If Africa’s biggest economy is desirous of changing its narrative of a mono-economy and address the current FX crisis, it must increase its agro-processing to boost export proceeds, experts say.
The country’s agricultural exports have emerged as a promising solution to diversify Nigeria’s economy, stimulate job creation, earn substantial foreign exchange and drive sustainable economic development.
But Nigeria’s failure to process the bulk of its agricultural commodities is making the country lose billions of dollars it would have earned if they were processed, experts say.
Nigeria exported agricultural products valued at N279.64 billion in the first quarter of 2023, according to data from the country’s foreign trade report.
About 97.6 percent of the total exports were exported raw according to the data. This means that N272.9 billion (which is 97.6 percent of N279.64 billion) was exported unprocessed in the first three months of the year.
Experts say for every amount the country made from its agricultural exports for the period, Nigeria would have earned at least 10 times the value of what was made if they were processed.
“We must stop exporting raw commodities without value addition,” Ikechukwu Kelikume, director of agribusiness at the Lagos Business School said at the BusinessDay 2023 AgreX Summit held in July.
Kelikume said that the greatest opportunities in boosting FX earnings from the agricultural sector lie in processing.
He noted that the higher the value chain that is closer to the consumer, the greater the revenue to be earned. “Most of the things we export raw, we virtually import them back as finished products,” he said, adding that it has made the country unable to get value for its export.
The agriculture sector is important for food provision, job creation, and security as a source of foreign exchange. However, Nigeria has failed to leverage the sector’s vast potential for economic prosperity.
The country’s under-performing agriculture is stifling the effective functioning of the industrial sector; consequently, resulting in a weak linkage between the agricultural and industrial sectors, in the face of a myriad of opportunities, Jude Obi, president of the Association of Organic Agriculture Practitioners of Nigeria (NOAN) said.
“Processing of agricultural produce is where the money is but we currently do very little of it and that is why our export proceeds have remained poor,” Obi said in a telephone response to questions.
“With the cassava value chain alone, the country can earn much more than it earns from crude oil,” he said.
“It is a crop we have a comparative advantage and if we start processing it for ethanol, starch, cassava chips, glucose, alcohol, and caramel among others, we would more than triple our export proceeds,” he said.
He urged the federal government to emulate what the Asian tigers did to grow their agro-industrialisation.
In 2022, Vietnam exported $7.14 billion worth of cashew and coffee, according to data from Vietnam’s General Department of Customs Statistics – 80.25 percent more than Nigeria’s total agricultural export of N598.15 billion ($1.41bn using the I&E window average rate of N423.72/$1 in 2022).
While Vietnam earned $7.14 billion from just two commodities, Nigeria, on the other hand, scratched only $1.4 billion in 2022 from more than 15 commodities from cocoa to cashew nuts.
The big difference in the export earnings between the two countries is owing to Vietnam’s ability to process the bulk of its cashew nuts and coffee beans for exports.
The difference also exposes the failing state of Nigeria’s inability to tap opportunities from agro-processing, as domestic challenges continue to hinder the few local processors to expand capacity.
“We cannot drive value addition when the power supply remains poor and inadequate. The Asian tigers provided a stable power supply and a conducive environment that spur agro-industrialisation and that is still lacking here,” Ibrahim Kabiru, president of the All Farmers Association of Nigeria said in a response to questions.
Vietnam’s success in making its agriculture market-oriented through value addition and investments in research holds many lessons for Nigeria in improving its export proceeds.
AfricanFarmer Mogaji, chief executive officer of X-ray Consulting, said with increasing its processing capacity of agricultural commodities, more jobs will be created and a lot of revenue will be generated.
He called on the government to emulate what Cote d’Ivoire is doing in terms of giving incentives to the cashew and cocoa industry to drive investments in processing. Cote d’Ivoire gives incentives to encourage processing and today, the sector has grown significantly, he said.
Akin Sawyerr, co-founder of the Agricultural Fresh Produce Growers and Exporters Association of Nigeria (AFGEAN) pointed out that low processing, absence of commercially-minded farms, poor quality seeds, inadequate farming practices and processes including a lack of produce traceability are challenges limiting the country’s export potential.