– Despite accounting for 25% of GDP, agriculture in Nigeria is mainly focused on commodity exports
– Nigerian authorities encourage agribusiness to maximize value addition
– A series of incentives and processing zones are designed to build agribusiness capacity
As Nigeria seeks to restructure its economy to make it more diversified and sustainable, agribusiness is emerging as a key tool for improving agricultural value addition while enhancing the sector’s status as an engine of economic growth.
As in many African countries, agriculture has long been an important part of Nigeria’s economy, not only in terms of food production, but also in terms of economic impact and contribution to the overall workforce. .
However, the discovery of oil in the 1950s and the subsequent development of the hydrocarbon industry saw the economic importance of agriculture decline.
Nevertheless, agriculture accounts for around 25% of GDP and was the country’s largest employer before the Covid-19 pandemic, accounting for 35% of the workforce, according to the World Bank.
Despite its large footprint, around 90% of agricultural products are exported raw, meaning the country is missing out on crucial value-added opportunities associated with agribusiness.
It is estimated that up to 80% of the profits of the agricultural sector come from the processing and retailing of raw materials. Emmanuel Ijewere, vice president of Nigeria Agribusiness Group and CEO of agri-processing company Best Foods, estimated that for every dollar earned exporting raw produce in 2016, Nigeria could have earned 10 times that value if the country had processed all exported products. .
The lack of processing capacity means that Nigeria essentially exports its agricultural products overseas, where they are processed and often re-exported to Africa at a much higher price.
For example, it is estimated that between 2016 and 2019, Nigeria’s cumulative agricultural imports of 3.3 billion naira ($7.9 billion) were four times greater than its agricultural exports.
As OBG has already noted, such situations are not uncommon in the region. For example, West Africa’s major cotton-producing countries, Benin, Burkina-Faso and Mali, export 1.8 million tons of unprocessed cotton worth $922 million, but import $2.4 billion worth of finished cotton textiles and garments.
The result of such a pattern is that despite a large agricultural sector and vast arable land, Nigeria remains vulnerable to food insecurity and fluctuating food prices.
These challenges were underscored by the fall in oil prices in 2014 which led to a recession in 2016. Against a backdrop of falling incomes, the government sought to diversify the economy and reduce the import bill by focusing on agro-industry.
However, the pandemic has posed additional hurdles, disrupting many international, regional and local supply chains, as has Russia’s invasion of Ukraine, which has restricted exports of various key crops in many emerging markets. and drives food prices to record highs throughout the first half of 2022.
In an effort to remedy the situation, in recent years Nigeria has sought to develop its agricultural processing capacity.
In 2015, the Central Bank of Nigeria launched the Anchor Borrowers Program, an initiative to connect smallholder farmers and agribusinesses through a range of finance and input options.
The Bank of Industry (BoI), for its part, has supported the sector by providing loans aimed at developing the agricultural value chain. It is estimated that more than 6.9 million direct and indirect jobs were created through BoI initiatives between 2015 and October 2020.
These measures build on broader government strategies such as the Economic Recovery and Growth Plan 2017-20 and Nigeria’s Industrial Revolution Plan, both of which see agribusiness as central to diversification plans. economy and reducing the country’s dependence on imports of processed foods.
In addition to government-supported programs, agribusiness in Nigeria has benefited from projects funded either by international organizations or in collaboration with other governments.
One of them is the Special Agro-Industrial Processing Zones (SAPZ) programme. With funding of $520 million from the African Development Bank and its partners, and $200 million from the International Fund for Agricultural Development, the initiative aims to build agro-industrial zones in all 36 states, with a pilot phase to be held in Ogun, Oyo, Imo, Cross River, Kano, Kaduna and Kwara States.
By allowing food producers, processors and distributors to operate from a centralized system
Geographically, SAPZs are designed to improve food security and reduce the food import bill.
Another important initiative is the Nigeria-Brazil Agricultural Mechanization Program, which will see Nigeria receive around $1.1 billion in loans from the Development Bank of Brazil and Deutsche Bank over a 15-year period.
The funds will be used to provide producers with agricultural equipment, as well as to offer entrepreneurial services across the country to support agricultural production, processing and packaging.
The program is part of the broader Green Imperative initiative, a bilateral development plan that will see 142 agricultural processing facilities established across the country.
In another boost to the agricultural sector, on July 4, the EU and its development finance institutions announced that they would provide Nigeria with €1.3 billion until 2027 to help the country diversify. away from oil.
In addition to improving access to renewable energy, the funding is designed to strengthen the sector by improving farmers’ access to markets.
A potential model for adding value to the Nigerian agricultural sector is that used by Sebore Farms.
Established in 1982 in Adamawa State, in the northeast of the country, the company offers a series of agricultural, agribusiness and logistics services aimed at strengthening the value chain.
In addition to its own on-site farm, Sebore Farms collects raw milk from thousands of small-scale farmers and brings it back to the company’s factory, where it is processed and packaged into pasteurized milk, butter, yogurt or cheese.
This model benefits farmers by providing them with a guaranteed market for their products, while Sebore Farms’ processing and packaging operations – along with its economies of scale – ensure that products gain value before they are sold.
In addition, the company’s cool storage facilities help reduce post-harvest food losses, with a 2021 report by the US International Trade Administration estimating that more than half of Nigerian farmers’ produce is lost due to insufficient storage.
Sebore Farms is also classified as an Official Export Processing Zone (EPZ), which sees the company provide small agribusinesses with services and facilities that allow them to operate without the substantial expense associated with purchasing their own equipment. .
“One of the priorities of EPZs and other economic zones in Nigeria is to support the development of agribusiness, in part by enabling local farmers to upgrade their production in order to increase production in terms of volume and quality,” Aminu M Nyako, managing director and CEO of Sebore Farms, told OBG late last year.
“We hope that this structure can be a model to further develop the agro-industry in the region by creating thousands of job opportunities to accelerate economic and social development,” he added.