For forex’s sake
I remember being in economics class in high school and getting an introductory session on imports and exports and what impact that has on a country’s overall economic health. I remember my teacher saying that X, for exports, should be higher than M, for imports, if otherwise, there is a problem. Although this was a simplistic view of the situation, it gave me a basic understanding of how things work.
So it is with great interest that I read about the most recent development related to Nigeria in regards to foreign exchange. President Muhammadu Buhari has directed the Central Bank of Nigeria to block food importers' requests for foreign currency in a bid to boost local agriculture. Late last year, agriculture minister at the time, Audu Ogbeh, said Nigeria spent USD 22 billion importing food every year. This is a very high bill that certainly has a huge impact on the economy, but also on local producers.
This is not the first the Nigeria imposes a ban on the use of forex for the import of food items, it did so on rice and other items in 2015. Rice, being the staple food, had its price increase dramatically from USD 24 to USD 82 for a 50kg bag of rice and later regulated to USD 34. This had the impact of increasing local production of rice, the government has also been subsidizing farmers who produce rice. Nonetheless, as the most populous country in Africa, the farmers are not able to keep up with demands and the practice of rice smuggling has begun.
I have been thinking a lot about the foreign exchange shortage that is affecting our country quite a bit lately. It seems that everywhere I go, I see the impact that the shortage has on many things. Those who own business who need to import raw material to process and sell their products in the country are complaining that they are not getting access to foreign exchange to get it, therefore unable to produce their products at the expected performance rate. Pharmacies, hospitals and clinics are lacking some medicines and medical supplies.
Most recently, I went to a supermarket to do some groceries and noticed many imported food items that could easily be replaced by items currently produced in the country. One of the items that really caught my attention is the sparking water Perrier, which can easily be substituted by our very own Ambo water. The thought of much sought after foreign exchange going to importing such easily substitutable products makes me a little sad, each time I see them.
But it is not all doom and gloom. The news about Ethio-lease Company registering and entering the Ethiopian market is quite the good news for our current situations. The company’s overall model is to lease out equipments in agriculture, manufacturing, road building sectors to companies who would have otherwise had to use their capital and seek foreign exchange to buy these equipments.
I hope this gives ideas to tech innovators to consider starting companies, who much like companies like Ride and Zay Ride provide rides to those needing to go from one place to another, they can create platforms and mobile applications that allow owners of equipments to rent them out to those who need them.
I also cannot help but wonder if the move taken by the Central Bank of Nigeria should be taken as a model by the Ethiopian National Bank. Banning the use of foreign exchange on importing certain products that can easily substituted would not only save us forex, but it will also put our local investors and producers to the task of having to fill a real gap. The government would also have to come up with a strategy to support these local companies to succeed at this great task.
Good food for thought, don’t you think?