The Lagos Government has embarked on agricultural mechanisation, steering the sector away from traditional farming, DANIEL ESSIET reports.

 

Given its potential, the agricultural sector is a priority for the Lagos State Government, as exemplified by various measures to boost investment, including promoting mechanisation.

During the  Lagos State Agro-Processing, Productivity Enhancement, and Livelihood Support (APPEALS) project monitoring tour in Badagry, the Acting Commissioner for Agriculture, Ms Abisola Olusanya, said the state was  determined to help rice farmers with machines to  reduce post-harvest losses and ensure better incomes for them.

She noted that there were many advantages of mechanisation in rice cultivation. According to her, mechanisation and good agronomic practices could yield better results for farmers.

To this end, she reiterated that the government  was working on measures to speed up mechanisation in rice cultivation in Badagry by encouraging more farmers to use machines.

Ms Olusanya said she was impressed with the impact of implementation by APPEALS project, saying that she had a fantastic experience during the field monitoring at implementation sites.

She said the satisfaction and happiness expressed by the beneficiaries over the support given by  APPEALS was, particularly, gratifying and laudable.

She thanked the Lagos State Governor, Mr. Babajide Sanwo-Olu, for the prompt release of counterpart funding to match the World Bank-assisted project fund, and the Deputy Governor, Dr. Obafemi Hamzat, who is the chairman of APPEALS project State Steering Committee, for his support in ensuring the sustainability of the project in the state.

She further said the state would soon start the implementation and popularisation of urban farming. She urged participants to consider homestead farming to support the government’s drive for food security.

Presenting the project brief, the state Coordinator of APPEALS Project, Mrs Oluranti Sagoe-Oviebo, said about 20 demonstrations on improved technologies across the selected value chains of Aquaculture, Poultry and Rice had been carried out.

According to her, eight of the demonstrations were carried out last year and are being used by farmers, while the project had also  supported farmers who sought  support to adopt the new improved technologies.

Mrs Sagoe-Oviebo said part of the sites visited were those of beneficiaries from the implemented 30 Value Chains Investment Plans (VCIPs), supporting 295 people, consisting of 206 males and 89 females, as beneficiary farmers and small and medium scale enterprises (SMEs) with improved input.

She also said another 38 VCIPs recently issued No Objections by the World Bank to support about 400 farmers as the beneficiaries were under implementation, adding that the exercise would be completed before end of last month.

“The implemented supports include floating cages, All Male Tilapia/Heteroclarias juveniles,Tilapia feed/Probiotic fish feed, barrier boom, collapsible fish ponds, industrial boreholes, mechanical pumping machines etc for aquaculture farmers’ cooperatives groups. The project also addressed a critical challenge of fish ponds flooding at Ikorodu through the excavation and desilting of canal around the farms.

“Day old chicks broilers, pelletised feeds, nipple drinkers with cup, medications, point of lay birds, growers feed, layers mash probiotics, water tanks and scaffolds for poultry farmers’ cooperatives and rice seeds, rice transplanters, thresher and winnower, harvester,  motorised sprayers, ploughing and harrowing, fertiliser applicators, screw three nets, herbicides, fertiliser, insecticides etc for rice farmers’ cooperative groups were also implemented,” she said.

Besides, Mrs Sagoe-Oviebo said the project had trained over 5000 beneficiaries this year and 1,307 out of the 1,621 regular beneficiaries under the Women and Youth Empowerment Programme since inception of the project, while a consulting firm has been engaged to conduct the agri-business needs assessments of 170 persons with disability and special selected in the state for empowerment.

“Partners and stakeholders that were involved in the joint implementation support monitoring exercise were the officials of the Ministry of Agriculture, Office of the Deputy Governor, Ministry of Economic Planning and Budget, Ministry of Commerce, Industry and Cooperatives, Ministry of Local Government and Community Affairs, Ministry of Women Affairs and Poverty Alleviation, Project Financial Management Unit, State Treasury Office, Debt Management Office and Project Coordinating Unit (Federal Ministry of Agriculture and Rural Development) as well as the state APPEALS Project Implementation Unit members,” Mrs Sagoe-Oviebo said.

The team members expressed satisfaction with the level of implementation by the project and urged them to ensure sustainability of support for the beneficiaries.

APPEALS Project is a World Bank-supported project  to respond to widespread of poverty, subsistence, low input, low output and low equilibrium trap, a major focus of the Federal Government Agricultural Promotion Policy known as The Green Alternative (APP:2016-2020), among others.

The cost of financing APPEALS by the International Development Association (IDA) is $200 million. It will cover Lagos, Cross River, Enugu, Kano, Kaduna, and Kogi states over six years.

The Project Development Objective (PDO) is aimed at enhancing agricultural productivity of small and medium scale farmers and improving value addition along priority value chains in participating states. The selected value chains for Lagos are Poultry, Rice and Aquaculture.

 

As Nigeria’s population grows, it is becoming a challenge to meet nutritional needs with traditional sources of protein. This is because feeds have become unaffordable for livestock farmers that many have been pushed out of business. But there is hope. Insect meal could be a solution to the problem, writes DANIEL ESSIET.

 

THESE are not exciting times for livestock farmers. Reason: The rising prices of corn and soybean meal (byproduct of crushed soybean), key ingredients of feeds.

Since March, the price of soybean has risen by 12 per cent to N123,000 per metric tonne (MT), while the cost of a metric tonne of corn has spiralled by 70 per cent to N165,000, according to the Poultry Association of Nigeria (PAN).

The Chairman, PAN, Akwa Ibom State, Solomon Ekong, told The Nation that a metric tonne of corn sold for N195,000 and N200,000 in some parts of Benin, the Edo State capital.

According to him, prices of corn and soybean change daily. This has put the poultry industry at risk, he said.

For him, it is difficult for farmers to make profit under such  situations. While some farmers have been forced to close shops, others have had to cut down production.

The high cost of grains and other ingredients used for specialised concentrate formulation has led industry operators to seek for alternatives for their animals as they could no longer cope with the sky-high prices of feeds.

One farmer that has felt the pangs  is the Vice-President, Association of Small Business Owners of Nigeria (ASBON),  Stephen Oladipupo.

Oladipupo, a poultry farmer, noted that the non-availability and low quality of feed, combined with the high cost of soybean and corn, were constraining the sector’s growth. He added that a sustainable solution was critical if the industry must continue to exist.

Poultry farmers are the worst hit as corn has become prohibitive such that they can no longer produce quality feeds for their birds. Corn constitutes between 50 and 70 per cent of chicken feeds.

Oladipupo said poultry farmers use more of corn than soybean meal, the product from crushing soybean to extract  oil, for feeds

As the cost of feeds was eating deep into his pocket, he decided to try sorghum as a substitute feed for his birds. The result, he said, is encouraging. Since then, he had been using sorghum and other crops in feeds formulation. He has been recommending it to other farmers.

Another stakeholder, who expressed concern, was the Team Leader, International and Rural Development at the Livelihoods Support and Development Centre, Nigeria, Prof. Kola Adebayo.

He noted that poultry farmers were facing tough times due to rising cost of raw materials and concentrates for feeds.

Specifically, he said corn and soybean meal were volatile commodities, adding that the restrictions because of  COVID-19 also contributed to their prices rocketing.

A solution to the challenge, Adebayo said, is for farmers and researchers to identify other alternative protein sources, citing insect-based feeds as  cost-effective for fish and poultry production.

 

Growing insects feed market

Across the world,  farmers are turning to bugs to feed their livestock. Reuters reported that the small but growing insect farming sector has captured attention and investments from some heavyweights in the $400 billion-a-year animal feed business, including United States-based  agriculture powerhouse Cargill Inc. The publication noted that fast food giant McDonald’s  was  studying using insects for chicken feed to reduce reliance on soy protein.

According to Insect Feed Market – Growth, Trends and Forecasts (2020 – 2025) published by Research & Markets, an international firm, the global insect feed market was valued at $ 687.8 million in 2018 and projected to reach $1.4 billion by 2024.

As of 2018, according to the report, Asia-Pacific dominated the global market and Europe was projected be the fastest-growing market in the future. In Asia-Pacific, the report noted that growing meat consumption compelled the demand for nutritious insect feeds in recent years. Along with this, investments by the insect feeds companies in the region have fuelled market growth.

With world population expected to hit nine billion by 2050, the report said increasing demand for protein-rich food from livestock, poultry, and fish would pose serious food security challenges for the future. Hence, the demand for production and consumption of edible insects will increase because of their high nutritional value and low risk of transmitting zoonotic diseases.

Insects contain more protein and low fat compared to traditional meats.

 

Alternatives

Sourcing cost-effective feed has long been a priority for many poultry producers who, for many years, have depended on soybean for high-quality protein feeds.

For analysts, if Nigeria is to meet growng food demand, sustainable protein sources will play a part. One way to achieve this is through insect-based protein.

One of the farmers who has recorded a success story is the Chief Executive, Agro Park, Sola Oshinowo.

He believes increasing costs would   lead to the development of insect feed for livestock and aquaculture.

For years, the agro entrepreneur  searched for affordable protein alternatives to cut cost of production. In the last three years, he has been exploring alternative protein sources and feeds and finally discovered maggots, which are cheaper and reduced his cost of production by over 60 per cent.

He has since produced hundreds of kilos of dried maggots that have been fed to fish and chickens. He also experimented with  grass and plant- based protein.

Osinowo explained that maggots were rich in protein, amino acids and minerals which are essential to build up the muscles of livestock.

He explained that the maggots were produced from flies, such as houseflies, but the most productive was  Black Soldier Flies (BSF) and it is economically viable.

According to him, a female BSF after mating can lay 500 eggs daily.

 

Introducing Black Soldier Fly (BSF)

BSF farming is an ambitious endeavour that will transform the global feeds industry. From backyard set ups to multi-million dollar startups, reports say investors are pouring money into companies producing black fly larvae and other insects as alternative and sustainable sources of protein for animals.

Oshinowo started raising BSF in his farm in Ogun State. He discovered that chickens preferred BSF larvae. He  noted that BSF was critical to sustainable protein production and the growth of the agricultural sector.

To this end, he is working towards making insects farming a rewarding commercial ventures for farmers.

The Journal of Insects said challenges in production and legislation were keeping insect farms and production for livestock feed from going mainstream.

 

Insect farms

Analysts say insects have the potential to yield 200 times the quantity of protein per hectare per year as soybean and don’t require fertile land.

According to them, insect meal is rich in protein (40 to 50 per cent) with a greater concentration of essential amino acids than soybean meal. BSF meal contains higher levels of threonine, valine, isoleucine and leucine when compared to fishmeal, they said.

Few organisations in Africa are involved in the production of insect feeds. Many of the insect feed companies are in European.

 

Kenya’s example

Like in Nigeria, scientists from the Kenya Agricultural and Livestock Research Organisation Poultry Research Unit are examining the possibility of fly larvae replacing soybean or fish meal in commercial poultry feeds.

Kenya does not grow enough soybean. It imports them, while demand for fish meal has led to problems around over-fishing in Lake Victoria. The ever-increasing animal feed costs are driving many vulnerable communities involved in animal husbandry out of business.

 

New investments in agribusiness processing capacity, combined with moves to bolster food security, in addition to grants by the United States Agency for International Development (USAID ) are increasing opportunities for growth and value-added earnings from the sector, DANIEL ESSIET  reports.

 

THE United States Agency for International Development (USAID) is working with the Federal Government to expand production capacity and diversify the agriculture sector.

To this end, the development of value-added processing projects is coming amid government efforts to diversify the economy from reliance on hydrocarbons earnings.

In addition to supporting longer-term investments in value-added processing, the agency has initiated programmes nationwide to boost food security and support the primary agricultural sector. Under a new contract with Cultivating New Frontiers in Agriculture (CNFA), an international agricultural development organisation, USAID launched Feed the Future Nigeria Agribusiness Investment Activity to help Nigeria develop and strengthen a better business-enabling environment through promotion of private-sector investment in agriculture.

Through CNFA, USAID is working to improve the ease of doing business in the sector, broaden access to finance by mitigating the credit risks of agribusinesses, and promote investment opportunities for agribusinesses to expand and scale up operations.

”This activity will pursue a unique, robust business-centered strategy to implement this Feed the Future initiative in Nigeria,” said USAID Chief of Party Adam Saffer.

“Under this approach, the activity will partner domestic and multinational companies to more effectively bridge the gap between government and the private sector – and to distribute the economic benefits of the project more broadly across Nigeria’s agribusiness sector,” he said.

Saffer said the objective of the activity was to improve the agribusiness investment climate, which plays a pivotal role in attracting foreign direct and domestic investment.

He said the programme focused on five key pillars – enlisting public and private sector partners, connecting micro, small and medium enterprises (MEMEs) to agribusiness services; support the development of new financial products, linking MEMEs and entrepreneurs with larger firms and reforming policies that constrain the ease of doing business.

“Special emphasis will be given to MSMEs that are women-owned or have the potential to hire significant numbers of women and youth,” he said.

“The activity will involve, inform and coordinate with a broad range of stakeholders and counterparts,” Saffer said.

The Agribusiness Investment Activity aims to collaborate with the Nigerian agribusiness sector to integrate and upgrade thousands of micro, small and medium enterprises (MSMEs) and producer organisations as high-performing commercial actors in the rice, maize, soy, cowpea, and aquaculture value chains.

Over a five-year period, the Agribusiness Investment Activity aims to facilitate $200 million in new lending and $100 million in new investment across the five crops in seven states: Kaduna, Niger, Kebbi, Benue, Delta, Ebonyi, and Cross River.

The U.S. Ambassador to Nigeria, Stuart Symington, said the programme hoped to nurture a business-enabling environment for agriculture in Nigeria.

Symington said it would reduce the cost of doing business.

“Through this initiative, the U.S government aims to work with the people of Nigeria to improve the ease of doing business in the agricultural sector,” he said.

Symington said the activity would expand the number of financial institutions with growing agribusiness and finance portfolios in focused value chains.

“This will mitigate the risks of lending institutions. It will promote investment opportunities for agribusiness to expand and scale up their operations,” the envoy said.

According to documents from USAID, the programme will reach at least 5,000 small and medium enterprises (SMEs).

“This will expand opportunities for agribusiness borrowers and lenders. It will strengthen the investment readiness of agribusiness. It will improve credit,” the document stated.

It will work with agribusiness stakeholders and counterparts, including ministries and other agencies.

The Feed the Future activity intends to facilitate the growth of existing private sector agribusiness and work with other selected agribusiness, including suppliers, financiers, investors, service providers.

”USAID’s launch of this activity aims to help improve the legal and regulatory environment for agribusiness finance and investment while creating sustainable linkages between agricultural producers and processors,” it said.

 

Increased soybean production will not only lead to improved food security and more balanced diets, but also improve the crop’s value chain, DANIEL ESSIET reports.

 

 

There is a campaign to boost production of soybean due to increasing usage as raw material in livestock feed – soybean meal for poultry production and human consumption. Soybean provides an inexpensive and high-quality source of protein comparable to meat, poultry, and eggs. Malnutrition, particularly protein deficiency, has led to the increase in the demand for soybean, which cannot be met locally due to low yield.

The United States (US) Department of Agriculture (USDA) anticipates that Nigeria will see greater demand for imported soybean as output growth is not expected to meet demand.

USDA’s official forecast points to Nigeria’s domestic soybean consumption rising 20,000 tonnes in 2019/20 to 1.147 million tonnes.

To help solve this challenge, scientists are involved in a national soybean improvement programme to develop varieties that will thrive in nutrient-poor soils. The Business Incubation Platform (BIP) of Consortium of International Agricultural Research Centre (CGIAR) – International Institute of Tropical Agriculture (IITA) – partnered with Seed Co. Pty Ltd., United Phosphorous Limited (UPL), and Nigeria Soybean Association (NSA) on trials to achieve better yield and income for farmers.

The average yields from the developed varieties are quite low—between 0.8 and 1.2 tonne (t)/hectare (ha), with demand far higher than the supply. The project is looking at how yield can be increased from 2 t/ha, which was the position last year to 4 t/ha by 2021. This will help reduce soybean importation and make it readily available for individual consumption and industrial use. The varieties used for the trials yielded 2.0–2.5 t/ha and 3.5 t/ha on average, for IITA-developed (TX 1448-2E) and Seed Co. varieties. The trials were carried out in Niger State (Mokwa and Badeggi), Benue State (Yandev, Zomon village, and Wannue), and Ibadan, Oyo State. The team achieved 1.5, 0.7, 1.8, 2.0, 1.9, and 2.8 t/ha at Mokwa, Badeggi, Yandev, Zomon Village, Wannue, and Ibadan.

In the same vein, corporate organisations have responded to the campaign to improve soybean production to alleviate hunger and boost the economy.

Leading the crusade is Premier Agribusiness Academy (PAA), an agribusiness training institute. The organisation is working in partnership with US Soybean Export Council (USSOY), Federal Ministry of Agriculture, Federal Ministry of Health, Nutrition Society of Nigeria (NSN), Nigerian Soybean Association (NSA), Poultry Association of Nigeria (PAN), Nigerian Institute of Animal Science (NIAS), International Institute of Tropical Agriculture (IITA) and others across the soybean value chain.

Its Director-General, Mr. Toromade Francis, said the country was challenged with high protein deficiency among children and adults, especially under-five children, adolescent girls, and women of reproductive age, which results in malnutrition and other health hazards like stunted growth, underweight as well as infections.

Referring to a research in the US, Toromade pointed out that an average Nigerian consumes only 1kg of soybean yearly whereas in the U.S., it is 55kg per person per year, which could explain the difference in life expectancy.

He further explained that the contribution of soybean to protein intake could not be overstressed as protein consumption was inadequate in Nigeria as a result of low production, high cost of production and importation.

“High-quality protein such as soybean should be available, affordable and accessible by the high and low-income classes in the country, especially the vulnerable class who are mostly affected by protein deficiency and malnutrition.

“To overcome the challenge of protein deficiency and its accompanying health problems, USSOY and PAA as well as other indigenous stakeholders across the soybean value chain have agreed that proper, strategic training is of importance.

“The reason we have such low rate of soybean production in Nigeria is knowledge gap. If people are properly trained in soybean production, they will know when and how to plant, what, how and when to apply which will result in better yields. Our agronomy practice is also a major reason for the deficiency which the Nigerian Soy Excellence Centre (SEC) have developed a curriculum to address.

“Also, farming will become attractive and more profitable, especially to the young ones because they would have been equipped and trained with the needed skills to profit from the production of soybean through the guidance of stakeholders and at a subsidised rate,” he said.

Francis said SEC would be training over 500 persons between this year and the next, adding that over 250 have shown interest. The SEC Advisory Council includes PAN Director-General Dr. Onallo Ankpa; Registrar/Chief Executive, Nigerian Institute of Animal Science (NIAS), Prof. Eustace Iyayi; President, Catfish and Allied Fish Association of Nigeria (CAFFAN), Mr. Rotimi Oloye; President, Nutrition Society of Nigeria, Dr. Bartholomew Brai; NSA President Mr. Ayodele Uwala; Director-General, Agricultural Research Institute of Nigeria (ARCN), Prof. Sharubutu Garba; Deputy Director, Industrial Training Fund (ITF), Mr. Victor Awoniyi; and Executive Director, Agboola Farms (Soybean Farmer/Aggregator), Ms. Tola Johnson.

Ms. Johnson noted that the initiative would  help to maximise the soybean industry in Nigeria and mitigate protein deficiency through the encouragement of soybean consumption and educating the various strata of the value chain; farmers, processors and consumers. She expressed delight at the support SEC was receiving from USSOY, who, according to her, has a lot of experience in the soybean value chain.

Prof. Sharubutu pointed out that the focus of the Federal Ministry of Agriculture aligned with the vision of SEC – to partner the private sector and other tiers of the government – to ensure that there is increased productivity of local crops in Nigeria, and alleviation of poverty.

“The drive for SEC at the moment is more on soybean production, and to support the move, ARCN will include soybean in the newly-approved Federal Government’s competitive research grant to encourage private sector researchers to develop proposals that will improve soybean productivity in the country,” he said.

 

Agro commodities’ exporters still find it difficult to get trade finance support from banks to ensure smooth transactions to the port of their destinations, DANIEL ESSIET reports.

 

 

In recent years, the Federal Government has been encouraging the development of the agricultural sector to diversify the country’s export base. Emphasis on reviving the sector has gained further impetus with the government unveiling various programmes to boost agricultural production and enhance exports. This change has created new opportunities for exporters, jobs and export earnings.

For farmers and agro producers, selling their produce in foreign markets is becoming an ever-larger slice of their businesses.

Under the zero oil plan initiative implemented by the Nigeria Export Promotion Council (NEPC), in collaboration with the private sector, the government aims to boost the supply of foreign exchange (forex) from non-oil sectors.

NEPC Executive Director/Chief Executive Officer Mr. Olusegun Awolowo said the zero oil plan could improve foreign reserve by $150 billion over the next decade, if successfully executed.

Champions in the agro export portfolio include palm oil, cashew, cocoa, soya beans, rubber, rice, ginger, cotton, shea butter, tomato, banana and plantain.

However, agricultural producers and the rest of the developing world face some hurdles.  Access to a range of financial services is a significant challenge for small agro commodities’ exporters.

An African Development Bank (AfDB) report said the continent has a high unmet demand for trade financing with an estimated yearly trade finance deficit of $91 billion.

As stakeholders see it, banks have not paid serious attention to agro commodities export expansion.  One of them is the Managing Director, Thy Global Investment Limited, Ismail Abdul Azeez. He has been in business for over 10 years, exporting agricultural produce.

Though he has made his fortune off food stuff and other agro exports, Azeez said agro exporters deal with challenges when it comes to selling commodities to overseas customers. He said Nigeria has a huge potential, urging the banks to bridge the trade finance gap with customised offerings to boost the sector.

Also, the Managing Director, Niji Farms, one of the largest cassava farms in Nigeria, Mr. Lucas Adeniji, believes lack of access to trade finance is an obstacle in the industry.

He said a slowdown in agro commodities trade could be pushed up by banks which would help new exporters.

 

 Export working capital

A financial expert, Eddie Akpan, said the agro exports sector has increased the importance of the trade finance market.

One of the common problems of aspiring exporters is working capital, Azeez noted that banks were a hard nut to crack when it came to supporting agro exports.  He noted that few banks were providing working capital financing to enable new entrants export agro produce.

While domestic policies are important in determining a country’s export growth, the Regional Technical Manager, Animal Feed, Olam Group, Sarah Olabisi Fagoyinbo, said players in the sector faced many challenges, one of which was finance.

She noted: “This basically also applies to the exporters of agro commodities in Nigeria and other developing countries.’’

A former Chairman, Exports Group, Lagos Chamber of Commerce and Industry (LCCI), Dr. Obiora Madu, noted that banks were not doing enough to support agro exports.

“l cannot really say they are supporting agro exports because there is no deliberate policy from the Central Bank of Nigeria (CBN) or the banks to pay serious attention to agro exports.

“Export finance is one of the biggest challenges that agro exporters face. You find a situation where the banks, after taking lien on the commodity, will ask you for all manner of collateral on top of personal guarantee.”

Akpan stressed that helping the export sector to get access to business finance was a critical part of the ultimate economic recovery.

His words: “The persistent fall in the demand for oil globally has put us in a situation where the government is finding ways to fund economic growth.”

He said there was huge trade finance gap hindering the efforts of local agro exporters to break into the global world of trade. He urged the government to expand access to enable them spur economic growth and development.

According to Akpan, banks have a range of ways to support exporters.

Through loans and guarantees, he said banks support agro producers to realise export opportunities or to contribute to the export supply chain.

The reality, according to him, is that some agro exporters have quite complex risk profiles and financial needs.

 

Why banks shy away from funding agro exports

 This year, at the global space, international banks such as BNP Paribas, Société Générale, Natixis, and ANZ announced their decision to exit the trade and commodity finance business.

Bloomberg, a financial newspaper, reported that banks’ revenue from commodities trade finance slid 40 per cent year-on-year to $700 million in the second quarter of the year.

Banks have suffered losses of $9 billion from the $18 trillion commerce finance enterprise.

Madu maintained that exporting was peculiar and the risks were high. He said: “So, do the banks have reason to shy away from it? Of course, yes. But the point is that exports are the mainstay of the economy.’’

Fagoyinbo added: “One reason many agripreneurs do not get finance is that many of the registers are filled with data of persons who are not real time agripreneurs but just want to access funds not meant for them. It is not as if the government and necessary financial Institutions do not pump out funds at all (maybe not enough).There is the problem of a great percentage of approved funds going into the wrong hands.”

She advised: “Officials in charge need to intensify proper vetting of data and documentation of agricultural stakeholders including agro exporters in their charge. People in agriculture also need to come out more and identify with the right crowd. There is no point in working in isolation, if you do not identify with necessary associations and get counted, your name will not be found in registers and you might have difficulty accessing funds.”

 

Establishment of export desks

 Internationally, export desk officers oversee documentation and procedures, including letter of credit, banker’s guarantee and spot discrepancies on documents, among others.

The Nation learnt that most of the banks do not have exports desk.

Madu observed: “Even the capacity of those on the desks are in question. I recalled that when l was in banking, CBN gave instructions that every bank should have an export desk and banks responded accordingly. Things got a lot better. The situation is not the same, again. If an exporter goes with a proposal to a bank and does not meet those at the front desk; then somebody cannot say go to the second or third floor. It becomes a matter of where should I go? Then you know that we are not serious. When you have a designated export desk, you can develop the capacities of those placed there. That is the starting point. For me, it is not just about CBN instructing banks to set up exports desks, but also taking the responsibility to ensure the capacities of those who manage such positions are fortified.

 

Fluctuating exchange rate

The Nation learnt that agro exports is prone to financial risks, especially highly volatile foreign exchange rates. A lot of money is lost when converting naira to hard currencies.

Azeez explained that lack of awareness and fluctuations in currency values could lead to unprofitable business.

He alleged that banks made a lot of money from overcharging agro commodities’ exporters by insisting on fixed rate despite swings in exchange rates.

Exporters said there were times they had to source from the black market, when they could not get it from the bank.

Azeez lamented that after transactions, the banks would want them to sell forex at the official rate when they bought it at a higher rate at the black market.

While focusing on receiving exports proceeds, he urged banks to work with exporters to ensure that transactions were profitable to keep them in business.

 

 Weak export credit guarantee base

In spite of the high risk in export financing, banks have no fallback position. Madu noted: “Export credit guarantee scheme, which is as old as private sector exporting in Nigeria, as one of the incentives domiciled in NEXIM, has not been fully explored. The purpose of that guarantee is that banks will subscribe and use it as a fallback, if exports transaction goes wrong. That facility has not been funded for so many years, same with export credit insurance. I just read that the board of NEXIM has approved export credit insurance to help exporters. It is good if it works. What that has to do with is, if you insure your invoice, banks can give money to the extent of the surrender value of the policy you have in your hands. Of course it protects the export proceeds if you are going into high risk area. In that way, the bank that is funding you can be sure of getting a certain amount of money. They can limit their lending to the cover amount. Even with intervention funds from NEXIM, like warehouse financing and others, banks take 100 per cent of the risk. The same situation applies with export stimulation facility.’’

 

Stakeholders’ response

 Stakeholders said improving the performance of the agricultural sector was critical to drive economic growth. One way to achieve this is by supporting agro exporters facing large financing gaps.

Madu said warehouse receipt financing is a lending technique that allows farmers, producers, and traders of commodities to access bank loans by pledging their warehouse receipts issued against commodities deposited in warehouses.

According to him, the system is core to the export diversification and development agenda and it has the potential to increase farmers’ incomes, and drive the economy.

Ethiopia is the most successful example of warehouse receipt financing initiative in Africa.

Madu said the Warehouse Receipt System (WRS) was an integral part of agricultural trade and financing and very important for agricultural development.

He said promoting the system would make it easy for exporters to obtain credit from banks.

To be most efficient, he noted that warehouse receipt finance required a smoothly-functioning commodity exchange as it was the backbone to most commodity exchanges.

The Executive Secretary, Institute of Export Operations and Management Nigeria, Ofon Udofia, said agriculture remained one of the key sectors that should be prioritised by the government to expand exports and promote a sustained approach to poverty reduction. He said the economy would maintain the growth driven by sound policies and expand exports. To him, Nigeria will continue to benefit from the rise in global trade and the pick up in commodity prices. He said the rise of exports in the agro-processing sector would unlock exciting opportunities for economic diversification.