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Policy objectives

21. There is not declared milk import policy on record in Nigeria. However, several policy objectives related to dairy imports could be inferred from some of the policy instruments employed by the government in the past and changes in the nature of some of these instruments over time. We can identify four policy objectives implied by some of the significant actions that the Nigerian Government has been taking in regard to dairy imports.

Satisfying urban consumer demand

22. Both before and after independence policy-makers in Nigeria seem to have been motivated by welfare considerations in meeting consumer demand for selected food items. This consideration has also been reflected in the country's external trade policy which made securing the maximum goods possible with the foreign exchange available and with the greatest ease, one of the priority government objectives (Nwoko, 1986). Milk has been one of those selected food commodities whose level of consumption has been used in determining the welfare level of the population.

23. Between 1973 and 1981 Nigerian commercial imports of dairy products increased on average by 15.4% per year but only 10.9% of this growth figure could be explained by changes in such variables as population, income or domestic milk production (von Massow, 1984). The remaining 4.596 increase was due to other causes which were mainly related to such factors as pricing and exchange rate policies pursued by the government. There is some evidence that prior to 1964 in Nigeria imports including imports of dairy products were facilitated by foreign exchange policies.

24. The case of procurement of imports was determined by the inter-changeability of currency or the convertibility of the pound (Federal Government of Nigeria, 1961). Currency was most easily exchangeable in the sterling areas as defined in the Exchange Control Ordinance of 1950 (Nigerian Government, 1950). Such areas included the "British Commonwealth (except Canada), any colony or trusteeship areas under Her Majesty's Dominion, British protectorates. Ireland, Iceland, Burma, Jordan and the United Kingdom of Libya." Importing goods and services from such areas was equivalent to domestic purchases of goods and services since the pound sterling was the unit of account.

25. The next best trade area in terms of inter-changeability of currency was the area defined by the Organisation for Economic Cooperation and Development (OECD). In this area there were..."special arrangements through which members settle their current import/export transactions with minimum foreign exchange difficulties" (federal Government of Nigeria, 1961). Since the United Kingdom was an OECD member, all the Commonwealth countries shared the benefits of its membership in the OECD. This special trade arrangement and the common unit of account of the sterling area facilitated the pursuit of a welfare policy regarding dairy imports during the period preceding 1964. However, as pointed out earlier, since imported dairy products were almost exclusively consumed by the urban population, the policy was biased toward meeting the demand of that sector of the country's population.

Raising government revenue

26. Another inferred policy objective of dairy imports is to raise revenue for the government. This was shown in the early taxation of imports of butter and cheese. Table 3 shows the estimated duty collected from dairy products from 1970 to 1983. Historically, the highest amount of revenue from dairy products was about N 27 million in 1983. As a source of revenue, import duties on dairy products do not account for any significant percentage of the Nigerian Government's revenue. Between 1960 and 1979, the highest percentage attained was in 1978 when revenue from import duty on dairy products accounted for .003% of total current revenue and 1.396 of the combined revenue raised from customs duties and excise taxes.

Table 3. Estimated Import duty from Dairy Products

Year

Total Duty (in million N)

1970

2.415

1971

10.984

1972

4.602

1973

4.411

1974

1.919

1975

.479

1976

.734

1977

.728

1978

22.312

1979

20.471

1980

22.521

1981

22.165

1982

22.545

1983

26.633

27. Raising revenue through duties on dairy imports seems to conflict with the objective of meeting consumer demand for milk by means of imported products. If the quantities of dairy products imported are inelastic to the rate of duty, then there would be no conflict between the two objectives.

Controlling dairy imports to encourage domestic production

28. The infant industry argument, a classic in international trade theory (see Haberler, 1959), which involves protecting young domestic industries from foreign competition so that the domestic industries can nurse their productive strength to full capacity, became popular after Nigerian independence (Fajana, 1977). As new industries got established, the cry for protection got louder. Consequently, protection has been a popular objective in Nigeria's international trade policies which, although not explicitly declared, obviously covered dairy imports as is evident from some of the policy instruments utilized (see later discussion under import policy instruments).

Minimizing balance of payments problems

29. Since 1960 when Nigeria attained independence the colonial era concept of currency interchangeability was rechristened conservation of foreign exchange because of the need to minimize balance of payments problems. This is evident from Central Bank publications (Central Bank of Nigeria, 1963) and the budget speeches (Oluleye, 1973). This policy objective, again although not explicitly stated, was also applicable to dairy imports as we will see later from the discussion on instruments particularly those relating to foreign exchange policy. This objective also appears to conflict with that of meeting consumer demand for milk through imports.


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