One of the impediments to the growth of the agric sector is lack of infrastructure, which has created a barrier between farmers and consumers. It has also reduced market opportunities and incentives for investing in farm productivity. DANIEL ESSIET writes that closing the infrastructure gap holds the key to enhancing the competitiveness of the sector.
Agriculture is Nigeria’s lifeline. It holds the key to eliminating hunger and ensure food security. About 70 per cent of Nigerians are employed in the agricultural sector, making it the largest employer and perhaps, largest contributor to economic growth and development.
However, despite being crucial to economic transformation, the sector is in dire need of massive investments in critical infrastructure to boost its productivity and competitiveness, encourage research, and open up new employment opportunities for many unemployed youths.
Experts say that the agricultural sector lacks critical infrastructure, such as roads, access to reliable sources of energy, clean water, and modern Information and Communications Technology (ICT) tools, particularly Internet. For instance, studies have shown that poor road, rail and port facilities add as much as between 30 and 40 per cent to the cost of moving agric produce and other activities in the sector. This adversely affects private sector participation and Foreign Direct Investment (FDI) inflow in the sector.
Because of the scary statistics, experts say that adequate infrastructure, such as roads, for instance, would enhance increased productivity and growth of the sector. The Programme Coordinator, Farmers Development Union (FADU), Mr. Victor Olowe, believes that investment in rural roads would link farmers and their produce to profitable markets. He said sufficient and quality roads between farms and markets would enable farmers transform their business, as roads would link them to vital input, such as seeds and fertiliser, while also offering them access to competitive markets where they have the opportunity to sell produce for a better price.
Olowe argued that the government cannot talk about encouraging farmers to make farming a business without investing in infrastructure to enable them move their produce from their farms to available markets. For agriculture to strive as a business, he said government needs to ensure that roads, railways and airports are boosting and not hindering the link between the farms and the markets. By ensuring that produce arrive on time to link with consumers in local towns and cities, he said farmers have the opportunity to compete with one another
Less than 30 per cent of the rural population live close to quality roads, which poses difficulty for farmers to transport inputs and produce. This coupled with poor storage facilities lead to post-harvest losses with nearly half of farm produce arriving in poor condition or never making it to the consumer at all. While insisting that reliable transportation in rural areas is critical to connect farmers to markets, Olowe added that value chains linking raw material producers to end users can play a vital role in promoting value addition to agriculture and the primary commodities.
According to him, local markets are a convenient entry point in the initial stage of value chain development and it is in the interest of the economy that government address existing and emerging bottlenecks. He was emphatic that the nation’s huge infrastructure deficit is holding back progress.
He pointed out that because of inadequate infrastructure, agriculture continues to suffer from weak linkages with other sectors, including agro-processing and agribusiness, fragmented markets and weak regional integration of commodity chains. These, he said, render, the sector vulnerable to external shocks due to inelastic commodity demand and price volatility. The result, he argued, is that Nigeria continues to be a net food importer despite her huge land and agricultural potential.
Olowe is not the only expert who is worried over the nation’s decrepit infrastructure necessary to drive the growth and competitiveness of the agric sector. The President, National Cashew Association of Nigeria (NCAN) Tola Faseru is also worried.
He said the challenge of infrastructure must be addressed if the issue of waste at farm level must be addressed. He said there must be improved infrastructure along the supply chain such as efficient freighting, temperature-controlled distribution, and improved storage and packaging system. These, he noted, could make a substantial difference to overall productivity.
What experts say
Olowe could not agree less, noting that growth in productivity without significant improvement in marketing is an opportunity lost. He said farmers need to be assisted to participate in higher value-added market chains than they can at present. To harness markets, he said investments should be directed towards increased value-addition, involving the promotion of public private partnerships, improving post harvest handling, storage and rural market infrastructure.
The Director, Africa Region, Cassava Adding Value for Africa, Dr Kola Adebayo, said boosting rural investment is key to improving food production with the steady rise in the number of poor people and their concentration in rural areas. According to surveys, two thirds of the nation’s population live and work in rural areas, which offer huge land surfaces, and agriculture represents 65 per cent of jobs available there. Yet, farmers in rural areas are often neglected. He said boosting agriculture and building a strong rural economy around it is crucial, as it would create jobs, wealth and food security.
Adebayo further noted that the agric sector is highly dependent on energy, telecommunications, water security and transportation and so there is a close alignment between improving infrastructure and national development. If farmers are to produce enough food to feed a growing population, whilst also sustaining a living from agriculture, he said sufficient infrastructure needs to be in place. “Infrastructure can connect farmers with markets, linking them to the inputs needed for the sector to survive,” he argued.
However, investment in infrastructure do not come cheap. For instance, experts say that an estimated $93 billion a year over the next decade would be required to close Africa’s infrastructure gap. The include new investments and maintenance of existing infrastructure. Potential internal sources of finance include raising additional taxes and harnessing domestic capital markets.
Experts also say that Public Private Partnerships (PPPs) and other innovative sources of financing and tapping into global savings for investment in infrastructure development can help the government address infrastructure needs, increase aggregate demand and address the twin problems of low growth and imbalances.
Indeed, lack of stable long-term finance, high sector specific risks as well as high macro-risk arising from political considerations and poor governance have held the sector down. But one sure way is to grant credit to farmers to enable them build proper storage facilities and infrastructure to access markets and develop a credible business. Experts however, say that sustaining such investment depends on the development of a strong agricultural finance sector that addresses industry structure, incentives, capabilities and regulation. Financing and risk management are other major riders in agricultural investment.
Farmer institutions are also seen as important forums for mobilising farmers around a common objective, delivery of services as well as policies that support agricultural development. They form key entry points for service delivery to individual households or communities. Farmer organisations also play a leading role in technology promotion, market organisation and value addition.
Yet majority of the farmer institutions are still characterised by low capacity to effectively perform their roles and to demand for delivery of agricultural advisory/extension services. It means that financing efforts should focus on strengthening the capacity of these institutions to fully participate in the commodity value chain development and combating climate change and ensuring accountability of public resources.
The Executive Director, National Centre for Agric Mechanisation Ike Azogu said with strategic vision, investing in infrastructure will stimulate engineering education. Citing the increasing use of renewal energy in agric, Azogu stressed the need to train the next generation of engineers to build and maintain such infrastructure.
For him, training in engineering should be a performance standard in agric merchanisation. He said such strategy will enhance the impact of agricultural development on wider industrial activities, as engineering skills from this foundational sector start to diffuse into the rest of the economy.
Agric Transformation Agenda
More than anything else, the administration’s Agricultural Transformation Agenda (ARA) is responsible for the recent calls by experts on government to address the challenge of infrastructure in the agric sector. At the core of the transformation agenda is the need to diversify the economy, and the agric sector is leading this drive with the goal to add 20 million Metric Tonnes (MT) to the domestic food supply – or five million MT per year – by 2015. It also targets a total of 3.5 million jobs by 2015.
ATA was launched in 2012. The focus is on expanding domestic food production, reducing import dependency, and expanding value addition to locally-produced agricultural products. In its first year, domestic food supply increased by 8.1 million MT, representing 41 per cent of the sector’s cumulative target for 2015, and created 2 million new jobs, exceeding its target by 200,000. ATA saw the launch of the “Nagropreneurs” initiative, aimed at creating a new generation of young commercial, market-driven farmers.
In terms of investment, in 2012, the agenda attracted $8 billion in commitments for current and upcoming agriculture projects across the value chain. This includes projects by Dominion Farms, Cargill, SABMiller and AGCO – the world’s largest manufacturer of Massey Ferguson tractors. The World Bank, African Development Bank, the US Agency for International Development (USAID), the International Fund for Agricultural Development (IFAD), the Overseas Private Investment Corporation (OPIC) and the UK Department for International Development (DFID) have, in total, committed $1.25 billion to Nigeria’s agriculture sector.
The Bill & Melinda Gates Foundation has also selected Nigeria as a priority country for its investment in agriculture, while the Tony Elumelu Foundation, Ford Foundation and United Nations Development Programme (UNDP) are providing significant technical support.
Indigenous firms
Nigerian companies are upbeat about taking advantage of the agricultural transformation agenda. Dansa Foods owned by Dangote Group, is establishing a tomato processing plant in Kano as well as a fruit concentrate processing plant; Famag-Jal has a large investment in Halal-certified meat processing plants in Abuja; Teragro of the Transcorp Group has invested in the processing of fruits in Benue State; and Flour Mills of Nigeria, Multitrex and Olam have all begun deploying capital to develop new agricultural operations. The Leventis Group has also embarked on new investments to revive all its previously abandoned farms and processing facilities, all due to the new reforms in the agricultural sector.
Cargill, Flour Mills of Nigeria and Transcorp Group have also embarked on a major investment that will produce 250,000 MT of starch from cassava to replace all the corn starch the country currently imports, as well as new investments to produce 100,000 MT of sweeteners from cassava syrup. Similar successes include the securing of investors in pineapple concentrates in Cross River and Benue states, tomatoes in Kano, and sorghum in Borno and Jigawa.
The largest manufacturer of Massey Ferguson tractors in the world, AGCO, also began operations in Nigeria in the last year, investing over $100 million in new tractor assembly plants and tractor parts and supply services in Ekiti, Enugu, Kaduna, Rivers, and Ogun states.
Such local and international responses must have been encouraged by Federal Government’s direct intervention aimed at driving the ATA. Government is prioritizing expanding farmers’ access to financial services to allow them build their productive assets, diversify income sources, and enhance their resilience. For instance, the Central Bank of Nigeria (CBN) established $350 million risk-sharing facility (NIRSAL) to reduce the risk of lending by banks to farmers and agri-businesses. The facility will leverage $3.5billion of lending from banks to agriculture. It will also reduce interest rates paid by farmers from 18 per cent to eight per cent.
Govt’s efforts
Government is also recapitalising the Bank of Agriculture to lend at single-digit interest rates to farmers, while the Ministry is working with Germany’s KfW to create an impact investment fund for agricultural finance, with the goal of injecting the equivalent of $130-260 million in capitalisation. Fourteen high-production food areas (or Staple Crop Processing Zones) have been designated by government to benefit from efforts aimed at creating an enhanced climate for attracting further investment.
Concentrating on higher-value crops and regions with existing markets, government is working to generate opportunities for the private sector through infrastructure upgrades, incentives and a favorable regulatory environment. For example, the Ministry attracted a $40 million investment in commercial rice production in Taraba State from the US agri-investment company Dominion Farms. Dominion has already commenced its operations and is investing on 30,000 ha of land, with young commercial farmers in what is hoped will enable the substitution of about 15 per cent of imported rice imported.
Thirteen new private-sector mills have also been established in the last 12 months, buying and processing local paddy. The total capacity of the new mills is 240,000 MT. Local rice has been rolled out into the market on a commercial scale by Ebony Rice, Ashi Rice, Mikap Rice and Umza Rice, with its high quality, taste and price helping to replace imported rice.
To ensure that Nigeria has industrial capacity in place for international quality grade milled rice that can compete with imports, the Ministry of Agriculture and the Ministry of Finance have concluded arrangements to facilitate the acquisition of 100 large-scale integrated rice mills, with a total capacity of 2.1 million MT to be located across the country and owned and operated by the private sector.
As a consequence, for the first time in Nigeria’s history, the country will have the potential to mill sufficient rice to replace all current imports, as well as become an exporter of finished rice to other African countries, opening up significant opportunities.
