With its status as the largest employer of labour in the country and its huge potential to become an alternative foreign exchange earner, Eromosele Abiodun posits that now is the time to take a serious look at the agriculture sector
Renowned physicist and Nobel Laureate, Albert Einstein once said: “In the middle of difficulty, lies opportunity.” A careful consideration of Nigeria’s current economic meltdown reveals the truth behind this aphorism and why serious attention must be paid towards diversifying the economy. In recent times, the country’s foreign exchange reserves have dropped below $30 billion as at January, 2016 and the currency has continued to lose value as the gulf between the parallel market and official rates the naira to the dollar widens further.
Crude oil accounts for over 90 per cent of Nigeria’s foreign exchange earnings, 35 per cent of gross domestic products (GDP), 75 per cent of government revenue.
However, with the fall in oil prices, and with no commensurate cut in production, Nigeria now finds itself in an economic bind. The current state of agriculture in Nigeria is only a shadow of what it used to be but it can be said that there are encouraging signs of improvement. It is common knowledge that about 80 per cent of Nigerian land is arable and has produced major crops, including beans, sesame, cashew nuts, cassava, cocoa beans, groundnuts, kolanut, maize (corn), melon, rice, millet, palm kernels, palm oil, plantains and rubber, among others. For many decades, the sector has been under-funded and not received the attention it deserves. As such, small holder farming forms a large percentage of the sector within Nigeria. Poor farming methodologies, lack of access to finance, post-harvest losses due to lack of storage facilities, unreliable power supply, poor transport infrastructure and unattractiveness of farming in terms of returns for many young people are some of the reasons why agriculture has remained on the back burner of our national life.
Nigeria has huge agricultural potential. With over 84 million hectares of arable land, of which only 40 per cent is cultivated; a population of 167 million people, making her Africa’s largest market; 230 billion cubic meters of water; and abundant and reliable rainfall in over two thirds of its territory, the country has some of the richest natural resources for agricultural production in the world. Not surprisingly, Nigeria used to be a major player in the global agricultural market in the past, as the world’s largest producer of groundnuts and palm oil in the 1960s, and the second largest exporter of cocoa. The country was also self-sufficient in food production before the emergence of oil in the 1960s.
In the past four years, Nigeria’s agriculture sector has undergone major reforms and transformation.
The introduction of Agricultural Transformation Agenda (ATA) brought about reforms in the input delivery or Growth Enhancement Support (GES) Scheme, agricultural financing, value chain development, including the Staple Crop Processing Zones, and farm mechanization have yielded an abundant harvest for farmers and great gains for the country. Between 2011 and 2014, national food production grew by 21million metric tonnes and led to a sharp reduction in food imports. Nigeria’s food import bill fell from an all-time high of N3.19 trillion in 2011 to N635 billion in 2013; a 403 per cent reduction. Direct farm jobs rose by 3.56million in the period 2012 to 2014 due to ATA interventions. Agriculture has become an exciting sector in Nigeria.
Contribution to GDP
Agriculture is made up of four sub-activities, namely: Crop Production, Livestock, Forestry and Fishing. In nominal terms, the sector grew by 9.50 per cent year-on-year. This was higher than growth rates recorded in the corresponding quarter of 2014 and the third quarter of 2015 by 3.22 per cent points and 0.16 per cent points respectively.
According to the National Bureau of Statistics (NBS), growth in the sector was driven by output in Crop Production accounting for 87.01 per cent of overall growth of the sector. The NBS in its Q4 2015 national GDP report said agriculture contributed 22.56 per cent to nominal GDP during the quarter. This, it stated, was marginally higher than shares recorded in the corresponding period of 2014 yet lower than the third quarter of 2015 by 0.49 per cent points and 1.95 per cent points respectively.
“Real agricultural GDP growth in the Fourth Quarter of 2015 stood at 3.48 per cent (year-on-year), a decrease of 0.17 per cent points from the corresponding period of 2014. Growth in the Fourth Quarter was 0.02 per cent points higher from the Third Quarter of 2015. While positive, growth in agricultural output has been relatively lower compared to the corresponding period of 2014 as a result of lower crop output which in turn was as a result of security challenges during the quarter. The contribution of Agriculture to overall GDP in real terms was 24.18 per cent in the Fourth Quarter of 2015, marginally higher from its share in the corresponding quarter of 2014, and lower from the Third Quarter of this year by 2.61 per cent points,” the NBS said.
Overtaking Oil, Manufacturing Sectors
Analysis of the performance of the three sectors in the fourth quarter of 2015 showed that the agricultural sector is doing well. There are 13 activities in the Manufacturing sector; Oil Refining; Cement; Food, Beverages and Tobacco; Textile, Apparel, and Footwear; Wood and Wood products; Pulp Paper and Paper products; Chemical and Pharmaceutical products; Non-metallic Products, Plastic and Rubber products; Electrical and Electronic, Basic Metal and Iron and Steel; Motor Vehicles and Assembly; and Other Manufacturing.
Nominal GDP growth of manufacturing in the Fourth Quarter of 2015 according to the NBS, was recorded at 6.93 per cent (year-on-year), 12.19 per cent points lower than the 19.12 per cent recorded in the corresponding period of 2014 partly as a result of higher operating costs.
“Growth was 2.13 per cent points higher than the Third Quarter 2015 recorded at 4.80 per cent. On a Quarter-on-Quarter basis, the sector grew by 0.33 per cent. Contribution of Manufacturing to Nominal GDP was 9.09 per cent in the fourth quarter of 2015, lower than the 9.11 per cent recorded in the corresponding period of 2014, and 9.67 per cent in the third quarter of 2015
“In the fourth quarter of 2015, real GDP growth of the manufacturing sector slowed by 13.09 per cent points to 0.38 per cent (year-on-year) from 13.47 per cent growth recorded in fourth Quarter of 2014. Growth was however 2.13 per cent points higher than rates recorded in the Third Quarter of 2015, (Figure 6). On a quarter-on-quarter basis, the sector slowed on the margin by 0.03 per cent, with oil refining and motor vehicle and assembly weighing on the sector manufacturing, “the NBS said.
It added: “During the period under review, Oil production stood at 2.16million barrels per day (mbpd) 0.3 per cent lower from production in Q3 of 2015. Oil production was also lower relative to the corresponding quarter in 2014 by 1.0 per cent when output was recorded at 2.19mbpd. As a result, real growth of the oil sector slowed by 8.28 per cent (year-on-year) in Q4 of 2015.
“This represents a decline relative to growth recorded in Q4 of 2014 recorded at 1.18 per cent. Growth also declined by 9.33 per cent points relative to growth in Q3 of 2015. Quarter-on-Quarter, growth also slowed by 19.10 per cent. As a share of the economy, the Oil sector contributed 8.06 per cent of total real GDP, down from figures recorded in the corresponding period of 2014 and in Q3 of 2015 by 0.91 per cent points and 2.21 per cent points respectively.”
However, with its status as the largest employer of labour in the country, its huge potential to become a major foreign exchange earner and help boost the nation’s revenue base, now is the time for everyone, government, citizens and corporates to take a serious look at the sector, even as the nation moves away from over dependence on oil.
Corporate Bodies to the Rescue
However, it is heartwarming to see that corporate bodies such as the Dangote Group, Guinness Nigeria Plc, British American Tobacco Foundation, have picked up the gauntlet in the drive to give agriculture the oxygen it needs to thrive. During the company’s pre-annual general meeting briefing in Lagos, Managing Director of Guinness Nigeria Plc, Peter Ndegwa, had said that the company has a target of sourcing over 80 per cent of its raw materials locally in the coming years.
He said that this was a fundamental part of the company’s social and economic contribution to the Nigerian market and this commitment is reflected not only at local but also at regional level as the Diageo Group has a target to reach the 80 per cent mark on Local Raw Materials (LRM) for Africa by 2018.
Ndegwa noted further that the multiplier effect of this strategic move of the company on society and the economy will far outweigh the challenges that may be initially faced.
Apart from driving down costs for the manufacturers and ease the pressure on the nation’s dwindling foreign reserves, local raw materials sourcing will also play an important role in creating employment opportunities, boost income levels and empower farmers along the agriculture value chain as well as small and medium enterprises who serve as suppliers to big businesses thereby resulting in such benefits as application of modern technologies, improved quality control, higher output, product marketing and self-sufficiency.
Interestingly, Diageo’s brands have always been closely connected with agriculture. In the 1800s, Arthur Guinness, the son of the brewery’s founder, served in the Farming Society of Ireland. Currently, maize and sorghum constitute 80 per cent of the Guinness Nigeria’s agricultural raw material input. Therefore, building strategic partnerships with banks, agricultural NGOs, donor agencies and research organisations and leveraging these partnerships to mitigate some of the challenges that currently affect the sorghum value chain will take the industry to the next level.
Sourcing Raw Materials Locally
Guinness Nigeria, which has been in the brewing business in Nigeria since 1950, was the first major brewing company in Nigeria to begin sourcing its raw materials locally. In 1984, the brewery acquired a 3000 hectares farm in Mokwa, Niger State for the production of maize. Between 1995 and 1998, the company had established an out grower scheme primarily for the promotion of ICSV 400, a particular sorghum variety among farmers in Nigeria.
The variety made it cheaper to process sorghum for malting than other varieties. By 1997, the company started a contract grower scheme with farmers in Kano, Kaduna, Katsina and Taraba States. The objective of the company’s contract growers’ scheme was to create awareness about the improved variety and consequently get a large group of farmers to adopt and grow the crop. With this rich pedigree of engagement in agriculture, it therefore does not come as a surprise that the company has made a strategic commitment to continually increase the quota for its locally sourced raw materials.
Job creation and economic empowerment, Ndegwa acknowledged, remain major challenges in Nigeria, but the local content initiative will substantially address these challenges by targeting the poorest areas and channeling investments into job-creating segments in the agriculture value chain.
Similar initiatives by other private sector entities will decidedly trigger a huge impetus towards diversifying Nigeria’s economy and reclaiming its primacy as a leading agricultural economy. The Lagos state government recognises this fact.
Lagos, Kebbi States Initiative
Recently, the state governor, Akinwumi Ambode announced the plan to work with Kebbi state to provide food for Lagosians, stressing that the future of Lagos State was partly tied to deliberate resolution on food security
He stated this during the signing of Memorandum of Understanding between Lagos and Kebbi State on the development of Commodity Value Chains.
He said food production and self-sufficiency required its immediate attention at policy and strategic levels to sustain the state, adding that Lagos State is the largest consumer of food commodities in Nigeria by virtue of its population.
“We have the market, with the required purchasing power also. Lagos State has an estimated consumption of over 798,000 metric tons of milled rice per year which is equivalent to 15.96 million of 50kg bags, with a value of N135 billion per annum.
“We have the economic prowess to produce rice locally. The era of imported rice is gone. The reality is for all of us to embrace the consumption of local foodstuff and commodities. In addition to rice, Lagos is currently consuming 6,000 herds of cattle daily which may increase to 8,000 in the next five years,” he said.
According to Ambode, the bulk of the vegetables produced in the country end up in the Lagos markets as the state is one of the largest producers of poultry and thus had a large demand for maize for livestock feed production.
He said: “The state also houses most of the industrial users of wheat and sorghum; mostly flour mills, bakeries, breweries and food manufacturers. Kebbi State, on the other hand, is blessed with a vast arable land suitable for the cultivation of rice, wheat, groundnut, maize, sorghum and sugar cane.
“It is an agrarian State with over 1.2 million hectares of arable land characterised by very large floodplains, lowland swamps and gentle slopes. In the 2014/2015 wet season, over 600,000 hectares of land was deployed for rice cultivation in the three senatorial areas of the state.
“The numerous thousands of our market women and men can become key employers of labour as distributors of ‘Ibile Rice’. We can also brand and package rice in the names of our distributors and market women. As a state, we shall adopt our local rice as a state dish in all ramifications.”
He explained that the special purpose vehicle will allow the entrance of private sector investors and other states in expanding the rice mill at Imota, Ikorodu and other locations. We have already designated the 100 hectare land at Imota as the Agric Park in the State. Other locations in and outside the State will be vigorously activated to fulfill our mission in record time,” he stated.
Speaking, Governor Atiku Bagudu of Kebbi State said that the two states had a long history of trade partnership and were just making it stronger with the MOU, adding that the partnership would provide 60 to 70 per cent of the country’s rice need.
He said his state had four emirates, including Gwandu, Argungu, Yauri and Zuru Districts in some particular goods and that they would all contribute to the commodity value chain.
“We believe in the vision of President Muhammadu Buhari to transform Nigeria from dependency on oil. We believe that the two states can significantly contribute to and improve food sufficiency and food security for our country. We believe that our states can benefit from this cooperation and we can jointly add value by creating employment,” he said.