientific farmer especially in Nigeria where you can wake up one morning and the policy environment has changed.