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How Govt Throws Citizens To Favoured Producers, By Feyi Fawehinmi

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The Vice President was recently in Germany during which he spoke to investors about the potential for investing in the Nigerian market. When he got talking about agriculture, he made a comment that set alarm bells off in my head.

The part of the speech I want to highlight is this:

 

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”Carlos Farms, a Mexican fruit and vegetable investor, had initially planned to grow bananas and pineapples for export; until he discovered that he was making more money selling his bananas locally at $3 dollars a kilogramme, for what he would have been paid only a dollar per kg in Europe.”

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This is just a shocking thing to read. Two years ago, I wrote a piece in The Guardian that featured bananas:

 

”Compare that to the banana — you have to harvest them while they are green then wash them with soap and water (if for exports). This is important because once the banana starts to ripen, the process cannot be halted or reversed. They also have to be shipped at exactly 14 degrees centigrade in special refrigerated ships to stop them from ripening during the journey. Timing is so important so that they start to ripen as they get to the supermarket. Then, after all this wahala and hard work, a banana costs only 18 pence (less than N100) at a Tesco supermarket in the UK.”

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Reading that, we can be certain that growing and selling bananas in Nigeria involves a lot less work than selling them in Europe where you have to grow them in the Caribbean and then ripen them with ethylene gas in the UK and so on. It is bad enough that Nigerian bananas can then be sold for 3 times the price in Europe. But to then have this celebrated by the Vice President, in a foreign country no less, as proof of how much money you can make in Nigeria? Unbelievably depressing. How can Nigerians — some of the poorest people in the world — be paying 3 times what Europeans — some of the richest people in the world — are paying? How can this ever be ok?

This is the part of Nigeria’s poverty that is self inflicted. Government, faced with a choice, 10 times out of 10, sides with the producer interest. These producer interests are then held up as a success. It is the model that gave us Aliko Dangote, a cement billionaire in a country with shambolic infrastructure and a housing deficit of close to 20 million. If these guys can sell their bananas for $3, then you can be sure they are not going to export anytime soon. Why bother? And if and when they run into trouble, you can also be sure they will be in Aso Rock lobbying for a ban on something or the other.

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There might even be a scenario where something like this might make some sense for a short period of time. A smart government might say — the global banana market is worth billions annually and most of it is produced by countries that Nigeria can reasonably hope to take some market share from. The government can then tell producers — for a limited time period, we will protect you locally so you can charge slightly higher prices BUT on the condition that you must export a certain amount every year. The high local prices you charge will allow you charge lower export prices so you can win market share. We will only let you do this for 5 years and after that, we will remove all protections from you so that local prices can fall and Nigerians can enjoy reduced and competitive prices. This is a short summary of how the Koreans built up their car industry. Many countries (especially in Asia) have done similar things. Yet, from the VP’s comments, the company was even going to do this by itself before reversing course.

But Nigerian governments never do this. They just throw their citizens to their favoured producer and move on to find the next winner. They then celebrate the ‘achievement’ of creating a new billionaire.

If you’re still surprised that Nigeria is a poor country, I am surprised at your surprise. People are poor because they don’t earn enough. But they are also poor because they pay too much for food and other basic items.

* Feyi Fawehinmi is an Accountant and Amateur Economist.

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