The eternal dream of autarky

CBN ban

In a bid to boost domestic production and wean itself off expensive imports, the Central Bank of Nigeria banned the import and export of 43 crucial consumer goods in 2019. But will it suffice to ramp up internal production?

The dream of autarky is as old as man himself: even the 600-year old Noah loaded up his ark with pairs of every bird and animal species before the rains could subsume the earth. Three millennia later, Napoleon’s Continental System was a similar attempt at European self-sufficiency—not to mention a means of depriving the British of continental trade—as were Dr. Gaspar de Francia’s attempts in Paraguay later in the 19th century.
Though neither of the above plans worked, even the most liberal of economist must admit the USSR weathered the Great Depression far better than its Western rivals, over-exposed as they were to interconnected financial, commercial, and agricultural meltdowns from 1929 onward. So, when the Central Bank of Nigeria (CBN) declared a halt to most overland agricultural commerce in August 2019, it was following a long and storied tradition of attempts to bolster one’s own domestic market by closing its doors on the world.
When it comes to industrial policy, such bans are hardly surprising: the better part of the 20th century was dictated by various post-colonial import substitution industrialization (ISI) policies that saw a vast bevy of post-colonial economies seek to boost domestic production by halting the import of industrial goods in order to boost their own indigenous sectors. Turkey, Argentina, India, the USSR, China, and Brazil are but a few examples.
Nigeria’s ban, on the other hand, which first went into effect in 2015 but was expanded to all land imports and exports in August 2019, is more focused on boosting domestic agricultural production, particularly rice. Banning the import and export of all perishable products, CBN, the body responsible for implementing the ban (insofar as it meets importers’ foreign currency needs) also targeted vegetable oil, poultry products, and used clothing.
Is the strategy paying off? According to the UN Food and Agriculture Organization, to a small degree. Rice production, for example, increased from 7.1 million tons a year between 2013-2017 to 8.9 million in 2018. As Nigeria is already the world’s second-largest importer of rice after China, President Buhari is keen to reduce this import bill. But, so far, Nigerian growers have been far from sufficient: despite spending USD165 million on rice subsidies in November 2018 alone, the government reported, Nigerians are still importing rice, mostly from Benin, at twice the price it was in July 2019.
The problem is that 80% of Nigerian rice producers are small-scale, often harvesting the grain by hand. Though they received USD150 million in loans to boost production from 2015-2019, not to mention a nearly 70% import tax before the total ban went into effect in August 2019, Nigerians still had to import the white grain in order to satisfy demand. For what was once a luxury good as recently as the 1960s is now a universal staple for 190 million people.
The same policy was extended to milk imports in 2019. With a foreign import bill of USD1.2-1.5 billion each year for milk alone, CBN included dairy on its list of 43 products no longer able to access to foreign currency reserves for import in August 2019. It also began offering low-interest loans to local milk producers, though they, too, are far from meeting domestic demand.

In addition to banning the import of all beer, used clothing, poultry, used cars, and vegetable oil, the bank also slapped an import tax of 45% on cloth and apparel, in addition to tax of 70% on sugar, and tax of 95% on cigarettes. Will it work? Therein lies the question. Though rice and dairy production have marginally increased since 2015, they have at nowhere near the rates the government needs them to be in order to minimize smuggling. If only Abuja could ask Napoleon and Gaspar de Francia where they had gone wrong.

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