By Tunde Bello
The COVID-19 pandemic makes clear what has been true all along. Your health is as safe as that of the worst-insured, worst-cared-for person in your society. It will be decided by the height of the floor, not the ceiling. Beyond its impact on human health, COVID-19 has shown us just how vulnerable agricultural value chains are to external shocks – and how much more we need to do to build the sector’s resilience.
Nigerian farmers have it tough. On one side, they are barricaded by unfavourable climate changes, limited access to domestic and international markets, increased transportation costs, lack of adequate infrastructure; and now on the other hand, by the effects of COVID-19.
Media coverage had focused on ‘essential workers’ getting the world through this time of insecurity, especially health workers — and rightfully so. But other unsung heroes are at the first step of the agricultural value chain, ensuring the foundations for many of the products we enjoy so much – from our cocoa beverages to palm oil: smallholder farmers.
Because of COVID and the impact on food security, more and more companies have woken up to the risk of not being able to create products or stock shelves. Businesses are suddenly interested in how farmers are performing – and whether they will be able to continue supplying their raw materials in the future.
Smallholder farmers are the nucleus of the world’s agricultural value chain; sustaining a plethora of sectors, commodities and companies. For example, Anheuser-Busch InBev, a leading brewing company, depends on more than 20,000 direct smallholder farmers, across thirteen countries and five continents, to grow high-quality crops to brew their drinks. In Nigeria, over 80 per cent of our domestic food supply is provided by small-scale farmers who work on less than a hectare of land. In Ghana, smallholders cultivating less than two hectares of land per farm, produce an estimated 20 per cent of the world’s cocoa, making Ghana the second-largest producer in the world, with cocoa exports accounting for about 40 of its foreign exchange earnings and 8–12 per cent of its Gross Domestic Product (GDP).
Despite their importance, there is a lot of poverty in the sector, especially in countries like Nigeria, where smallholder farmers make up around 80 per cent of the total number of farmers in Nigeria; yet, only 27 per cent of the farmers live above the poverty line ($2.50 daily).
During the height of the first wave of the coronavirus pandemic, in addition to an already grim reality, farmers were dealt a further blow, mostly rural smallholder farmers that are typically family-run operations with limited access to credit, information, technology, storage options and labour. The pandemic exacerbated these issues with disruptions to transportation, market access, labour availability, and uncertainty for farmers who were worried whether or not their crops would still be purchased as entire industries came to a halt. Restaurants had to stop buying as much food, purchases of cotton for consumer goods slowed, and low oil prices reduced demand for ethanol, hurting corn planters.
In an impoverished country, where unemployment was rife even before the pandemic, it is time to ask: what support our unsung heroes need to keep going – and, eventually, to recover while improving their livelihoods and competitiveness?
With Targeted Support Comes Success
The United Nations Conference on Trade and Development (UNCTAD) recommends timely and well-targeted support to the needs of smallholder communities – especially at farm level (SDG 2). For instance, farmers’ financing needs are determined by expenses and cash outflows at various stages of the growing season — at the start of every growing season, there is a huge outflow of cash (e.g. to buy seeds and other farm inputs) and this negative cash flow grows until farmers can harvest and sell their crops. Credit products must therefore be customised to farmers’ unique circumstances, financing needs and revenue-generating activities.
Well-targeted support like those offered by Babban Gona, empowers smallholder farmers to succeed in the transition to more resilience against shocks and climate changes (SDG 13), sustainable consumption and production patterns (SDG 12), competitive, safe and inclusive employment (SDG 8), and to ensure “no one will be left behind” (SDG 1). People get left behind when they lack the choices and opportunities or endure disadvantages or deprivations that limit their options and opportunities to participate in and benefit from development progress. Many smallholders live in extreme poverty and operate in the hard-to-reach rural communities and can thus be considered ‘left behind’ and the most adversely impacted by the pandemic.
For Umar Dangari — a 55-year-old farmer in Adamawa state, northeast Nigeria — in planning for the next planting season, he finds that a bag of fertiliser he purchased for his farm for ₦7,500 just before the lockdown more than seven months ago is now sold for ₦22,500 because the lockdown affected the import of these agricultural inputs. To further exacerbate the situation, Umar is unable to access loans from financial institutions because of the perceived high risk of lending to the agricultural sector. For a start, reaching remote rural areas can be expensive. Weather risks, crop concentration, and price volatility increase the credit risk for financial institutions that are primarily interested in short-term lending and high returns.
The disruptions to the supply of farming inputs such as fertilisers and seeds could negatively affect agricultural output. It follows that we may be approaching a dire situation where farmers prioritise buying food today over planting seeds for tomorrow, raising the threat of food shortages later on.
We have begun to see the far-ranging consequences of the COVID-19 pandemic around the world, and it is now more apparent than ever that the COVID-19 health crisis could soon become a food crisis. Yet, Nigeria’s COVID-19 stimulus relief packages are difficult to access by small-scale farmers like Umar that are critical players in preventing this looming food crisis. Recently, we watched in shock as people carted away COVID-19 palliatives from warehouses across Nigeria. Let’s also consider the Agri-Business, Small and Medium Enterprise Investment Scheme (AGSMEIS) Non-Interest Fund offered by the Central Bank of Nigeria. The process requires a Bank Verification Number (BVN) in a country where 40% of the population are financially excluded, and many rural communities are unbanked and hard to reach electronically.
A new analysis estimates that by the end of 2020, 265 million people in low and middle-income countries will be under the threat of starvation, up from the 135 million in 2019. In Nigeria, data from the National Bureau of Statistics (NBS) Consumer Price Index Report shows that Nigeria’s food inflation rate has maintained a steady rise from 14.67% recorded in December 2019 to 15.48% in July 2020. This means that the purchasing power of Nigerians has declined and their ability to afford the same quantity of food has reduced significantly.
Overcoming the Crisis
Due to disruption experienced during the lock-down and now a widespread inability to afford food, smallholders and micro-entrepreneurs – especially women – in the most vulnerable communities in Nigeria face food insecurity to a greater extent than others. We see them being ‘left behind’ yet again.
As a well-documented enabler of promoting sustainable agriculture and food security (SDG 2) as well as other developmental goals, financial inclusion has a vital role to play in the mitigation of COVID-19’s harms to Umar, and the other 38 million smallholder farmers like him in Nigeria. We should be thinking about the systems that undergird the financial system and how to use them to create financial protection for the most vulnerable population.
Kenya stands out as a digital finance pioneer, with mobile money payments used for remittances, bill payments, utilities, salaries and even government payments. In 2017, 37% of adults in rural areas in Kenya received money from the sale of agricultural products through a mobile phone (compared to around 30% in 2014). In the wake of the pandemic, the Kenyan government made a difference for Kenyan farmers by leveraging the robust digital payment infrastructure to support smallholder farmers and help them get access to capital.
In May, the Kenyan government implemented an e-voucher programme in which farmers received vouchers on their mobile phones to exchange for partially subsidised farm supplies based on their individual and household needs. With such an initiative, smallholders who have suffered the brunt of inadequate resources, especially at the start of the growing season, can increase their productivity, purchasing power and improve many other facets of their lives.
Scrolling through ‘Kenya e-voucher Twitter’, it is heartening to see the success story of Victoria Muteti, a 44-year old farmer living in Kenya’s Makueni County. Victoria was able to secure her income, access to sufficient, safe, and nutritious food and invest part of her income into a poultry house and a cow, which will further improve her nutrition and bring additional revenue.
Looking at some of the lessons learnt from the pandemic, it is clear that countries with robust digital payment infrastructures can quickly get money out to people who are most in need and serve as a demonstration of the importance of an inclusive financial system for crisis response and economic recovery. Now more than ever, Nigeria needs to pay attention to the progress that can be made from deepening financial inclusion, or our most vital producers may be left behind.
Bello, an independent journalist is based in Nigeria