A study by Chevron-funded Foundation for Partnership Initiatives in the Niger Delta (PIND) and Market Development in the Niger Delta Programme (MADE) has shown how four Nigerian key value chains –  palm oil, cassava, aquaculture, and poultry – benefited from the devaluation of the naira and other Federal Government trade restriction policies.

According to the report of the study, made available to the ICIR by PIND, crash in the price of crude oil from $100 per barrel to below $30 led to devaluation of naira twice by the Central Bank of Nigeria (CBN) – first in November 2014 and later in early 2015.

The study was carried out in 2017 in the Niger Delta region.

In order to reduce imports and conserve its diminishing foreign exchange reserves, the CBN banned access to foreign exchange for 41 items, including rice, poultry, and palm oil products.

Additionally, the Federal Government increased import levies on these goods and other agricultural products, and even banned some imports entirely.

This, the report said, had significant impact on the four value chains, as they experienced increased production and demands from Nigerians due to high cost of imported goods.

For instance, the report indicated that there was increased demand for both technical palm oil (TPO) and special palm oil (SPO), as imports of refined palm oil were banned while crude palm oil imports were subjected to combined import tariffs of 35 percent, and were invalid for official foreign exchange access.

“The increase in demand has led to increased prices for palm oil and the fresh palm fruit, which has been higher than the increase in prices that producers and processors have faced when purchasing inputs,” the report said.

“The biggest challenge in the palm oil value chain is that producers have been unable to increase supply quickly enough to meet the increased demand, leading to low capacity utilisation by processors who are unable to purchase enough fresh fruit bunches to operate at full capacity.”

In the cassava value chain, the report revealed that the devaluation also led to higher cassava demand and higher prices.

It noted that demand from the food sector increased as the price of imported rice, a major substitute for cassava food products, more than doubled between 2015 and the beginning of 2017, while official imports dropped by about 2 million tonnes since the devaluation.

“Meanwhile, demand on the industrial markets has also increased, as industrial consumers turn to cassava products such as cassava starch and cassava chips as substitutes for imported inputs.

“Even with the increased industrial demand, the price for cassava on the food market is still higher than on the industrial market, leading producers and processors to allocate even more cassava to producing cassava derivatives for the food market.

“This study found that the price increases that market actors in the Niger Delta receive for their products were higher than the increase in input prices, meaning that the naira’s devaluation has been positive for most actors in the cassava value chain.”

In the aquaculture value chain, there was shift in demand for imported feeds to locally produced feeds “because farmers faced large price increases for imported and locally produced fish feeds.”

The report said prices for locally-produced feeds did not increase by as much as for imported feeds, leading to shift in demand for locally-produced feeds.

“Catfish prices have increased as consumers turn to it as an alternative to more expensive imported fish and poultry, meaning that the farmers who have stayed in business have seen their revenues increase. For processors, the price increase of smoking kilns has led to reduced adoption of those kilns,” it said.

For the poultry, the report stated: “Our analysis of the poultry value chain found that the devaluation, which has caused significant price increases of vaccines, resulted in a drop in the demand for preventive vaccines while there is still a constant demand for treatment vaccines, as poultry farms adjust to the increased costs of production.”

But in general, both PIND and MADE said that they found that across all the value chains, the naira’s devaluation increased the competitiveness of Nigerian products compared to foreign products on both local and international markets.

They observed that there were indications that the price increases witnessed in 2016 and early 2017 were attracting significant investment into production in 2017 which might lead to a significant increase in available products, in particular maize and cassava that may bring prices down sharply.

“If this does happen, it may start a cycle of production increases and decreases over several years as the markets gradually return to equilibrium.

“The devaluation has led to import substitution and increased export opportunities, thereby helping to support government trade policy.

“But the CBN has intervened to strengthen the naira, reducing some of the gains in competitiveness that resulted from the devaluation. This exposes the inconsistency between Nigerian government trade and monetary policy, and reinforces the historical unwritten policy for a strong naira.”