By GEB
The Federal Government’s decision to reduce import duties on rice, vehicles, and other selected essential commodities is a bold intervention to ease the cost-of-living crisis. But the decision highlights the contradiction in the political system’s approach to addressing the country’s multiple economic challenges and the crisis of choice between short-term comfort and building an enduring economy. The responses also expose the hypocrisy of civil society, which is often quick to vilify the political class’s lack of commitment to building an economy that is responsive to people’s needs.
For the umpteenth time, the country appears not ready to pay the price of a much-needed transformation that would indeed transform the country from an import-dependent economy. At about 70 per cent or above, the propensity to import shows that the country exports much of its jobs, creating room for insecurity and youth restiveness to fester – a trend the inward-looking policies of the past years, including high import duties, sought to address. To reverse such policies is to detract from the gains of efforts to build local capacity and domesticate the gains of the huge population, which many have described as the strength of the economy.
But the crisis point built around questions about surviving today while waiting for a better tomorrow. Recently, the Federal Government succumbed to the tension these concerns caused. In a policy thrust termed import adjustment tax (IAT), the government reduced import tariffs on bulk rice, crude palm oil, raw sugar, and refined salt, among other agro commodities. Already, farmers have warned that the policy would weaken incentives to produce locally – a contradiction of the dreamed food sovereignty.
Sadly, this came after a long period of sustained aggressive policies to support local production that paid off in increased output. As the import supplies were cut off, prices spiked, causing much pain for millions of Nigerians. The price hikes turned out to be the sacrifice Nigerians had to make to grow their farms and take charge of their food in their stomachs. To begin by pivoting from the policy thrust and opening the border for foreign foods is to throw away the benefit of the pains of the past years. It could also mean an invitation to chaos in a country that is barely surviving the onslaught of insecurity, resulting in part from joblessness and economic disruption.
This is not the first, second or third time politically-induced pressure would force the hand of government when the long-term impact of the policy would be destructive in the long run. Indeed, the decision reflects political realism. Food prices have spiralled beyond the reach of millions of households; transportation costs have surged alarmingly, leaving behind economic hardships that have become impossible to ignore. Yet, while the duty cuts may offer temporary respite, they expose a deeper contradiction at the heart of Nigeria’s economic policy – a country that is uncertain about its economic direction and whether it truly should subscribe to protectionism or embrace free trade.
Experiences of the last two decades have proven that free trade offers a more prosperous global economy, but it rarely gives opportunities to all countries to grow at a reasonably even pace. It has created a two-tracked growth in developing countries, including Nigeria, at the periphery. Even some developed countries, including the United States, have realised the folly of the free market. Nigeria, at this stage, must understand that it does not have the technology, infrastructure and capital to compete with Asian and European countries. Hence, she must shun the pressure to succumb to external expectations and prioritise national survival in her policy choices, especially in trade.
For several years, successive administrations defended high tariffs and import restrictions as necessary tools for economic transformation. Nigerians were repeatedly told that limiting imports would stimulate domestic production, strengthen local industries, conserve foreign exchange and create jobs. The rice sector became the flagship example of this philosophy. Borders were closed; tariffs were imposed and imported rice was heavily discouraged in favour of locally produced alternatives. The same arguments were advanced for the automotive industry, where high import duties on vehicles were designed to encourage local assembly plants and investment in the value chain.
The model has been persuasive enough, though the results have been deeply unsatisfactory, pushing up prices amidst lacklustre production. The poor results should justify reversal but provide a basis for a deeper review and assessment of the associated fiscal framework, market incentives and infrastructure support. Across relevant sectors, the government must sit back to assess the abiding constraints that must be addressed to unlock the commercial viability of the policy thrusts. Protectionism or backward integration must work for Nigerians in creating jobs, creating wealth and opening new industries. Pivoting at the slightest temptation is not an option for the failure of policies, nor would it deliver the gains of a self-sustaining economy.
Historically, protectionism, rather than nurturing a globally competitive industry, has become a vehicle for transferring the burden of policy failure to ordinary citizens. In the spirit of reforms, the current administration should focus on the sources of policy failures and tackle them, rather than seeking an excuse to chicken out of the model – a tested path to national greatness as demonstrated by the Asian tigers and modern China.
When a state spends years discouraging imports only to later lower barriers to combat inflation, it reveals the limits of its earlier strategy. That calls for more work and shortcuts. Assuming this is the only path to addressing the twin crisis of joblessness and insecurity. Should it chicken out or confront its obstacles?
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