BY Guest Writer
Recently, I made a post on my facebook timeline in which I postulated that Nigeria’s economic revival must be based on industrialization while paying special attention to agriculture because it is an essential SOCIAL SERVICE (NOT A BUSINESS) that must be pursued at all cost. I also emphasized that, agriculture is not an economic driver and it will never replace oil or make Nigeria one of the top 20 economies in the world by 2020.
Various people expressed very divergent opinions in a mature manner and some even shared personal experiences relating to the topic. Surprisingly, Ben Akabueze, the Director General of the Budget Office added his comments in a rather strange way. Instead of sharing his opinion, maturely, like everybody else had done, he first tried to discredit my economic views and then went on to quote some very suspect statistics. In this response, I have broken down his statement into its five main components for ease of reference.
“This Submission Is Poor Economics”. Since creation, Man has always had divergent views on economics. Abel believed in investing, Cain believed in savings. Over the centuries, great names like Adam Smith, John Keynes have put forward their differing views on economic issues. More recently, while Gordon Brown preferred an expansionary fiscal programme to address the recent global economic crisis, David Cameron preferred a contractionary fiscal programme to address the same problem. So, I don’t know the basis on which Akabueze can judge another person’s economic views as poor. Is it that he now equates himself with GOD Almighty who possesses all knowledge? I am not surprised at his god complex because it is obviously the official mindset of the Buhari Administration. Only their own views are right, everybody else is wrong. Self righteousness has been turned into a policy instrument such that they do not even believe in upholding public fiscal transparency (a key aspect of good governance).
“Agriculture Is A Business, Not A Social Service!” The USA currently subsidies farmers (not the agro allied industry) with an average of $20 billion each year. This amount is expected to increase because of a reduction in the net income of farmers due to falling crop prices. The EU (EEC) commenced farm subsidies in 1962. By 2013 the budget for direct farm payments (subsidies) and rural development under the Common Agriculture Policy (CAP) was 57.5bn euros (£49bn), out of a total EU administrative budget of 132.8bn euros. (that is 43% of the total). 75% of the CAP budget is direct payments to farmers. They even commenced the subsidising of exports since the 1970s. On average, farm subsidies provide nearly half of farmers’ net income in the EU. Even in Nigeria, Banks are exempted from paying tax on interest earned from agricultural loans. The PRIMARY reason why nations, with knowledgeable governments, spend so much money on agriculture subsidies is to ensure that food is always available for their citizens at very cheap prices. Even with the current overproduction in Europe, practices which try to curb production, because of low market prices, are discouraged. Food security is one of the social safety nets in a modern society. There is no serious government in the world today that sees agriculture first as an opportunity for it to make money. In nation building, AGRICULTURE IS A SOCIAL SERVICE AND NOT A BUSINESS.
“Perhaps The Author’s Definition Of Agriculture Is Limited To The Local Hoe-Bearing Subsistence Farmer.The USA Earns About $120bn And Brazil $55bn Pa From Export Of Agricultural Products”. I don’t think Akabueze thought this statement through because it does not put him in good light as the Director General of Nigeria’s budget. Every other person knows that Nigeria’s agricultural sector is made up mainly of subsistence farmers. Our agricultural production capacity cannot be compared with those of the highly mechanised farmers in the USA or Brazil. To attain their current capacities, those nations had invested hundreds of billions of dollars, over one or two centuries, in equipment and research. The first combine harvester (the king of agricultural machines) was patented in the USA in 1835. As at today, I am not sure Nigeria can boast of 30 harvesters in service. Any meaningful increase in Nigeria’s agricultural capacity will require huge capital injection (with high foreign exchange component) which Nigeria does not have today. I have always assumed that the Director General of a country’s Budget Office would contribute to economic discourse within the context of the country’s fiscal position. I guess that I assumed wrongly. Nigeria (and yes with its subsistence farmers) is the largest producer of cassava and yams in the world. However, a large proportion of the cassava harvested is lost to spoilage annually. This is why government’s first priority is to encourage industrial off takers who would absorb the harvest which is lost annually.
“The Ethiopian Economy Has Grown By An Average Of 11% Pa Over The Past Decade Mainly Driven By Agriculture, Which Is Also Its Principal Foreign Exchange Earner”. This statement obviously presumes that all Nigerians are gullible because mathematically 11% is only a relative factor. 11% of poverty is still poverty. With an average growth rate of 11% in the last decade, Ethiopia is still one of the poorest countries in the world. It’s total earnings from commodity export is only $3.7 billion of which 17% is from KHAT (a semi legal narcotic) and 10% is gold. Nigeria (an unfocused commodity exporter) earns about $2.5 billion without any serious effort. Akabueze obviously assumed that by brandishing irrelevant statistics he would sway opinion in his favour. It is not even true that the useless 11% growth (growth that does not eradicate poverty) was mainly driven by agriculture. The service sector (Ethiopian Airlines) contributed equally to the growth and it is now the largest contributor to Ethiopia’s economy. One airline, contributing to their GDP more than the whole agricultural sector of the country. It is no wonder they are seriously impoverished. I hate to burst his ego bubble but in 2015, the government finalized and published a new five year (2016-2020) plan, known as the Growth and Transformation Plan (GTP II) which emphasizes developing manufacturing capacity in sectors where Ethiopia has a comparative export advantage such as textiles and garments, leather goods, and processed agricultural products. Even agricultural Ethiopia knows that industrialization is the way forward.
“Agriculture Definitely Can Replace Oil As Nigeria’s Leading Economic Sector”. For agriculture to replace Oil or Petroleum as Nigeria’s economic mainstay, it must contribute at least $25 billion annually (conservatively) to Nigeria’s foreign exchange earnings. In Cocoa (Nigeria’s main agricultural export) terms, Nigeria will have to increase its export from 0.2 million tonnes to about 8.3 million tonnes to achieve this feat. However, the world’s total cocoa production is only 4.37 million tonnes and the market is already saturated from over production. The irony is that because of the adverse Terms of Trade (TOT), the more cocoa Nigeria produces, the lower the prices become. Oil did not kill the groundnut pyramids, terms of trade did. Even if by a miracle, Nigeria is able to produce corn like the Americans (32% of world’s total), to whom would it be sold. The Americans can always sell wheat and rice to countries like Nigeria plagued by weak governments. The question is to whom, will Nigeria sell its fantasy agricultural products too. Would the U.S.A buy rice or corn from Nigeria? Most countries are not that backward. The three largest agricultural exports from Africa are tea, coffee and cocoa. It cannot be a coincidence or an accident that the majority of farmers producing these products are poor. In 2015, it is estimated that global cocoa sales will be about $13 billion. In the same period, the top 10 manufacturers of chocolate based candy will make sales of about $83.6 billion. This says something for industrialization.
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