Depleting the Grains Reserves: Matters Arising

James Emejo writes that the federal government must do all within its powers to boost local food production by addressing insecurity and increasing investment in agriculture

Last week, President Muhamaadu Buhari had summoned the Minister of Agriculture and Rural Development, Muhammad Abubakar, and directed him to release 40,000 Metric Tons (MT) of grains from the national Strategic Grains Reserves (SGR) to be distributed among vulnerable Nigerians.

According to the Minister, the President was shaken by the increasing food inflation in the country and sought for a way to cushion the effects on ordinary Nigerians who may not have the means to acquire the costly food items from the market.

The Minister, while officially signaling the commencement of the distribution exercise at the Internally Displaced Persons’ (IDPs) camp in Karmajiji, Abuja, said, “As part of the federal government of Nigeria’s effort to ensure food security and alleviate poverty, Mr. President, Muhammad Buhari has approved the release of 40,000MT of assorted food commodities from the National Strategic Reserve to the vulnerable Nigerians to cushion the effects of rising prices of food items.”

The Minister stressed that the incessant bandits’ attacks had displaced many farming communities in some states, disrupted their source of livelihood and rendered them homeless, adding that some of the victims are currently taking shelter around the schools, mosques and churches while households are in dire need of food assistance to ameliorate their sufferings as they faced untold hardship and food scarcity.

Specifically, he noted that the high prices of maize in the open market had affected the cost of production of poultry feeds and consequently, the availability of the products thereby threatening the poultry industry, which had been a major employer of labour for decades. 

He further pointed out that high fuel prices, insecurity and the low purchasing power of public servants had also made access to food difficult and challenging, adding that the low-income civil servants and as many that need the relief package would benefit from the intervention.

Abubakar also noted that while the measures were temporary, the government would continue to take steps aimed at ensuring that food prices are substantially subdued.

Food Prices Upward Trajectory

However, even as the government took measures to ameliorate the sufferings of vulnerable Nigerians through the provision of food palliatives, data from the National Bureau of Statistics (NBS) indicated over the weekend that the Consumer Price Index (CPI), which measures inflation increased to 15.92 per cent (Year on year) in March 2022 compared to 18.17 per cent in March 2021. 

This is the highest level inflation had attained since October 2021, when it was recorded at 15.99 per cent before dropping to 15.40 per cent in November, 15.63 per cent in December, 15.60 per cent in January and 15.70 per cent February.

Month- on -month, the headline index increased by 0.11 per cent to 1.74 per cent in March compared to 1.63 per cent in February.

According to the CPI figures for March, this implied that on annual comparison, the headline index slowed down in March 2022 when compared to the same month in the previous year.

Nonetheless, month-on-month, the food sub-index increased to 1.99 per cent in March, up by 0.12 per cent from 1.87 per cent in February, marked by increases in prices of bread and cereals, food product, potatoes, yam and other tuber, fish, meat, oils and fats.

Year on year, the core index, which excludes the prices of volatile agricultural produce, added to the inflationary concerns, rising to 13.91 per cent in March 2022, up by 1.24 per cent when compared to 12.67 per cent in March the previous year.

The highest increases were recorded in prices of gas, garments, cleaning, repair and hire of clothing, shoes and other foot wear, clothing materials, other articles of clothing and cloth­ing accessories, liquid fuel, fuels and lubricants for personal transport equipment and oth­er services in respect of personal transport equipment.

Concerns over Depletion

The federal government’s decision to draw from the SGRs to ameliorate the sufferings of Nigerians, though a laudable initiative, has nonetheless called into question, the level of national food security.

One of the major sources of worry is that the country had not been able to meet the minimum 3.5 million tons of grains reserves required at any particular time, as stipulated by the United Nations.

The concerns came at a time several international orgnisations including the Food and Agricultural Organisation (FAO) had in recent times painted a gloomy picture of food insecurity in most parts of the country, as farmers are kept away from their farms as a result of insecurity.

Observers have also concluded that drawing from the SGRs was an indication that food production challenges subsists in the country, a situation which calls into question the government’s claim of the country’s self-sufficiency in food production and security in recent times.

Huge Supply Gaps

Analysts also believed that the rising cost of food items was a result of demand-supply gaps caused by low local production, which had further been blamed on the inability of farmers to access their farms due to insecurity.

Thus, there had been doubts as to whether the country actually had this much in the SGRs as there are allegations that the government could have been buying grains from other countries to bridge existing shortfalls.

But according to the Director of SGR, Mr. Sule Haruna, the country’s food reserves had been reduced to only about 32,000 metric tons after the federal government ordered the release of 70,000 metric tons of grains from the SGR as palliatives to vulnerable Nigerians amidst the COVID-19 pandemic.

He, however, insisted that the reserves had since been restocked to 90,000 metric tons and urged the government to hasten efforts at replenishing the food vault.

 Fueling Inflation

There are further concerns that the federal government through its activities may be inadvertently giving room for rising inflation in the country.

To restock the grains reserves, the government often acquires produce from farmers during harvest, a development, which some analysts said could create scarcity and lead to rising prices.

But Abubakar, while responding to the allegations said, “We have more than 40,000 metric tons and we have restocked the grains after releasing the 70,000 metric tons to where it is now. We have about 90,000 MT and we are releasing 40,000MT and if and when another need arises, we will release again…I don’t know why anyone will think the grains are not there.”

Analysts’ Perspectives

Analysts have urged the federal government to do more to rein in rising inflation, occasioned largely by structural challenges.

However, reacting to the increasing inflationary concerns and the government’s reaction, analysts in separate interviews with THISDAY, said the recent palliative measures by the government, though plausible, would only provide a short-term reprieve for the soaring food prices.

They argued that current local food production remained inadequate in satisfying increasing demand amidst a fast-growing population. The analysts also recommended the importation of food items in the short term to meet existing supply gaps.

Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, told THISDAY that the release and distribution of the 40,000 metric tons of grain could only serve as a stop-gap measure only if it is adequately channeled to the poorest in the population and not on political leanings.

He said, “The factors leading to the high cost of food prices are still subsisting and if not addressed we might not witness a reduction in the cost of food prices for a long time to come. The gas pressure has abated temporarily in some state capitals however, it has increased the cost of transportation of farm produce which definitely affects the cost.”

He added, “The continuous rise in the exchange rate has not helped matters because the high cost of imported farm implements will affect the price. Presently, if we can attain self-sufficiency in fertilizer production, as Dangote refinery is trying to do and we can achieve self-sustenance in crude oil refining, then we can start seeing a gradual reduction in inflationary trends.

“These two products go a long way in affecting not only food prices but production in general.”

In the same vein, Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, said to tame inflation, heavy investment in mechanised farming remained the only way out.

According to him, the federal government must also look for a solution to the security issues that continued to plague the agricultural communities, especially in the Northern part of the country.

He said, “The palliative measures by the government, whilst laudable will only be a short-term reprieve to soaring food prices. With a population of over 200 million, 40,000 MT will hardly be sufficient to significantly cater to rising demand.

“According to UN and other development agencies, Nigeria should have strategic grain reserves of a minimum of 3.5million MT and from recent figures, we are far below that figure.

“This means that any intervention by the government will literally be like pouring a bucket of water on an inferno. It is also worth noting that in order to shore up the grain reserves, the government would need to buy up more from the market thereby causing even more inflation.”

According to Shelleng, “Global supply shortages caused by the Russian-Ukraine war is also having a significant impact on food prices, especially wheat and with the government coffers already under massive pressure, there may be limited resources available to buy up more grain from the international market.

“Our local production is simply inadequate in meeting up with demand and this has to be addressed. Heavy investment in mechanised farming is the only way to address this, whilst also looking for a solution to the insecurity issues that plague the agricultural community, especially in the Northern part of the country.”

On his part, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu said, the government needed to identify all the causes of inflation and high cost of production and deal with them head-on.

He also expressed concerns that the grains being distributed by the federal government may not really get to several persons who may be in dire need of the items.

Ekechukwu said, “The last time the National Strategic Grains Reserve distributed grains, did anybody receive any grain in my village, and the answer is no. As a reader, I am certain nobody received in your village or town.

“Let us, therefore, look for the short-run and long-run solutions to reducing inflation and ensuring people go back to the farm. In the short run, we can allow for the importation of food items that were hitherto banned, or items not valid for FX allocation. We need to identify all the causes of inflation and high cost of production and deal with them head-on.”