Enhancing Agricultural Value Chain

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Jonathan Eze writes on Guinness Nigeria Plc’s recent launch of its ‘Grow with Nigeria’ initiative.

As the demand for food grows, private investment is essential if agriculture is to fulfil its function of contributing to economic development, poverty reduction and food security.
Private sector investment plays a vital role in delivering inclusive economic growth, environmental sustainability and poverty reduction as well. In addition, governments need to incentivise the right kinds of private investment to flow into agriculture, as well as strongly regulate once the investments are made.

A recent World Bank report on Agriculture Finance & Agriculture Insurance said “There is an ever increasing need to invest in agriculture due to a drastic rise in global population and changing dietary preferences of the growing middle class in emerging markets towards higher value agricultural products.

“In addition, climate risks increase the need for investments to make agriculture more resilient to such risks. Estimates suggest that demand for food will increase by 70 per cent by 2050 and at least $80 billion annual investments will be needed to meet this demand, most of which needs to come from the private sector. Financial sector institutions in developing countries lend a disproportionately lower share of their loan portfolios to agriculture compared to agriculture sector’s share of GDP.

“On the other side, the growth and deepening of agriculture finance markets is constrained by a variety of factors which include: inadequate or ineffective policies; high transaction costs to reach remote rural populations, covariance of production, market, and price risks; and absence of adequate instruments to manage risks; low levels of demand due to fragmentation and incipient development of value chains; and lack of expertise of financial institutions in managing agricultural loan portfolios.”

It noted that the development of agriculture requires financial services that can support larger agriculture investments and agriculture-related infrastructure that require long-term funding (given that currently transportation and logistics costs are too high, especially for landlocked countries), a greater inclusion of youth and women in the sector, and advancements in technology (both in terms of mechanising the agricultural processes and leveraging mobile phones and electronic payment platforms to enhance access and reduce transaction costs).
It further stated that agriculture finance and agricultural insurance are strategically important for eradicating extreme poverty and boosting shared prosperity.

Globally, there are an estimated 500 million small-holder farming households – representing 2.5 billion people – relying, to varying degrees, on agricultural production for their livelihoods.

Historically, Nigeria was considered an agricultural giant and a model to other countries up until the early 70s. A study carried out then had indicated that; agriculture was the main contributor to Nigeria’s economy, contributing over 64 per cent to the country’s Gross Domestic Product, providing employment for over 70 per cent of the population and provided 95 per cent of the food needed to feed Nigerians.

That is why the federal government has through its agricultural policy continued to encourage private sector participation in the sector. This has been the focal point of the federal government’s effort in diversifying the Nigerian economy through the promotion of agriculture and Guinness Nigeria Plc recently keyed into the government’s initiative through the launch of its “Grow with Nigeria,” in Abuja recently.

Speaking on the initiative, the Managing Director of Guinness Nigeria, Baker Magunda, said the move was a demonstration of the company’s commitment to the federal government’s policy on diversification and local content.
According to him, the initiative would also support the growth of the agricultural value chain and small holder farmers who form an integral part of the brewer’s business.

“Over the last 20 years, our business has consistently sourced its entire core ingredients such as sorghum and malt extract locally through the various local raw material chains. Currently, our local content sourcing is 75 per cent and we plan to increase this significantly within the next couple of years.

“These partnerships have enabled us to develop an ecosystem of private sector players creating value that impact smallholder farmers directly. In 2018, we partnered with 5, 121 smallholder farmers across eight states of Nigeria.
“These farmers were provided access to finance, certified seeds, unadulterated inputs, mechanisation, training on good agronomic practice and basic book keeping, supplier credit process, extension support and access to market.

“With this intervention, Guinness Nigeria was able to leverage on the collaboration as provided by the respective partners in the ecosystem to improve the livelihoods of these farmers by moving them from subsistence level to full economic inclusion,” he added.

Impressed with the initiative, the Minister of Agriculture and Rural Development, Chief Audu Ogbeh, commended Guinness Nigeria on the laudable initiative.
According to him, “When Guinness began buying sorghum from local farmers, many of us realised that this was a revolution that started ahead of its time.

The logic of buying raw materials from local farmers has seen wealth being moved into the rural areas instead of out of the shores of Nigeria, because every time you import anything, you are importing poverty and exporting wealth and dangers not visible.”

Stanbic IBTC, the financial partner of the initiative reassured farmers of its commitment to providing financial solutions that will help them and their businesses grow through its agriculture desk. The bank said it has injected over N50 billion into Nigeria’s agricultural sector, saying the initiative was one of the largest investments in the sector so far.

The company also disclosed that with its investments in Agriculture, local manufacturing and backward integration, the Guinness Nigeria Local Raw Materials (LRM) initiative, has benefited over 6,000 subsistence farmers, rural traders and various stakeholders in the production value chain.

The LRM initiative despite its current focus on rural subsistence farmers is helping to create value in local markets, strengthening state and national economies, improving agricultural systems, enhancing food security, and boosting supplies of sustainable raw materials that meet global standards.

Guinness Nigeria has built a strong portfolio that is steeped in diversity over the years. This they have done via their operating brewing facilities located across Nigeria for the production of their different products.

Currently, maize and sorghum constitute 75 per cent of the company’s agricultural raw material input. Both crops are sourced locally through a third party sourcing model. It has contractual relationships with dealers and suppliers who aggregate the grains from the farmers, process, store and then supply to Guinness Nigeria.