Poor policy implementation stalls food duty waiver initiative

In a bold move to alleviate the growing pressure of food inflation on the Nigerian populace, the Federal Government launched a temporary import duty waiver on staple foods. The waiver, set to last from July to December 2024, was aimed at reducing the cost of key imports such as rice, wheat, maize, and sugar, in a bid to curb skyrocketing food prices and provide economic relief to millions of Nigerians struggling with the high cost of living.

However, despite the government’s good intentions, the import duty waiver ultimately proved to be a failed initiative, failing to yield the expected results as the six-month period drew to a close on December 31st, 2024. Prices of food remained high, supply chains were disrupted, and the country’s dependency on food imports showed no signs of abating.

Background

Nigeria’s food crisis has been escalating for several years, exacerbated by a combination of inflation, currency devaluation, and a growing population. As of mid-2024, food inflation in Nigeria had surged to 27.6 per cent, the highest rate recorded in the last five years. Key staple foods such as rice, wheat, maize, and sugar, which form the core of the Nigerian diet, had become increasingly unaffordable for average citizens.

Rice, a key staple, saw a sharp price increase, with a 50kg bag of imported brand retailing from N30,000 by early 2024 to about N120,000 towards the end of the year 2024.

In August, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, through his X account, explained that the specific items to be granted duty waivers were those with material gaps in local production.

“The duty waiver ranges from 5 per cent on grain sorghum, millet, and maize to a 20 per cent duty waiver on wheat and beans and a 30 per cent waiver on husked brown rice. The measures are for a temporary period, effective from July 15, 2024, to December 31, 2024, to ensure that efforts aimed at enhancing local production are not undermined,” Oyedele explained.

He added that the eligibility to participate as an importer is restricted to established businesses with a track record of good governance and tax compliance for a minimum of five years.

“Only companies with sufficient farmland for cultivation, feed mills, or agro-processing companies with an out-grower network for cultivation are eligible to import items such as husked brown rice, grain sorghum, millet, wheat, maize, or beans. A minimum of 75 per cent of the imported items must be sold through recognised commodities exchanges, which will be monitored for compliance and sanctions, while the export of the imported items in their original or processed form is prohibited. The moderation in the inflation rate just announced for July 2024 on the back of over a 130-basis point decline in food inflation, which accounts for more than 50 per cent of the consumer price index basket, is expected to continue in the coming months as the new measures take hold,” he said.

Meanwhile, with many Nigerians spending a significant portion of their income on food, the government saw the import duty waiver as a necessary intervention to reduce food prices and ease the burden on households.

When it was first introduced in July 2024, there was a wave of optimism across the country. The government’s official statement claimed that the move would reduce food prices by as much as 20 per cent. Stakeholders, including importers, traders, rice millers, farmers, and market analysts, were optimistic that the suspension of duties would lower the cost of foodstuffs, especially for rice and wheat, which are among Nigeria’s most imported commodities.

Challenges

Despite early reports of price reductions, the promised relief from food price inflation never fully materialised. By the time the waiver was expiring in December 2024, the anticipated price reductions were nowhere to be seen. Instead, food prices remained stubbornly high, supply chains were disrupted, and the country continued to rely heavily on imported staples. Several key factors contributed to the failure of the import duty waiver.

Devaluation of the naira: One of the most significant factors that undermined the effectiveness of the waiver was the continued devaluation of the naira. By the end of 2024, it had depreciated by nearly 18 per cent against the dollar compared to the same period in 2023. This devaluation meant that even though import duties were waived, the cost of purchasing goods in foreign currencies remained high. Importers still had to buy dollars at elevated rates, making it difficult for them to reduce the prices of imported goods.

For instance, the exchange rate between the naira and the dollar stood at N890/$ in July 2024. The official exchange rate between the naira and the United States dollar ended in 2024 at N1,535/$, an analysis of data from the Central Bank of Nigeria has shown, increasing the cost of food imports significantly. This currency instability wiped out any potential gains from the import duty waiver, leaving food prices unaffordable for many Nigerians.

Food inflation has also seen a sharp rise, reaching 39.93 per cent in November 2024, up from 32.84 per cent in the same period, making it difficult for many households in the country to afford daily meals. The price of imported rice, for example, did not see the projected decrease; instead, it remained around N120,000 per 50 kg bag as of December 2024 due to the persistent dollar scarcity and currency devaluation.

Lack of effective monitoring: Another issue that hindered the success of the import duty waiver was the lack of effective monitoring and enforcement by the Nigerian government. Traders and importers took advantage of the policy to increase their profit margins without passing on the savings to consumers.

In many cases, importers chose to pocket the difference between the waived duties and the actual price they had paid for goods. Without sufficient oversight, there was little accountability for these actions.

Nigeria’s already struggling supply chain infrastructure was ill-equipped to handle the surge in food imports prompted by the waiver. In the first three months of the initiative, clearance times for imported goods increased by 30 per cent, and several containers filled with food products were delayed for weeks at the port.

Despite the government’s hopes that the waiver would boost local production by making imports cheaper, Nigeria’s dependence on food imports remained high. The country continues to face significant challenges in the agricultural sector, including inconsistent crop yields, poor infrastructure, and the impact of climate change.

Local rice production, for example, has been unable to keep up with demand, and Nigeria remains one of the largest rice importers in Africa. In 2024, Nigeria imported nearly 3 million metric tons of rice, up from 2.5 million metric tons in 2023, despite the government’s push to increase local production. The import duty waiver did not change this trend, as local rice production could not compete with cheaper imported varieties.

According to data from the Central Bank of Nigeria, agricultural output growth slowed to 2.1 per cent in 2024, far below the expected 4 per cent growth needed to meet the demands of Nigeria’s growing population. The country’s food insecurity problem remained largely unresolved by the import duty waiver, which only temporarily alleviated the price burden without addressing the underlying structural issues in agriculture.

Political instability: Political instability and governance issues also played a role in the failure of the import duty waiver. The government’s inability to provide clear communication and transparency surrounding the policy created confusion among importers and consumers. According to a report by the Nigerian Institute of Social and Economic Research, there was widespread scepticism among the public regarding the government’s ability to manage the policy effectively.

Many Nigerians viewed the waiver as a short-term political manoeuvre rather than a sustainable solution to the country’s food crisis. This lack of public trust further undermined the policy’s effectiveness.

Stakeholders speak

A recent survey by the National Population Commission revealed that over 70 per cent of Nigerians are unable to afford basic food items, even with the import duty waiver in place. In addition, a report from the United Nations Food and Agriculture Organisation stated that food insecurity in Nigeria had reached alarming levels, with more than 30 million Nigerians facing hunger by the end of 2024.

When queried on why the government was delaying the implementation of the policy in October, the Director-General of Rice Processors Associations of Nigeria, Dr. Andy Ekwelem, in a recent interview with The PUNCH, said, “We believe that the government is working on the guidelines, and perhaps very soon it may be released.”

According to him, there was a need for the government to act fast as it regards implementing the policy before it snowballs into a crisis as the cost of foodstuff like rice is skyrocketing.

“The policy document I saw made it clear that the government approved the importation of husked brown rice at zero duty, zero levy, and zero other charges for rice processors and millers”, Ekwelem explained.

According to him, full implementation of the policy would ensure that jobs and employment are retained and millions of Nigerian rice farmers and agro-input dealers would remain in business.

However, licensed agents and customs agents have argued that the policy’s delay was due to the government’s decision to restrict the initiative solely to rice millers.

Meanwhile, RPAN insists that allowing the importation of brown rice would create jobs and boost the N1tn invested in Nigeria’s rice processing industry.

Agents expressed frustration, stating that opening the policy to non-Miller importers could have led to better outcomes.

They reasoned that since the announcement in July, food prices have continued to rise, undermining the goal of making essential commodities more affordable.

A seasoned licensed agent, Mr. Abayomi Duyile, criticised the lack of price reduction, particularly in wheat, which has not impacted the cost of bread or other wheat-based products.

Duyile pointed out the flaw in limiting the duty waiver to rice millers, which, in his view, excludes direct traders and has caused the prices to keep rising. “Instead of reducing, prices are increasing every day.”

 The National Protocol Officer of the Association of Nigerian Licensed Customs Agents, Amuni Rilwane, called the initiative another unfulfilled government promise. “If they are happy making revenue from imports, it’s hurting the economy. The promise has not been fulfilled,” he added.

The National Secretary of the Western Zone of the National Association of Government Approved Freight Forwarders, Stanley Ezenga, echoed similar concerns, calling the policy a “broken promise,” noting that no shipments of brown rice had been cleared since the announcement.

Conclusion

The failed import duty waiver initiative on staple foods in Nigeria highlights the challenges of implementing effective short-term policies in a country struggling with deep economic structural issues. While the government’s intentions were well-meaning, the lack of adequate enforcement, poor infrastructure, and Nigeria’s continued reliance on imports made the policy unsustainable.

The government must learn from the shortcomings of this initiative and focus on long-term solutions to address the country’s food security challenges. These solutions should include strengthening local agricultural production, improving supply chain infrastructure, and ensuring stable currency management.

As Nigeria looks to the future, it is clear that food security can only be achieved through comprehensive reforms that move beyond temporary measures like import duty waivers. Only by addressing the root causes of food insecurity and investing in sustainable agricultural development can Nigeria hope to ensure affordable and nutritious food for all its citizens.