Why Nigeria needs new strategy to promote agro exports
Diversifying the Nigerian economy away from oil and earning the much-needed foreign exchange, especially amid the COVID-19 pandemic, would require paying more attention to agro-processing.
The agricultural sector, which was previously neglected, has since 2016 became an option for diversifying the economy owing to its vast potentials to drive a more sustainable economic growth in Africa’s most populous nation in terms of job creation and revenue diversification.
To accelerate this growth, the government in the last five years had devoted a lot of energy to deepening agriculture with initiatives such as the Anchor Borrowers Programme (ABP), placing a ban on the importation of some agro commodities, and the shutting down of its land borders without paying adequate attention to value addition.
As a result, revenue generated from agro exports has continued to remain low.
Data from the country’s Trade Report shows that despite the steady growth in the country’s agricultural exports in recent times, the country’s agro exports to total exports still account for less than three percent.
In 2016, total agricultural exports stood at N60.7billion, accounting for 0.7percent of total exports for the period. In 2017, total agro exports grew by 180.7percent but accounted for 1.3percent of total exports.
By 2018, agro exports increased by 77percent, accounting for 1.6percent of total export for the period. In 2019, agro-export declined by 10.8percent, accounting for 1.4percent. In 2020, the value of agricultural export increased by 19percent, accounting for 2.6percent of total export for the period.
The low contribution of agriculture to total export is because the country still exports about 90 percent of its agro commodities raw and is yet to develop a new strategy to promote the export of processed commodities.
Nigeria is among the top growers of agro commodities such as cashew, cocoa, sesame, sorghum, and ginger among others.
But the inability of Nigeria to process a large percentage of these agro commodities before exporting is responsible for the loss of billions of dollars which the country could have earned if they were processed.
About 90 percent of the total exports for 2016 were exported raw according to Emmanuel Ijewere, vice president, Nigeria Agribusiness Group, and chief executive officer, Best Foods Limited.
According to Ijewere, for every amount earned in the exports of raw agro commodities in 2016, Nigeria would have made about ten times the value of what was made if it has processed all the commodities that were exported during the period.
Similarly, experts noted that more revenue is earned in value chains that are closer to the consumers.
“Processing to retailing accounts for 80 percent of the entire profits in the agricultural sector, so, any country not focusing on processing is losing that much,” said Babatunde Shodipe, senior manager –export development financing, Africa Export-Import Bank (Afreximbank) at a 2019 First Bank Agribusiness conference in Lagos.
According to him, adopting the strategy of driving value addition helps a country edge its farmers against price violability in the international market, while citing the Brazilian model for its coffee industry as an example.
“Nigeria must create value addition that is about quality and standards which must be met and maintained by key actors,” he said.
“Without quality, our products cannot compete and get a fair price,” he added.
Also, experts in the sector, stressed that some challenges needed to be addressed to expand the country’s export for it to contribute to structural change and help promote the sector’s growth, which is vital for sustaining economic growth and development.
They stated that good market penetration and ensuring standards on the part of the exporters, as well as adequate financing from banks and government, among others would be key to achieving export competitiveness.