Background
You must have heard that the CBN Form M has been banned for maize imports. This article will help you understand the ban and the implications. The fact that the world is in the middle of a pandemic that has ground all economic activity to a halt is no longer news.
The effects of this pandemic have been seen and felt in almost all sectors of the Nigerian and World economy and it shows no signs of slowing down with more and more cases being reported on a daily basis. Governments all around the world have implemented or are in the process of implementing plans aimed at kick-starting their economies and alleviating the economic hardships it has imposed on their citizens.
The Central Bank of Nigeria (CBN) which happens to be at the forefront of Nigeria’s economic restoration and revival has decided that any plans aimed at stimulation of the economy would have to involve an increase in the level of local production of agricultural produce and other locally made raw materials, to reduce the need for foreign exchange.
It is for this reason that the CBN has discontinued the processing of CBN Form M’s for the importation of Maize, which is equivalent to banning the importation of maize into the country with immediate effect.
Image Courtesy of the University of Nebraska-Lincoln
What is Form M?
CBN Form M is a compulsory statutory document required to be completed by all importers of goods before they can import any goods into the country. It is an E- form (electronic or online form) put in place by the Federal Ministry of Finance and the Central Bank of Nigeria to monitor goods entering the country and probably collect import duties.
Reason for the Ban of CBN Form M
This move is expected to stimulate local production of maize in Nigeria and to cause more people to move into production and processing of maize and its byproducts thereby leading to an improvement in the value chain of maize production in Nigeria and also leading to the creation of jobs in the agricultural sector.
This ban on CBN Form M for the importation of maize into the country is bound to lead to market shortages of maize and its by-products for both households and agribusinesses which rely on maize as an input. Prior to this development, Nigeria imports large quantities of Maize into the country yearly. In 2019 we imported about 400,000MT of Maize, valued at about $68m. By banning the importation of Maize, we would be saving the $68m we spend annually on this crop.
Consequences
This ban of CBN Form M in itself would lead to a series of events unfolding. Some of which include:
- A shortage in maize by 400,000 MT and probably more if you add the shortage caused by the impact of COVID-19 on food production within the country. As economics has proven several times, when supply does not meet demand, prices of goods and services increase. This would, therefore, lead to an increase in the price of maize and consequently that of its byproducts. The degree of this increase would however depend on how elastic its price is, that is how much people are willing to pay for it and the availability of alternatives.
- One of the main uses of maize is for livestock feed for various livestock, especially poultry. The possibility that this will have a knock-on effect on the price of livestock is pretty high.
- The market gap created by the ban on importation of maize would lead to a frenzy among farmers with a lot of them moving into the production of maize to try and meet local market demands.
- A possible increase in the smuggling of maize judging by what happened with the ban on the importation of rice a couple of years ago where the number of rice that was smuggled into the country increased by several degrees. There is no reason to believe that the same response would not take place.
Image courtesy of roysfarm.com
Opportunity
Whether the ban on importation of maize is a good or bad move remains to be seen and only time will tell. In the meantime, this might be a good time to explore maize production and/or processing. But like all things agriculture, do your homework. Research the market, know the requirements of the market, find your buyers, and learn everything you need to about maize production and/or processing so that your venture will be a successful one.
Do not make the heartbreaking and expensive mistakes others before you have made, we will provide you with the professional guidance you need to benefit from this opportunity. Contact us.
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