Importing Poverty
If your expenses exceed your income, it is inevitable that you will eventually become broke!
Nigeria, and Nigerians, are driven by a need to utilize foreign products. It is extremely difficult to convince us to use locally made products. Even more importantly, it is extremely difficult to convince us to manufacture locally. For this reason, we import. But what has importing got to do with poverty if we are spending our money?
To answer this question, we need to understand a little bit about the flow of money. Nigeria’s economy is driven by government spending. Government exports oil, gets paid, uses that money to pay workers, who proceed to the market to spend it. In an ideal society, this money would remain in circulation, but in Nigeria, that money goes from the market to other continents, because the market traders import what they sell.
All of this flow would not be bad if we only imported a few items. However, when the value of our imports exceed the value of our exports, we start to have a problem such as a shortage of foreign exchange with which to pay for our imports.
Exactly how much do we spend on exports?
We have data from the Central Bank of Nigeria (CBN) summarizing banking transactions for the 2nd of March, 2017. This data is freely available on the CBN website in tabular format. We have cleaned it up a bit.
USD 367.13 M (Three Hundred and Sixty Seven Million Dollars)! In Naira, that is 118.60B (One Hundred and Eighteen Billion, Six Hundred Million Naira).
That is how much left Nigeria in payments for that day.
What were we importing? Before we get started, it is important to note that what we are looking at is a snapshot, just one day out of 365, so we must not jump to conclusions. Having said that, let’s dive into the data.
There were a lot of items, so we chose the top ten to look at. These account for 115 Million USD on that day, which is about a third of expenses for that day. Topmost on our list is sugar. We spent 25 Million Dollars importing raw sugar! The next item was Gas Oil, followed by Raw Sugar in Bulk, then GASOIL, GASOLINE, GAS, Equipment for cement industry, Gasoline, Wheat, and 100 units of Truck CKD Kits (that is complete knock down kits for truck assembly).
Let’s simplify further; we imported sugar, petrol, and wheat. Subtract USD 16.3 M for CKD and equipment, and you have $99 M spent on importing sugar, petrol, and wheat.
That amount of money was spent in one day!
Did we need to import those items? Whatever response we give is debatable. Sugar can be obtained from sugar beets and cane, which I believe we can farm on a large scale. Wheat is also something we can farm. Gasoline is obtained from the fractional distillation of crude oil. That is what refineries do. While our major refineries have issues, it is possible, and probably also the norm, to build small modular refineries.
Why are we importing what we can produce? Is it because our farmers are not doing enough? Perhaps the industries need more than we are capable of cultivating? Or perhaps our farmers are not interested?
If you do decide to go into cultivating these products on a large scale, your major clients are visible in the chart below.
While we only analyzed 30% of expenses, it is important to note that there were items in the data that made sense, like revenue repatriation by foreign airlines. Again, if we had a local carrier, we would not need to send that money out.
I believe we can produce a lot of things locally, but feel free to analyze the information and come up with your own ideas about the situation.
