Nigeria halts access to forex for maize imports

In a strategic move to promote local production of maize, the Central Bank of Nigeria has instructed lenders to cease processing Form M documents for the importation of maize into the country. The CEO of Afex Commodities Exchange, Ayodeji Balogun, shared insights on the implications of this decision in an interview with CNBC Africa. Balogun revealed that the surge in maize prices, up by 40% in the last eight weeks, had been anticipated as a result of climate-induced crop shortages exacerbated by the COVID-19 pandemic. The delayed rains in the previous year led to significant losses of maize crops, creating a scarcity that was further exacerbated by speculative activities in the market. Balogun emphasized the importance of supporting local farmers who have been risking their lives to produce food during the pandemic. He stated that reckless importation of maize would jeopardize the economy and the livelihoods of millions of farmers. Balogun called for sustained support and intervention to increase agricultural productivity and ensure fair prices for farmers. Addressing concerns about Nigeria's consumption exceeding local production, Balogun highlighted the potential for increased productivity to bridge the existing gap. By focusing on training farmers, expanding private sector involvement, and providing liquidity, Nigeria could triple its maize production and become a key exporter in the region. The policy to restrict maize imports is expected to attract investments in agriculture due to higher yields and increased productivity. Balogun noted that commodities have been a lucrative investment asset class in Nigeria, outperforming other financial instruments. Plans to launch a derivatives market in early 2021 aim to help players hedge against price volatility and manage risks effectively. Analyzing the potential impact on inflation, Balogun acknowledged that rising maize prices could affect consumer staples like poultry and processed foods. However, he projected that the overall impact on inflation would be mitigated by lower prices of other food items in the market. Balogun suggested that the effects on inflation would be moderate, considering the diverse food basket of the country. In conclusion, the directive by the Central Bank of Nigeria to halt forex access for maize imports signals a strategic shift towards self-sufficiency in maize production. The decision aims to stimulate local agriculture, empower smallholder farmers, and enhance food security in the country. By leveraging increased productivity and prudent market interventions, Nigeria is poised to strengthen its position as a regional agricultural powerhouse.