Massive Food Diversion: Traders Exploit Naira Decline, Flock to Neighbouring Countries for Profit

In response to the staggering depreciation of the naira against the United States dollar, grain traders in Nigeria are resorting to selling their produce to neighbouring countries, such as Niger Republic and Cameroon, where stronger currencies promise higher profits.

Traders, citing the allure of stronger currencies in these nations, reveal a growing trend of diverting essential food items, potentially leading to hoarding, artificial scarcity, and a looming food crisis. Experts caution that if unchecked, this could exacerbate the ongoing severe hunger crisis in the country, with staple prices having surged over 300% recently.

Nigeria, grappling with its highest inflation rate in 28 years, witnesses a surge in food inflation, reaching 35.41% in January. The free fall of the naira further complicates matters, with a bag of long-grain rice now fetching nearly N80,000, compared to N45,000 in December 2023.

Traders, facing challenges like harassment on highways, insecurity, and poor roads, find selling in neighbouring countries more lucrative. Reports indicate an uptick in smuggling, with 15 trucks intercepted at the Sokoto State border, loaded with food items intended for illegal export.

Currency Dynamics and Trans-Border Trade

The West African CFA franc’s increasing strength against the naira emerges as a significant factor in this shift. The CFA franc, the official currency of several West and Central African nations, has appreciated notably against the naira in recent years, making it more profitable for traders.

As of the latest data from Aboki FX Limited, 1,000 West African CFA francs (XOF) trade at N2,400 in the black market. Traders rushing to countries like Senegal, Niger, Mali, Burkina Faso, and others find themselves doubling their profits compared to selling within Nigeria.

Despite government efforts, traders continue to exploit these opportunities, pointing to economic hardships and the need to secure family livelihoods. The situation is further complicated by cross-border alliances, with traders in Cross River State forming a trade axis with Cameroon, strengthening the CFA franc against the naira.

Government Response and Economic Impact

In response to the escalating crisis, the Nigerian government has set up committees and task forces to curb food hoarding and illegal exports. The Sokoto State Government recently established a task force to address smuggling and hoarding within its borders.

Despite these measures, the smuggling of food items, especially grains, persists, leaving the government grappling with a multifaceted challenge. Traders argue that the government should focus on economic stability, addressing the root causes of the naira’s decline, and ensuring a conducive environment for legitimate trade.

As the nation navigates these complex economic dynamics, the outcome remains uncertain, and the resilience of the food supply chain hangs in the balance.