New Telegraph

December 11, 2023

FX ban: Prices of bread, semovita, others to rise

If the announcement on Friday by the Central Bank of Nigeria (CBN) is anything to go by, the Federal Government would soon add Sugar and Wheat to the growing list about 43 items not qualified for allocation of foreign exchange by the Central Bank.


This is as the apex bank regulator announced on its Twitter handle on Friday that it will no longer provide foreign currency for importers of sugar and wheat to conserve national dollar reserves.


The Central Bank restricted access in 2015 to foreign exchange for 41 items it says can be produced locally, and has been adding to the list since then. “Sugar and wheat to go into our FX restriction list; we must work together to produce these items in Nigeria rather than import them,” the Central Bank said in a tweet.


Currency restrictions aimed at easing pressure on the local currency amid a shortage of dollars have contributed to galloping inflation and further weakened the naira in recent years, analysts say. The Nigerian currency hit a record intraday low of 437.62 to the dollar on Friday after the Central Bank sold hard currency at a weaker level in the forward market to foreign investors. Annual inflation hit a more than four-year high in March, driven largely by food price inflation, which rose 1.16 percentage points from a month before, to 22.95 per cent.


The World Trade Organisation has voiced concerns about Nigeria’s foreign exchange management and the way the country has used it to support manufacturing, imports and exports.


In August 2019, the central bank told lenders to stop offering credit to importers of milk    after saying it would ban access to foreign exchange for dairy purchases to spur local production. It later lifted forex restrictions for milk imports for six firms following an outcry from businesses.


Analysts say aside which is heavily produced by Dangote and few other companies in the country, Nigerians will be more badly hurt by the restriction to access to forex on wheat which the country neither has the capacity to produce it nor made any serious effort by the Buhari administration to built capacities in the production of the grain.


To this end, Nigeria has relied on importation of wheat to feed its 200 million people. Wheat is the raw material for the production of bread, semovita, wheat meal, and spaghetti etc, the core basic food in every home in Nigeria. Data from the US Department of Agriculture (USDA) indicate that while Nigeria produced 60 tonnes of wheat in each of 2018, 2019 and 2020, the domestic consumption of the commodity in those years stood at 4760, 4900 and 4319 tonnes respectively. …


The consumption level, according to the USDA data, grew from 3582 tonnes in 2010 to 4900 tonnes in 2019. Nigeria will continue to rely on grain imports for food security as the country is challenged with coronavirus (Covid-19) restrictions, currency devaluation and climate change, according to a Global Agricultural Information Network (GAIN) report from    the US Department of Agriculture (USDA).


Domestic wheat production is forecast to fall 8 per cent to 55,000 tonnes in the 2020-21 marketing year. In Nigeria, farmers do not live on wheat farms and wheat is usually planted in November and harvested in April. The Covid-19 lockdown across Nigeria that began on March 30, 2020, restricted access to wheat farms and in turn resulted in higher post-harvest losses, the USDA said.


Wheat imports are expected to total 4.9 million tonnes in the 2020-21 marketing year. The Nigerian government’s restrictions on wheat continues to add increasing cost of flour, rising food prices and reduce consumption of bread and wheat flour-based products, the USDA noted.

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