Rice, Floods and a Debt Maze

Flood of Rice
Recently, floods washed away at least 2million tons of rice harvest in Kebbi state, leaving over 500,000 hectares of land devastated, and reducing the projected output (from the highest producer of rice in Nigeria) down to 500,000 tons. This is a loss for the Agricultural sector whose GDP grew by 1.6% in the second quarter of the year. This does not only mean a shortage in the markets for consumers but a shortage of income for small-scale farmers who commonly sell 80% of total production and consume only 20%.

Maize In, Chicken Out
In July 2020, the Central Bank of Nigeria (CBN) placed a ban on the importation of maize, which is among the top 10 most imported food items in Nigeria. Maize is the most cultivated crop in Nigeria in terms of area harvest, with each farmer cultivating an average of 0.65Ha Maize. It is a widely consumed staple, with up to 50% of maize produce utilised by animal feed. The price of maize rose from NGN80/kg in March 2020 to NGN180/kg in August 2020, posing a threat to the stability of industries reliant on maize produce, including the poultry industry which consumes 98% of all maize produce in Nigeria. The cost of poultry feed increased from NGN4,000 to NGN4,200 (for a 25kg starter bag), and from NGN3700 to NGN4,000 (for a finisher). These changes are projected to cause an annual loss of 1 trillion Naira and up to 1 million job losses in the industry. On September 2020, however, the CBN approved an emergency import of 262,000 tons of maize for 4 companies; these include Wacot Limited, Chi farms Limited, Crown Flour Mills Limited and Premier Feeds Company Limited, which are approved to import 60,000 tons, 60,000 tons, 22,000 tons, and 120,000 tons respectively. The approach is expected to boost the availability of Maize and ensure food security in the country.

The Debt Maze
In addition to the threatening food shortage, the national debt rose by NGN2.381 Trillion (USD6.593 Billion). Nigeria’s debt increased from the NGN28.628 Trillion (USD79.303 Billion) of March 31, 2020, to  NGN31.009 Trillion (USD85.897 Billion) on June 30, 2020. The debt is a result of the USD3.36 Billion Budget Support Loan from the International Monetary Fund, New Domestic Borrowing to finance the Revised 2020 Appropriation Act (including the issuance of the N162.557 Billion Sukuk), and Promissory Notes issued to settle Claims of Exporters. With a potential future increase in domestic borrowing, and the financing of the 2020 national budget by the World Bank, African Development Bank, and the Islamic Development Bank yet to occur,  the national debt is projected to increase as the economy progresses to Q4 2020. 

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