Nigeria’s Agro Allied Industry: A Starting Point for Enterprise Revolution

In Western Africa, agriculture accounts for an estimated 40% of combined GDP and employs up to 70% of the available working population. Agricultural commodities are the second largest export from the region to the European Union, although most goods are traded without any local value addition. This represents a significant failure to produce high-value products that can enhance profitability in agro-operations and provide much-needed employment. Exports to newer markets are often held back by concerns over compliance with international production standards. Further, the region’s high transportation costs inflate the price of agro-products in local markets and lower export competitiveness. The gross outcome of these conditions is that developing economies in West Africa and elsewhere generate only $40 by processing one ton of agricultural products against $180 in developed countries.

Fortunately, this persistently bleak outlook for agriculture across sub-Saharan Africa is gradually beginning to change and Nigeria is poised to take the lead in reversing the trend. In the first decade after its independence in 1960, the traditionally agrarian Nigerian economy contributed 60% of GDP and more than a third of total export revenue. The country was the world’s top exporter of palm oil and had commercialised production of several cash crops including cocoa, cotton, rubber, groundnut and kola nut. The situation changed radically when the oil boom of the ’70s shifted focus away from cropping and petrochemical exports became the primary national obsession. Agriculture was marginalised into a labour-intensive, low-productivity subsistence activity that eventually plunged large parts of rural Nigeria into abject poverty. Despite several resuscitation attempts over the decades – including the 1972 National Accelerated Food Programme, the 1976 Operation Feed the Nation and the Green Revolution initiative of 1980 – the steady descent of agriculture continued till the very end of the last century.

The redirection of agricultural policies affected since the return of democracy in 1999 proved more successful. Under a radical reforms programme, Abuja targeted rural development with integrated plans for agriculture promotion, rural industrialisation and infrastructure development. This integrated approach has yielded tangible results: Agriculture now leads the country’s economic recovery, bouncing back to contribute 42% of GDP by 20084.

Perhaps the most significant thought arising out of this recovery is Nigeria’s natural inclination towards farming. Traditional involvement with agriculture and the existence of diverse ecological conditions across the country offers tantalising potential for growth of a flourishing and suitably interlinked agro-allied industry. Nigeria’s ambitions for accelerated and inclusive economic growth are contingent on achieving a vibrant agriculture sector that can support extensive down-the-line enterprise development and employment. In fact the UN Conference on Trade and Development (UNCTAD) expressly recommends the adoption of a national investment policy to diversify the economy with strong focus on agro-allied industries. The fact that this sector is primed to spark off rapid enterprise development in Nigeria is simply undeniable.

Enterprise potential exists in almost all areas of local farm production. Nigeria currently produces over 100,0006 metric tonnes of kola nut, which finds use in the manufacture of beverages, liquor and confectionaries. Yet, local processing units are rare and exports are largely limited to fresh and dry nuts with little value addition. Cassava, likewise, has emerged as a major cash crop with untapped potential in industrial use and bio-fuel development. With adequate private sector involvement, commercialised agriculture can not only aid industrialisation and employment generation but also breach the productivity gap and reduce food costs.

In terms of broad parameters, policies for effective development of the agro-allied sector in Nigeria must focus on a number of key considerations:

* Ensuring food security by increasing supply and lowering prices with the specific aim of curbing inflation.

* Enhancing credit access to small farmers and agro-based enterprises at low rates of interest.

* Providing information, support and training for emerging agro-industries and promoting best practices.

* Increasing productivity through promotion of high-growth models in food processing enterprises.

* Prioritising locally available raw materials over extravagant imports.

* Removing informal barriers to trade and streamlined manufacturing of agricultural products.

* Promoting greater regulatory cooperation among West African neighbours to increase regional trade.

* Reducing tariff on goods and services that support the agro-processing sector.

* Enforcing relevant safeguards for agricultural and value-added food products to guard against import surges.

* Building capacity in the private sector and promoting public-private partnership in agro-processing industries.

Abuja’s intervention in the agro-allied sector must essentially be aimed at creating the right environment for rapid expansion of locally-owned enterprises. However, there are serious challenges in this direction. Industrial processing of agricultural products is almost negligible, existing standards being very basic and often incomparable with export requirements. Post-harvest losses are also very high in the region, averaging up to 50%7 for fruits and vegetables and 25% for grains. In many instances, losses due to customs delay and complicated documentation exceed applicable tariffs. Labour saving production and advanced harvesting and processing technologies are therefore critical for sustained revival of the Nigerian agriculture scenario. Moreover, efficient production and marketing systems will prove vital in ensuring high quality standards and competitive prices for both domestic industries and export markets.

In terms of Nigeria’s long term growth prospects, perhaps the most important consideration of all is simply the realisation that future prosperity depends not on the yield from its oil fields, but on the harvest of its land.