Exchanging the Future for Loaves of Bread

How Poor Energy Policies mean that Nigerians Have to Destroy the Environment to Make Food

Bread is a Nigerian staple – consumed as an essential part of breakfast in rural and urban homes all across the country. To satisfy the resulting huge demand for bread, there are thousands of bakeries operating in almost every community across Nigeria producing, distributing and selling bread on a daily basis. It is generally a profitable business.

But what is good for business and the stomach might not be necessarily be good for a sustainable future. Traditional bread making, as routine as it appears, poses a huge threat to Nigeria’s environment.

Most of the bread in Nigeria is baked in wood-fired traditional ovens. Before a batch of bread loaves can be baked, these traditional ovens are typically pre-heated for, at least, three hours to create the right temperature in the baking chamber. This process, in addition to creating uncomfortably high ambient temperature and unbearable indoor air pollution within the bakery space itself, consumes a lot of wood. A whole lot of wood!

A recent study in Jigawa State identified over 300 registered bakeries in the state. Each bakery was estimated to consume, on the average, one tree trunk a day as fuel wood. If each bakery did business as usual every day for one year, that’s 108,000 trees going into baking bread alone!

Bakery owners admit it is becoming harder to obtain firewood. They often have to go longer distances in search of firewood or source from suppliers at higher costs. This inefficient consumption of wood exacerbates the twin environmental hazards of deforestation and desertification. Diminishing wood supplies also threatens their source of livelihood, which may eventually leave families and communities desolate.

But wood guzzling bakeries are just a symptom, not the cause of the problem. In fact, the energy challenges of traditional bakeries in Nigeria help highlight the cause – providing one of the best illustrations of how seemingly innocuous activities inevitably contribute to deepening Nigeria’s environmental crisis in the absence of an effective energy policy.

Poor access to modern energy sources all over Nigeria has resulted in a majority of Nigerian homes and small businesses relying heavily on energy from fuel wood. According to the IEA, fuel wood still accounts for up to 80% of Nigeria’s energy consumption. This fact, combined with a large and rapidly growing population translates to an enormous amount of pressure on Nigeria’s forest resources.

As a result, forest and green vegetation have become Nigeria’s most endangered natural resources. According to the World Food and Agriculture Organization (FAO), Nigeria lost almost half of its forest cover in the 20 years between 1990 and 2010 (47.5%). In 2012, Verisk Maplecroft – a global risk analysis market leader – ranked Nigeria as number one among countries hardest hit by deforestation. Today, deforestation in Nigeria continues at an alarming rate – accounting for the loss of forest cover equivalent to four times the size of Lagos State (4,000sq km) annually.

In Northern Nigeria, the rapid advance of the Sahara Desert is perhaps the most devastating impact of Nigeria’s deforestation crisis. Experts say that the Sahara now encroaches southward at a rate of 6 kilometers every year, converting 2,168sq km of previously arable land to hot, dry desert. This desert encroachment has been closely linked with food shortages, insecurity, poverty, climate related migration and communal clashes.

Perhaps, one could argue that longer and more frequent droughts in the north and floods in the south – occasioned by climate change – are the major driving forces for the devastating environmental changes we are witnessing. But human activity sure has played its part. The felling of trees in such quantities for use as firewood destroys our natural defenses against desertification and erosion. It is therefore no surprise that the Federal Ministry of Environment has attributed the acceleration of desert encroachment in the 11 Frontline States in Northern Nigeria to “uncontrolled logging and tree felling”. Given the fact that registered bakeries in Jigawa state alone (one of the 11 Frontline States), consume over 100,000 trees annually, it is hard to argue against this assertion.

Nigeria’s worsening environmental crisis is indeed also an energy problem.

Therefore, in addition to the regulation of tree felling and the planting of trees in desertification frontline states, it is imperative that the Federal and State Governments develop and implement a holistic energy policy that will transition majority of Nigeria’s population to safer, efficient and more sustainable energy use. With a broad spectrum of energy alternatives available for domestic and commercial use – ranging from clean cook stoves, liquefied petroleum gas and renewable energy sources – such a policy would improve the efficiency and effectiveness with which Nigeria utilizes its energy and natural resource. It will also have a high chance of success.

The incentives for implementing a national energy policy are immense. Nigerians would be thankful to use energy in safer, healthier and more affordable ways. Also, if we continue the way we are, we are digging ourselves deeper into a mess that we might not be able to reverse.

In the meantime, when next we buy that loaf of bread, perhaps we should start seeing the price as higher than what we paid for it over the counter. And when we settle down to have it for breakfast, we might just be taking a bite out of our future.

 

 

The Opportunity Costs of Fuel Subsidies

It is unfortunate that the public debate over fuel subsidy removal in Nigeria is, more often than not, confined to the immediate negative impact it would have on the price of goods and services. Although these impacts are real, they fail to communicate the full effects of subsidy.
It was Frédéric Bastiat, a French political economist, who in 1848 posited the principle that any act of economic consequence has not only one, but a series of effects. The first effect is immediate and usually visible. Other effects are invisible, difficult to foresee and emerge only over a period of time. He concluded that confining ourselves to only the visible effects is bad because “it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa”. This principle would eventually be known as the important economic concept of opportunity cost.
When we expend a significant amount of public resources on fuel subsidies without actually lifting people out of poverty, we forego the alternative of using those same resources on interventions that will.
The opportunity cost of subsidies become even more apparent when one considers the huge disparities in fuel consumption patterns between rich and poor. When government subsidizes fuel, it makes a crucial assumption that the few who capture the largest share of direct benefits faithfully and equitably pass them on to indirect beneficiaries who are in the majority. It is the impact of this crucial assumption that we often overlook when evaluating the effects of subsidies.
The fact that the percentage of Nigerians living in poverty continues to rise even though our GDP appears to be growing suggests that our economy is not particularly good at passing on benefits from top to bottom. The structural inefficiencies inherent in our economy imply that most of the benefits of economic growth are captured at the top with very little trickling to the bottom. As a result, top-down economic interventions like subsidies have the unseen impact of widening the gap between the rich and poor.
It follows that even in the absence of corruption, the majority of the benefits of fuel subsidies will never reach the Nigerians who need it the most. And even though the little that trickles down makes a huge difference to Nigeria’s poor, this is only so because of the extreme levels of poverty they endure.
It is in light of this that we urge all levels of Government to engage Nigerians transparently about fuel subsidies with a view to collectively deciding how we can better apply the resources currently being expended on subsidies to lift our citizens out of poverty.
We believe that the majority of Nigerians, if engaged honestly by a morally upright Government, will inevitably support the conclusion that fuel subsidies do more harm than good.

Nigeria’s Economic Competitiveness Challenge

The drastic measures needed to defend the Naira following a prolonged period of low oil prices have once again highlighted Nigeria’s poor economic competitiveness. Despite its enormous potential, Nigeria struggles to produce anything worth exporting beyond crude oil and gas. As a result, “Africa’s largest economy” remains deeply vulnerable to external shocks.
Although the CBN is doing its best to respond to the situation, the measures it has introduced cannot and should not be framed as a solution to Nigeria’s economic vulnerability.
It is our lack of economic competitiveness, rather than an “addiction to imports” that best explains why import restrictions are needed to “protect our economy” at this time. A more competitive economy would need no such protection. Its production base would view a weak local currency and low oil prices as favorable conditions – leveraging the relatively lower input costs to increase the competitiveness of its products in markets at home and abroad.
It is little surprise that the World Economic Forum ranked Nigeria 127th out of the 144 countries covered by its Global Competitiveness Report for 2014-2015. A breakdown of the assessment of Nigeria by the same report ranked Nigeria 140 out of 144 in the basic requirements for national competitiveness. One of those basic requirements was primary education and health where Nigeria, perhaps most alarmingly, was ranked 143 out of 144 countries (only better than Chad).
It follows that an improvement in our national competitiveness will not arise from simply restricting what the local market can or cannot consume. An improvement will only result from a set of institutions, policies, and factors deliberately combined with the intent to increase the level of our productivity. It is this increased productivity that will lead to prosperity.
We note that Nigeria has made several attempts in the past to improve its economic competitiveness. These efforts have failed because government focused primarily on attracting foreign investment. A more effective approach would have focused on developing local capacity to produce what domestic and export markets are willing to consume. This is the approach we propose.
The election of President Buhari presents an opportunity for Nigeria to reposition itself on a path towards true prosperity. Taking advantage of this opportunity requires the President not only to articulate a bold vision that captures our competitiveness aspirations, but to also show leadership in galvanizing relevant stakeholders around a programme designed to bring the vision to reality.
Such a programme, to succeed, must recognize how gaps in areas like basic education and infrastructure negatively impact on our collective productivity and define strategies to address these gaps.
Without such a holistic approach, any attempts to fix the economy will be papering over the cracks and postponing the evil day.