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  • Free Trade Fact of the Day

    Initiative for Public Policy Analysis executive director Thompson Ayodele writes about hunger, trade, and his homeland Nigeria in The Madison Times:

    Food prices have skyrocketed internationally. In my own Nigeria, rice has epitomized the crisis after doubling in price since last year.

    It’s not hard to link African food crises to inappropriate government agricultural policies that stifle the continent’s great agricultural potential. Over the years, nothing has been done to address low crop yields. To the contrary, government has seemingly gone out of its way to hamper production with policies that are often flawed from conception and ad hoc in nature.

    According to the Rice Farmers Association of Nigeria, Nigeria fell 800,000 metric tons short of a five-million ton production target for 2006 due to inconsistent government policies. Of the projected annual 4.64 million metric tons of national demand for rice, current local production stands at a meager 525,000 metric tons – requiring $267 million in imports. Because most locally-produced rice is of low quality, its market potential is limited even within Nigeria.

    By protecting local rice growers, the government shields them from competition by. Farmers have no incentive to improve quality or yields nor are able to invest. This naturally breeds reduced production.

    In Nigeria, the tariffs on rice are at 55 percent, including a five percent levy for increasing local production. In neighboring Benin, it is mere 35 percent. That’s a whopping $200 per ton price advantage Benin imports have over Nigerian ones.

    At different times, Nigeria has also banned the importation of staples including wheat, rice, maize and vegetable oil. Such restrictions may protect local industry for a short time, but it punishes consumers and discourages production. Protectionism allows local producers to hike prices and lower quality. Relaxing restrictions does the opposite.

    Posted in International [slideshow_deploy]

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