Category: Industry

Nigeria and other African countries are wasting foreign exchange (forex ) on importing foods that can be produced locally and exported. But, this may soon be redressed by those investing in agribusiness, writes Assistant Editor OKWY IROEGBU-CHIKEZIE.

Efforts to achieve self-sufficiency in food production, promote industrialisation and create jobs are on course.

Those behind the push to halt or significantly cut down on Nigeria’s humongous foreign exchange for the importation of foods that should be produced locally and even exported are private sector investors whose massive investments in agribusiness hold promises.

Leading this charge BUA Group and Dangote Group. For instance, BUA Sugar has since anouncd an investment of $300 million in Lafiagi Sugar Company (LASUCO), in Kwara State. This will help grow the country’s sugar output by two million tonnes (mmt) per annum.

According to the Managing Director, BUA Sugar, Mr. Ibrahim Yaro,  BUA remained committed to becoming a mega local sugar producer and first sugar exporter in the country. According to him, the company remains committed to partnering with the government in ensuring the success of the backward integration policy of the sugar industry as well as in its drive to resuscitate and develop other areas of the Nigerian agric sector.

He explained that BUA’s interest in the local production of raw sugar brought about the acquisition of LASUCO, which he said has over 20, 000 hectares of arable land, suitable for sugar cane plantation and is strategically located to serve the northern and southern markets of the country.

He stated that the 500 hectares earmarked for its nursery development in 2016 had been developed; adding that similarly, what is currently ongoing was the land clearing and development preparation for additional 5,000 hectares which would take the company through 2018. “

Africa’s richest man and President of Dangote Group, Alhaji Aliko Dangote, has also stepped up his investment in agriculture.

In doing so, he said he believes that the Federal Government leveraging the agric sector to diversify the economy remained the solution to achieving food self-sufficiency and creating a healthy economy.

Dangote spoke at a meeting with some Asian businessmen in his Lagos office.

He said without the new approach at redirecting the economy from its import dependence to an export-oriented one, which the administration is leading, no meaningful change  can happen. He noted that it was because of his belief in the government’s approach at re-energising the economy to make it export oriented that made him step up his investment in agriculture for food sufficiency.

“We have invested massively in rice, sugar, dairy products, and tomatoes. Our rice-out grower scheme will produce rice by next year. This will reduce our rice import to nearly zero because Nigeria imports more than half of the rice it consumes,” he told the Asians.

Specifically, Dangote said his company has expanded its sugar operations in Tonga in Nasarawa State, in addition to Numan sugar projects, where sugarcane is cultivated.

“Some months ago, we laid the foundation for the construction of an ultra-modern rice processing integrated plant that will process 16 metric tons of paddy rice in one hour. By the time you multiply this by the number of hours and days it operates, you will understand that this is huge,” he added.

Dangote said the interesting thing about investment in agric is that apart from food production sufficiency, the job potential is unquantifiable. He said he was investing in agribusiness and promoting industrialisation through backward integration to ensure that Nigeria became self-reliant in food production in good time to save the much needed foreign exchange.

To underscore the company’s emphasis on backward integration, Dangote said: “We are producing the raw materials needed in our factories. In the sugar sector, we developed a sugar backward integration project plan targeted at the production of 1.5 metric tonnes (mt) per annum from various sites across Nigeria, in the next 10 years.”

He explained that his organisation has a scheme involving 20,000 out-growers who will grow about 180,000 tons of paddy rice for processing.  He also said rice processing mills are being built in Kano, Jigawa, Sokoto, Zamfara, Kebbi and Niger states in the first phase.

Dangote added that in the second phase, other mills will be built in Nasarawa, Kogi, and other states, noting that with the six mills, the company will achieve a capacity of 700, 000 metric tons per year of par boiled rice. The target, according to him, was to be the largest rice producer in Africa, which is a bold step in making Nigeria self-sufficient in rice production.

The Nation learnt that the Dangote Group stepped up its investments in agriculture and food production following the Federal Government’s policy of economic diversification that placed emphasis on agric rather than oil and general importation. He hailed the government’s economic recovery and growth plan, saying his investments in refinery, petrochemical and fertiliser production were in that direction.

According to Dangote, the decision of the Federal Government at diversifying the economy from oil only to agriculture-centred one remained the viable solution to the myriads of economic conundrum that Nigeria is facing

He, however, said the private sector has important roles to play, which was why his Group has taken up the challenge to lead the way as a leading private sector operator. He said with the government providing the right environment through good policy formulation and implementation, it will be a matter of time before Nigeria would become one of the world’s economic powers.

Experts say that the African population is expected to double by 2050, meaning that food demand on the continent is expected to at least double. Beyond the need to feed the expected population bulge, increase in food production and productivity will not only create jobs in agriculture, but also in upstream, downstream and support activities.

The consensus is that food self-sufficiency is achievable, and that Nigerian and other African countries can be net exporters of food products instead of their current status as importers. This optimism is largely hinged on the availability of arable land for agribusiness, population and market.

 

The challenges

As promising as the agric sector is, there are still hurdles to cross. For instance, there is too little data on crop types, production areas and harvest prospects. This, according to experts, complicates planning while often leaving smallholder farmers without the necessary advice and support to improve their production and income potential.

It also complicates the implementation by small farmers of the quality and food safety standards necessary for food businesses.

Also, banks have strict risk management requirements that complicate the provision of financing to small family farmers. Without precise knowledge of their farms, harvests and incomes, the risk of granting loans is simply too high and the interest rates on loans granted by banks or microfinance institutions vary between 20 and 40 per cent, which limits their scope.

The thinking is that it is necessary to aggregate farmers into formal groups and cooperatives. This will make it easier to work with them, train and support them, for example in traceability and certification processes that are mandatory for food manufacturers.

Experts, however, say that most of these challenges can be solved by connecting the various actors in the agricultural value chain through digital marketplaces that manage the supply from smallholder farmers, manage the stocks and manage the commercialisation of agricultural products and their transport.

Through these digital marketplaces, banks and insurance companies will have access to the data necessary to reduce their risks and thus be able to serve the untapped market of smallholder farmers.

In all of these, the role of the private sector is said to crucial in the transformation of Nigeria and Africa’s agriculture. Agri-food firms have massive purchasing power, while smallholder farmers are looking for ways to improve productivity and quality as well as increase their production and income.

The belief is that when farmers are integrated into global value chains, both sides benefit: farmers improve their incomes by having easier access to markets and private companies have access to the raw materials needed to produce their goods.