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Fixing Nigeria’s Agriculture By
Nasir Ahmad El-Rufai
Newsdiaryonline Fri Sep 16,2011
El-Rufai
Last week, we discussed unemployment in Nigeria, asking where
the jobs are. In the coming weeks, this column will explore
answers to that question by focusing on the real sector,
beginning with agriculture. On the differing unemployment rates
mentioned last week, we erroneously swapped the numbers. At
their Senate confirmation hearings, it was Segun Aganga who
mentioned about 20% while Ngozi Okonjo-Iweala stated that the
unemployment rate was 14-16%. The senators did not question
either figures. We apologize for the mix-up, but it shows the
contradictions in ministerial statistics!
Back to agriculture. Israel, a mostly desert country with only
about 17,000 farmers produces a wide variety of food and cash
crops.
The country’s agricultural
output is valued at over $2 billion, of which 70% is exported.
Nigeria, on the other hand, has about 50 million people involved
agriculture, with abundant arable land and water resources, yet
last year spent
over $4.2 billion to import food -
N635 billion to import wheat; N356 billion on rice, N217 billion
on sugar and N97 billion on fish – commodities we should be
exporting.
In the 1960s, agriculture contributed over 60% of our Gross
Domestic Product (GDP). Nigeria was the world’s second largest
producer of cocoa with 15% of the world market, largest exporter
of palm oil with 60% market share, and leading exporter of
groundnuts with 30% of the world market. We also held dominant
positions in the markets for cotton, rubber, hides and skins.
Although the farmers relied on rudimentary, traditional
tools and methods, the sector accounted for about 70% of
Nigeria’s exports, and about 95% of our domestic food
consumption.
The oil boom of the 1970s spelt a doom for agriculture in two
ways - the overvaluation of the naira made our exports less
competitive, and imports cheaper - a trend that has continued
till date. From domestic self-sufficiency and leading exporter
in 1960s, by 1982, we imported about 153,000 metric tons of palm
oil at a cost of $92 million and 55,000 metric tons of cotton
worth $92 million.
Between 1973 and 1980, we imported 7.07 million tons of wheat,
1.062 million tons of rice and 431,000 tons of maize. In 1990,
we spent $430 million on food imports; in 2000, we spent $1.25
billion and last year, Nigeria
spent $4.2 billion to import food. Demand has gone up with
growing population, rural-urban migration and changing tastes
as we moved from the
traditional staples to foreign grown foods.
Today, agriculture still employs more people than any sector and
contributes 42% of our GDP. We are ranked 11th in the world in
terms of arable land but with fertilizer use of 6kg/hectare, we
are ranked 116th out of 138 farming nations. Though our domestic
production continues to grow, accounting for about 60 per cent
of the ECOWAS output, it has not met up with the patterns of
demand, so we continue to import subsidized rice and wheat, to
the detriment of our domestic agriculture and farmers, as well
as food security strategy. Nigeria today is the world's second
largest importer of rice, next to Philippines.
Agriculture has remained largely subsistence - farm sizes are
between 05.-3 hectares, with national average size of 1.2
hectares militating against scale economies.
Farmers have no title to land and therefore unable to
access credit from banks. Loans, when available are at
exorbitant rates of interest, and most banks do not really
understand, or make any effort to appreciate the vagaries of
farming and agribusiness. Inputs like fertilizer, improved
seeds, agro-chemicals including herbicides and pesticides need
to be imported at high costs and do not get to the subsistence
farmers in timely and affordable manner. Produce when harvested
gets lost due to poor storage technologies, absence of a price
support system, infrastructure deficits, poor market access and
pests. Post-harvest losses in Nigeria average between 20% and
40% depending on the crop, about the highest in the world.
Federal Government interventions to remove the binding
constraints have been misguided and mostly failed. For example,
in the mid-1970s, the government
established sugar plantations and processing factories at Numan,
Lafiagi and Sunti.
All such efforts floundered proving once more that government is
an incompetent businessman. The Nigerian Agriculture and
Co-operative Bank (NACB) was established in 1973 to address the
credit needs of farmers, and between 1995 and 1998, the
government reformed the lending policies of the CBN's
Agricultural Credit Guarantee Scheme (ACGS), both with little
impact.
There was also the 1996–1998 National Rolling Plan with the
ambitious projection that by year 2000, Nigeria would have grown
the agriculture sector to ensure the country could feed her
rapidly growing population and even develop capacity to process
agricultural raw materials for local industries and export. None
of the targets were achieved and we are where we are - a nation
without food security, with little participation in global
agribusiness except as an importer, and an ageing population of
farmers with small farms, without much hope of being replaced by
young people, new technologies or large scale mechanization.
A nation with only
30,000 tractors for 50 million farmers is going nowhere.
What should be the direction of policy to ensure that
agriculture returns to its pre-eminent, pre-independence
position? What should we doing at Federal, State, Local
Government and individual levels to attract entrepreneurship,
investment, and youthful energies and passion for agriculture?
What would incentivize the expansion of small-holder,
subsistence farms, and emergence of large scale, mechanized
farms? How can we achieve food security and recover our position
in the global agribusiness value chain?
The first priority is to learn from our past successes and
failures. When Nigeria was a leading agricultural nation, we did
not need a huge Federal Ministry of Agriculture. We do not need
it now. Agriculture
is a state and local government matter, with a small regulatory,
standards-setting and quality control organization at national
level - for exports, imports and domestic consumption. What we
need are strong and active ministries of agriculture at state
level and departments within local government councils. The
multitude of colleges and research institutes properly belong to
states and geopolitical zones, and they should be so reverted.
The second is to reorganize the institutional framework for a
productive sector. The federal government has no land, said
Governor Rotimi Amaechi of Rivers, so why do we budget N63
billion for a Federal Ministry of Agriculture? I agree. Each
state should identify and focus on its areas of agricultural
competitive advantage. Rice and wheat which we have capacity to
be self-sufficient command special attention of coordinated
policy support. Other export crops which we can lead the world
should similarly be attended to - sharing the burden between the
national and sub-national governments.
The third is to remove binding constraints that hold back
agricultural production. There should be renewed focus on
building infrastructure to link up production, consumption and
exporting centres. Zero-interest credit for agriculture must be
delivered to our farmers, and titles to their land given to them
to facilitate formalization of their ventures and access to
loans. Intensified extension services, visits and advice by
agricultural experts must return to our farms. Access to
affordable seedlings, including genetically-modified seeds,
chemicals and fertilizer should be enhanced.
Finally, designing and implementing a sustainable system of
subsidies, price support and market mechanisms for agriculture
to be prestigious, and the farmer to make money and flourish.
The EU and USA spend more than $1 billion every day to subsidize
agriculture; we must also subsidize ours. but the subsidies
should be strategically targeted. Something like the Commodity
Boards which used to buy off all produce from farmers, needs to
be re-introduced. A Price Support System for farmers which would
guarantee that what all our farmers can produce will be
purchased. This would incentivize farmers and boost productivity
at all levels. Governments can then act as buyers of last resort
and store the purchased produce at its various silos nationwide
for gradual sale throughout the year. In fact, this is an avenue
for the emergence of private sector participation in commodities
trading, food preservation and storage. The opportunities for
job creation are huge.
While there is nothing wrong with subsidies to farmers, what we
have has been hijacked by bureaucrats, middlemen and politicians
who often have nothing to do with farming. Even President
Goodluck Jonathan admitted that only 11% of fertilizer reached
farmers, yet this year, the Federal Government will spend about
N4.7 billion on fertilizer 'market stabilization' - whatever
that means!. This scam should stop right away and the funds used
to buy all the output of farmers for storage and sale throughout
the year.
Apart from fertilizer scams, even the medium and large scale
farming by retired public servants and politicians have mostly
been failures with poultry and livestock being the significant
exceptions. The experiment of the Kwara State government with
Zimbabwean farmers in Shonga has been partly successful only
because it was a public-private partnership and not the
much-touted 'commercial farming' because the banks own 45% and
Kwara State 15%, but the state shouldered virtually all the
financial and political risks, in addition to providing
infrastructure. The key lesson of the Shonga experiment is that
when the government is willing to provide political leadership,
infrastructure and low-interest loans, agricultural production
can be substantially increased.
The federal government should downsize the agriculture ministry.
In the first instance, rural development should be the business
of states and local governments. Out of a total budget of about
N65 billion to the ministry and its agencies, over half of that
amount will be on recurrent expenditure including a
preponderance of research institutions and colleges that
duplicate functions and have made very little impact on the
sector. The parastatals in the sector account for N46 billion of
the sector's budget with little justification for their
existence in terms of outputs to improve agricultural
production.
Government recently unveiled a four year plan aimed at
“revolutionizing” the sector in a plan made public by
Jonathan-led Economic Management. The plan appears laudable, but
the modalities for the
proposed injection of funds into the sector under the
blue-print is not clear
to transform agriculture without radical change in approach.
Agriculture can only be largely driven by state governments.
It is not clear if the EMT projections took into
consideration the critical factors that have been bedeviling the
sector that have been identified earlier.
Nigeria must return to agriculture. Global demand for food will
continue to increase because in October, world population will
hit 7 billion. If you think that our population is large today,
imagine what it would be like at the turn of this century – when
all our oil would certainly have dried up, or when technology
would have made fossil fuels unneeded. By that time, Nigeria
would have over 700 million people, 500 million of which would
live in cities. What would they eat?
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