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Seven things Buhari needs to fix in agriculture over the next 4-years (2)

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As it appears to be another four years for Muhammadu Buhari as Nigeria’s president, the article continues from last week with an additional two areas of focus that need attention in agriculture.

Value addition

Nigerian exporters of agricultural produce are often excited when their goods are shipped overseas and they earn some foreign currencies. However, most of these exports are raw, unprocessed goods that as a result, see the Nigerian exporters getting less value than would have been obtained if some processing was done. There are however several reasons why this remains the norm. Top on the list is electricity, particularly the near non-existence of it in some rural parts of the country where agricultural activities take place. Therefore, agric produce is harvested and rushed off to the market for it to be sold as quick as possible before deterioration sets in. Notable for these are vegetable crops such as tomato, which perish in high volumes, yet the country still has a huge demand gap to be filled.

At some point in 2018, Tomato farmers complained of huge losses (to the tune of N10 billion) as the commodity continues to perish in large volumes, without them being able to sell off or get them preserved. It was the second time in the year the complaint will be made, as farmers allege sabotage by some entities that continue importation of tomato pastes into the country, without recourse to government’s policy on it.

George Uwakwe, chief risk officer, Guaranty Trust Bank, had expressed the view that bankers have always advocated that value chains across agriculture need to be fixed. He explained that, it is one thing to provide funds to the farmers, but when they produce, most of the time substantial portion of the produce get spoilt before getting to the market. “If the producers cannot sell, the truth is that you will not be paid back (as a bank). That is the issue,” he said.

However, fixing the value chain needs to run end-end, that is, from inputs carefully developed to deliver desired yields, through well-managed production processes, and final delivery to consumers. Currently, fresh tomatoes are often packed in raffia baskets instead of Crates, increasing the tendency for spoilage. There is also a dearth of temperature Controlled Storage, and in the end, all of these still require funding to be achieved.

As Bolarin Omonona, an agricultural economist at the University of Ibadan explained, “finding the value in the value chain involves heavy investments in the agricultural value chains”. Agricultural finance is crucial to support the growth of the agricultural sector because of its importance for food security, job creation and overall economic development.

The tomato value chain for instance needs to be fixed, and potentially retain up to N72 billion in crops that may have been lost. At the same time, funding is required in order for this to be achieved. The banks, as it appears, would need to have more trust and commit funds so that the risks they fear can be gradually eliminated when the value chain is fixed.

Access to Finance and De-risking agriculture

Access to finance and de-risking go hand-in-hand as without guarantees, financial institutions are reluctant to support agricultural projects. With a lot of focus on agriculture in recent years, funding has remained elusive for millions of smallholders and other players in the sector, as commercial banks find it difficult to commit substantial funds. Interest rates are crippling for agribusinesses to attempt, and even when they try to, securing funds is extremely difficult.

While the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending has been trying to improve this in recent times, more still has to be done.

Uzoma Dozie, CEO, Diamond Bank, told BusinessDay in an interview, that while his bank has been lending to agriculture for a long time, it has been more from a large scale perspective, not the primary end. He however expressed optimism in going all the way down to the smallholder farmers if the value chain fixes being promoted by NIRSAL can take effect.

“In recent time, with support from the central bank, and emphasis on achieving food security, we are now looking at the primary end (of agriculture),” Dozie said.

He explained that Diamond Bank is currently providing finance for over a thousand farmers across different belts, and this number will increase exponentially as more players come into that market.  But for his bank to do more, he says there have to be more investments in storage, processing, and even availability of farm equipment to improve the odds that farmers will be able to produce optimally, sell profitably, and be able to pay back promptly.

With the value chain fixed, especially as being promoted by NIRSAL, “There is a bright future in agriculture,” Dozie said.

On the risk side, “Investments in agriculture, unlike many other business ventures, are exposed to a wide range of risks and uncertainties. There are risks associated with input and prices, agricultural yield, post-harvest losses, product prices fluctuation, and vagaries of nature such as inclement weather conditions; flood, drought, fire, outbreak of pests and diseases,” noted Folashade Joseph, MD, Nigerian Agricultural Insurance Corporation (NAIC), in an addressed presented on her behalf at an forum by Dayo Mobayo, NAIC’s head of its Lagos office.

Joseph emphasised that the application of insurance to agriculture could provide risk management, income stabilization and reduction of economic wastage. This will to some extent address challenges of risk, which financial institutions cite when they develop cold feet in lending to the sector.

However, there is a need to create more confidence in NAIC as presently, a good number of stakeholders in agribusiness do not consider it reliable.

“NAIC has poor capacity. They aren’t well organized and don’t pay claims promptly. My friend was delayed for his rice farm, (and) they (later) claimed the accident happened too soon after he signed up,” said Yomi Fawehinmi, a member of the Agric and Agro-allied group platform of Lagos Chamber of Commerce and Industry (LCCI).

For Taju Onitiju, CEO, Tajukola farming enterprises, a farmer since 1983 (four years before NAIC’s establishment), “I don’t think many people believe in NAIC, and I don’t believe its existence is justified,” he said.

Globally, agriculture is a risky venture, one in which unexpected diseases or pests could wipe out months (or even years) of hard work and investments. It gets worse in places like Nigeria where little advancements have been made in developing agricultural systems that are immune to adverse (natural and man-made) conditions. To top this, there is hardly insurance to cushion against agricultural losses in Nigeria. This has to change in the next four years.

 

 

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