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A look at agriculture and agribusiness in Nigeria

Agriculture in Nigeria as seen by a Nigerian specialist. In
some respects, the circumstances in Nigeria resemble those
of neighbouring countries. In this analysis, the emphasis is on
pragmatic approaches and the spirit of enterprise, whether
family-run businesses or larger-scale operations.

Grain de Sel: What is your diagnosis of the agricultural
sector in Nigeria?

Ndidi Nwuneli: Agriculture is the most important
sector in the Nigerian economy. It employs 60% of
Nigerians, including many rural women, and contributes
up to 35% of the country’s GDP. As in many
other African countries, agriculture in Nigeria is
largely focused on food crops for the domestic market,
given the Nigerian population estimated at 150
million people. In spite of this reality, Nigeria remains
a net importer of food, for many reasons. First of all,
the majority of the agriculture-focused operations
in the country are small-scale, with limited innovation
regarding inputs, harvesting, processing, distribution,
and access to markets. The vast majority of
people engaged in agriculture operate at the subsistence
level, are uneducated and have limited access
to training. Moreover, 95% of the country’s exports
are dominated by petroleum and related products,
which has shifted focus away from agriculture. As
a result, until recently, there has been severe underinvestment
in agriculture by the public and private
sectors, civil society and bilateral and multilateral
agencies. This has been intensified by weak, un-enforced,
poorly implemented and often conflicting
policies at all levels of the country.

GDS: Isn’t there strong potential for agricultural development
in Nigeria?

NN: The potential of the agriculture sector in Nigeria
is huge. The country has a substantial base to
build upon: its natural assets including land (39.6
m hectares of arable land, of which 60% is under
cultivation), climate and rainfall, its coastal areas,
its history as an agrarian economy. Today, Nigeria
is one of the world’s largest producers of cassava,
cashews, tubers (sweet potato, yams), fruits (mango,
papaya) and grains (millet, sorghum and sesame).
In addition, the country’s population represents a
large domestic market that can support and sustain
local production and processing. Nigeria also plays
a key role in West Africa and there are tremendous
opportunities to access regional markets. Unfortunately,
there is limited collaboration across regional
value chains; there is greater collaboration between
the West African countries and their former colonisers
or the United States, than with their neighbours.
This has resulted in significant lost opportunities in
sectors such as rice, cotton and cocoa, and continued
dependence on imports.

GDS: What are the respective roles of the public and private
sectors for developing agriculture in Nigeria?

NN: The public sector is responsible for creating
an enabling environment for agriculture to thrive.
It also needs to invest in addressing the key issues
that currently hinder the sector by reinforcing trade
policies and land tenure policies; investing in strong
agricultural educational and research institutions;
easing government engagement in fertiliser, seed and
input supply, distribution, and financing; providing
incentives for financial institutions, especially banks
and insurance companies to support the private sector;
ensuring strong and effective extension support
services, and agriculture development programmes
at the local government level; and providing adequate
infrastructures, especially feeder road networks and
consistent and affordable electricity. Moreover, agriculture
needs to be recognised as a key business
sector in Nigeria, and like other sectors, requires the
engagement of the organised private sector across
critical value chains. The sector presents tremendous
opportunities for the emergence of small and medium-
sized enterprises which can create value and
jobs across critical value chains. The private sector
can provide financing, support systems—including
equipment, processing, transportation, distribution
and marketing support.

GDS: What is required to strengthen the agricultural
sector in Nigeria?

NN: There is an urgent need for improvements in
productivity, via access to improved seeds, fertilisers,
water management techniques, equipment, financing,
and markets. Today, only about 5% of Nigerian
smallholders use improved seeds because there are
significant problems with seed availability, quality and
pricing. Four seed companies dominate seed production;
and there is a significant amount of bad seed in
the system due to the poor quality of produce from
seed companies. The fertiliser application rate is approximately
7 kg per hectare of arable land, a small
fraction of the global average of 100 kg/ha. Only 18%
of farmers receive extension services. Rudimentary
technology is still used for cultivation, harvesting
and processing, which increases overall production
costs. Storage capacity is poor; there is limited access
to good packaging and no organised warehouse systems,
generating large post-harvest losses and wide
price fluctuations. Packaging is inadequate and inappropriate,
due to poor communication between the different players across the chain and lack of awareness
of the processors’ packaging needs. Direct and
indirection distribution circuits are fragmented and
often hastily improvised, at very high cost. In addition,
high oil prices have dramatically increased the
cost of transportation.
There is an urgent need to address the energy challenge
in West Africa, particularly electricity supply.
Energy is required for processing, packaging and
storing agricultural produce. Unfortunately, electrification
is limited in rural areas, and the provision
of electricity is sporadic even in urban areas. Many
processors are compelled to rely on generators, and
to devote a large percentage of their operating expenses
to paying for increasingly expensive petrol
and diesel.
Alleviating these constraints will ensure that Nigerian
produce is competitive relative to imports
(today’s combination of low yields, averaging 1.7
tonnes/Ha, and high labour costs results in paddy
prices of around US$ 300/t, compared with $130-140
in Thailand) and affordable for local consumers. Beyond
the issue of yields, considerable emphasis has
to be placed on value chains, in order to ensure that
they are not only efficient, but also effective.

GDS: What do you mean by “agribusiness”?

NN: The term “agribusiness” simply refers to the
breadth of businesses engaged in all aspects of agriculture,
from the provision of inputs such as seeds
and fertiliser, to farming, processing, marketing, distribution
and retail sales. It emphasises the notion
that for agriculture to be sustainable, it needs to be
viewed as a business.

GDS: Do you think agribusiness is the only way of increasing
and developing agriculture in Nigeria?

NN: Yes I do. African farmers have lived and worked
as subsistence farmers for far too long. At the subsistence level, we have shrinking and depleted farms,
an ageing population with limited interest from the
youth to engage in agriculture; there is an urgent
need to explore the potential profitability of every
agriculture investment and to determine whether it
makes financial sense to proceed in the short, medium
and long-term.

GDS: Are there interesting agribusiness undertakings
in the field now?

NN: There are very few examples of thriving and efficient
value chains in the Nigerian context. Companies
such as Olam, Nestle and Nigerian Breweries
successfully source their produce from smallholder
farmers and support growth across the value chains.
In the case of Olam, through support from USAID
Markets, it has been demonstrated that coordinated
and targeted interventions can generate significant
increases in yields. By organising smallholder farmers
into groups, providing training, extension services,
and inputs on credit, the farmers experienced
significant increases in yields, resulting in greater
supply of rice for the Olam processing facility in
Benue state, Nigeria.

GDS: What can be done for agribusiness? How can
the private sector grow?

NN: It is important to recognise the need for comprehensive
interventions to ensure sustainable growth
and job creation. For example, the cassava value chain,
one of the most important value chains in Nigeria,
benefited from a presidential campaign for cassava
and its products, including cassava chips, flour, etc.
With minimal investment in research, provision of
market information, access to subsidised fertiliser,
and links to international markets, cassava received
a major boost in the country between 2003 and 2007.
This boost has resulted in a glut on the market, obviously
disappointing farmers. is demonstrates
that a focus on increasing yields, without investing
in processing and other aspects of the value chain
will lead to short-term gains, but not long-term sustainable
growth and development for actors across
the chain.

GDS: In your opinion, what types of farming should
be encouraged?

NN: Both small-scale and large-scale farming should
be encouraged. Every emerging economy needs both
small-scale farmers and large-scale farmers working
together and supporting each other. Family farms must
be modernised and become more market-oriented.
The government has recently launched a Commercial
Agriculture Initiative to support the emergence of
larger farmers. However, given that majority of the
farmers in Nigeria operate farms that are less that
one hectare, it is imperative that broad-based agriculture
initiatives be implemented.

Born in Nigeria, Ndidi
Okonkwo Nwuneli has a
Master’s degree in
Business Administration
from Harvard Business
School. She began her
career as a management
consultant with McKinsey
& Company in the United
States and in South Africa.
She returned to Nigeria in
2000 to promote
entrepreneurship and
leadership development in
Africa. After a stint as
pioneering directorgeneral
of the FATE
Foundation, she founded
LEAP Africa and NIA, two
structures that provide
ethics, leadership and
management training, and
coaching for youths,
business owners, social
entrepreneurs and the
public sector. She is also a
co-founder of AACE Foods,
a local agro-processing
company in Nigeria, and of
AACE Consulting, a
consulting firm specialised
in agricultural strategy
and policy.

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