Maize Ban: Food Security, But At What Cost?


Wednesday, September 09, 2020 / 2:00 PM / by FDC / Header Image Credit: The Street Journal


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The CBN has approved the importation of maize by only four companies. This decision comes one month after the apex bank banned the importation of maize and restricted maize importers from accessing forex from official sources in an attempt to increase local production and safeguard rural livelihoods. The CBN's actions triggered a maize shortage and a spike in prices. The government is ostensibly seeking to strike a balance between food imports and local production capacities to meet the shortfall.


This is in line with its policy on food security and sufficiency. Despite being Africa's largest producer of maize, Nigeria imports about 400,000 tons each year to meet domestic demand. The Federal government also announced plans to release 30,000 tons of maize from the national reserves to animal feed producers to deal with the high cost of poultry production (maize, constitutes over 50% of poultry feed content).


The four companies will import a total of 262,000 tons of maize into Nigeria - Wacot Limited (60,000 tons) Chi Farms (60,000 tons), Crown Flour Mills (22,000 tons) and Premier Feed Mills (120,000 tons). The Nigeria Customs Service has issued a stern warning stating that the exercise would run strictly from August to October during which only the aforementioned 4 companies will be allowed to import maize into the country.


The new development is expected to increase the supply of the commodity in the Nigerian market and moderate its price. It would also reduce the price of products such as golden morn and cornflakes thereby lowering food inflation in the country. Nigeria's food inflation was 15.48% in July and could rise further in the coming months on the back of higher logistics costs. In addition, sorghum which is a substitute for maize will record a fall in its price due to the cross elasticity effect as the demand for sorghum falls.


However, the impact of this development on Nigeria's terms of trade is that the import bill will increase, thereby putting pressure on the reserves level and the naira. In the long-term, the CBN's policy should incentivize corn production and could lead to Nigeria becoming a net exporter of the commodity after attaining self-sufficiency.

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