Agriculture subsidies and why you buy 100kg bag of rice 20000 (24000) Naira!!

 

Muhammad Rislan

@rislan1

In August 2019, Nigeria partially closed its land borders and banned the importation of rice. We all celebrated (or most of us) because we hoped this landmark decision would increase our productivity and ensure we eat healthy (freedom from expired rice according to our customs officials).

Well, what we failed to put into account is the economics of food production which by some stroke of misfortune our well-trained economists and agricultural experts were too ignorant to brief the nation on so that we can brace ourselves for what is to come. Perhaps, our economists are best suited for market speculations and not the real economy.

Subsidy is a word we are all too familiar with, and it especially gained notoriety when Nigerians learned about how fuel subsidy was used to bleed our public coffers to a coma. We, the masses, came to hate all things subsidized. However, while we are busy subsidizing consumption in the late '80s, the developed economies (and some serious upstarts like China) were (and still are) subsidising production. The economic sectors with the largest share of global subsidies -agriculture fisheries, transport and energy, accounts for 81% of world subsidies and affect 66% of world trade.

To put it into context, the USA has a farm bill that is worth $180 billion that will raise U.S. agricultural subsidies by up to 80 per cent a year. In addition, the 2002 Farm Security and Rural Investment Act will enable U.S. agricultural producers to sell their crops at very low prices, and then the government will make up for their (farmers) losses through direct payments. The result is that the U.S. can dump its farm surplus on world markets and sell at prices far below the cost of actual production.

Similarly, Agriculture subsidy is an integral component of the European Union economy. It is so important that at one point is accounted for 73% of the EU budget (in 1985) but now down to 37% (in 2017). The EU spends $65 billion a year subsidizing agriculture. Japan also spends close to $9 billion a year on agriculture subsidies.

Let's take a look at the new elephant in the room; China. China is now the world's largest subsidizer of agriculture — Beijing provided an estimated $212 billion in farm subsidies in 2016, significantly more than the European Union ($100 billion), United States ($33 billion) or any other country in the world.

What we can see from all these examples is that there is a liberal approach to agriculture. Developed economies subsidize agriculture, not tax agriculture.

And when we open our borders to compete with them, we find ourselves overrun with cheap commodities that were not produced due to farmers' ingenuity or technology but from heavily subsidized government handout.

Perhaps, it is time to face the real challenge of developing our economies and stop blaming our farms or farmers as being unproductive. Let's stop listening to the World Bank, IMF and the so-called WTO (that has failed to address trade-distorting domestic support mechanisms that have unfairly affected nations especially in Africa) and put in place an honest support mechanism for subsidizing agriculture. This will certainly ensure stable food prices, plentiful food production, a guarantee for farmers’ basic incomes, and it will generally strengthen the agricultural segment of the national economy.

Until then, let's continue to buy rice (and other agricultural commodities) at the real cost of production!!