OBSERVATION: Still On Productivity

  BY ADEMOLA YAYA IN the very early 1960s, Nigeria was the world largest palm oil producer with the world market share of 43%. Palm oil is an ingredient in a wide variety of foods. It is a viable alternative to unhealthy hydrogenated and partially-hydrogenated fat, as it contains just 1% trans fat, which makes…”
Yusuf
December 18, 2020 10:03 pm

 

BY ADEMOLA YAYA

IN the very early 1960s, Nigeria was the world largest palm oil producer with the world market share of 43%. Palm oil is an ingredient in a wide variety of foods. It is a viable alternative to unhealthy hydrogenated and partially-hydrogenated fat, as it contains just 1% trans fat, which makes it a healthier diet and cost-effective alternative to animal fats in products like spreads and baked goods. It is used as lubricant to machinery. It is also used to manufacture sodium sulphate, a foaming agent in many body care products like soap, toothpaste, cleaning and pharmaceutical products. It is a major ingredient in materials used for make-up, candles and moisturisers.

From late 1960s till today, Indonesia and Malaysia have overtaken Nigeria as the first and second world largest producer of palm oil respectively, with Indonesia alone producing 53% of the world output, which has lifted millions of people out poverty with well-paying jobs in the two countries. Nigeria consumes 6.7 million metric tonnes of crude palm oil but only has capacity to locally produce 4.7 million metric tonnes, with a shortfall of 2 million metric tonnes to be imported. From a leading exporter in the 1960s, although dominated by small-scale farmers which account for about 80% of production and large-scale production of 20%, Nigeria has become a net importer of palm oil! Between 2018 and 2020 alone and despite the government’s restriction policy on importation of the produce, Nigeria imported 1.2 million metric tonnes of crude palm oil valued at N368.8 billion and its importation has continued to increase steadily from 397,000, 400,000 and 420,000 in 2018, 2019 and 2020 respectively and the product is being imported mainly from South-East Asia – Malaysia, Thailand and Indonesia, despite increase in the price per tonne from $601 to $650. If it has maintained its leading exporting, Nigeria would have been generating $USD 20 billion annually and generated millions of good jobs for its teeming unemployed youths.

What is required to optimise our potential is simple. First, there must be a deliberate investment in the industry value chain and provision of easy access to land and capital; the outdated small-scale production should be eliminated to give way to large-scale, which will eliminate wastages during harvesting and production; replacing low-quality seedling with Tenera seedling variety that can be harvested after planting in 27 months with very good yields of between 20 to 30 metric tonnes of fruits per hectare in a year and the palm tree has a lifespan of 20 to 30 years and eliminating crude farming techniques to give way to expert farm managers.

In the previous edition on productivity, it was established that as ancient and conservative as our approach is, studies reveal that cow and cattle rearing and production generates $6.8 billion of the potential income of $20 billion annually, which is about 12% contribution to the Nigeria GDP. We have, however, refused to do the needful in terms of deliberate policy to embracing mechanised farming to boosting our economy, provide jobs for the teeming unemployed population and making Nigeria a better place for mass majority of the people.

As at now, oil money is grossly inadequate to move us forward. For instance, the Federal Government of Nigeria’s 2021 proposed budget before the National Assembly is N13.08tn. At the current exchange rate, it is US$34bn. Budget is expected income and expenditure. It is balanced when outlays equal receipts. It is surplus when expected revenues are higher than expected expenditures and it is deficit when expenditures exceed revenues. Of the 2021 budget, total projected revenue from oil and non-oil sources is 55% – N7.89tn, while the deficit – N5.19tn will be borrowing and support from Central Bank. At the prevailing market rate, $USD 20 billion that could have been generated annually from exportation of crude palm oil alone is about N8tn which is more than projected revenue all sources in the 2021 proposed budget and almost double the entire Nigeria FG budget of 2014 which was N4.962tn.

Assuming that we give deserved attention to cow/cattle rearing and production also, it would have earned us another $20 billion. $20 billion from exportation of crude palm oil and another $20 billion from cow and cattle exportation automatically generate $40 billion annually which is far greater than $34bn (13.08tn), the entire Nigerian 2021 budget deficit, apart from propelling socio-economic development like massive employment and stabilising the economy and improving the value of our currency. 

To demonstrate how infinitesimal the 2021 FG proposed budget is, let us make some assumptions. Assuming, for instance, that the Nigeria Federal Government 2021 proposed budget ofN13.08tn, which is US$34bn at the current exchange rate, before the National Assembly is balanced (Note that there is deficit of N5.19tn) and equally assuming again that other two levels of government – state and local governments – will not go cap-in-hand to obtain allocation from FG and that there will not be stealing at all levels and that the two levels of government will generate same assumed balanced budget of N13.08tn, which is US$34bn, the total assumed balanced budget at the three levels will translate to US$34bn x 3 = $102bn or N39.24tn. In New York City Council, environmental Protection budget alone for 2021 is $89.3bn – almost equivalent of the assumed budget of FG, states and local governments! This is not New York City State. It is a Council like our Osogbo Council in the State of Osun. The sad and harsh conclusion is that if we subtract the deficit from the assumption, York City Council environmental Protection budget alone is greater and above FG budget 3 times.

To make it clearer, let us come home. Let us assume the three levels of government budget for 2021 is US$34bn x 3 = $102bn or N39.24 (approximate it to N40tn for easier calculation). Let us assume again that there is no government, nobody steals from the fund, no infrastructure, no security, no education, no health, no salaries, et al, so that everybody should just get his/her own share and spend as he/she wishes, it will amount to N200, 000 per year per person; which equals N16, 000 per month per person, putting our population at 200 million people. What can this amount provide in a month for a person? Is it food, education, health, security, transportation etc? Instead of unsustainable borrowing to funding national budget, it is high time the government vigorously and sincerely paid attention to mechanised farming and productivity, and for the mass majority of the people to wake up and key in. Reliance on unearned income from oil and gas clearly doesn’t make sense any longer. It is either production or perdition, no middle ground.

 

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