In February 1989, Nigeria was in a tight spot. Squeezed by years of austerity following the end of the oil boom era and racked by the twin perils of falling consumer demand and galloping inflation, the economy was taking a beating. Food shortages in particular, had become a problem for many Nigerians, alongside runaway food prices that met wages that were stagnant or even reduced in real terms. The Ibrahim Babangida administration had a problem on its hands, and it needed to do something.
On February 16, 1989, the Nigerian government did something with the commencement of the Export Prohibition Act, 1989. Under the terms of this Act, a list of raw and processed food items including yam, cassava, rice, maize and cowpeas were forbidden from being exported out of Nigeria. 32 years later, as Nigeria faces another 1989 moment, understanding the rationale behind this extraordinary policy decision and analysing its outcomes is key to answering the question of how to end Nigeria’s brewing food crisis and feed Africa’s largest population.
Problems or Opportunities? It’s a matter of perspective
According to the National Bureau of Statistics (NBS), Nigeria’s composite food index, which measures food inflation, stood at 20.3 percent in August 2021. Figures from 2019 revealed that about 58 percent of Nigerian household income is spent on food. To put this figure in perspective, the Bureau’s monthly COVID-19 National Longitudinal Phone Survey in October 2020 revealed that roughly one in 3 Nigerian households had started taking out loans to pay for food. Colloquial evidence abounds that food is increasingly scarce and expensive in Nigeria. For a population with over 100 million people living in abject poverty according to World Bank figures, this situation should be a disaster. Or is it?
Back in 1989, the government certainly thought so, which was why the Export Prohibition Act was put forward. According to the reasoning at the time, ordinary Nigerians were having trouble accessing dietary staples such as rice, corn, yam, garri (cassava) and beans (cowpeas) at affordable prices, in part because these products were being sent to export markets. The agricultural middlemen and traders, it was said, preferred USD export income over local market income denominated in the weak and unstable naira. Closing the doors to export would thus force them to sell to Nigerians, making the commodities more accessible and cheaper.
Read also: Reducing the importation of processed food items
In hindsight, it was a short-sighted policy that ended up achieving very little except showing up as a nasty legal surprise to would-be commodity exporters decades later. This Act remains on the books in Nigerian law, as former Agriculture Minister Audu Ogbeh found out to his chagrin while trying to launch a yam export initiative in 2016. The reasons for the policy failure are also lessons in what Nigeria’s Agricultural policymakers and industry players need to do. The first reason is that as with many other Nigerian government policies, it was a reaction to a problem, instead of a proactive step toward an opportunity. When formulating agricultural policy to ensure that 200 million people get fed, it is more useful to see problems as opportunities to be exploited, than as enemies to be fought.
Look at it this way. Nigeria is a country that has a large population of unemployed young people looking for nonexistent urban jobs – young people who have no intention of becoming subsistence farmers. Nigeria however, is also a country with over 400,000 SQ. KM of pollution-free, arable land under cultivation, relatively low population density (ranked no 63 in the world) and excellent irrigation resources. It is possible to put all these factors including unwilling young people to work in Agriculture with a few changes to its land use, land tenure and youth empowerment policy – it is only a matter of perspective.
PwC estimates that Nigeria has over $900bn worth of so-called “dead capital” in real estate – value that is trapped in limbo as a result of Nigeria’s opaque and convoluted Land Use Act. This has a direct result on the country’s agricultural outcomes since the vast majority of Nigeria’s food cultivation takes place on land that has been rendered almost impossible to monetise. Explaining how to take advantage of this opportunity, Babajide Ogunbanjo, Portfolio Manager at Elixir Asset Management says:
“Simply repealing the Land Use Act and instituting in its place a transparent and investment-friendly land ownership and tenure system would attract investment and create jobs in the agricultural value chain without any kind of dramatic state intervention.”
If Nigeria’s agricultural policy makers come to view Nigeria’s economic, geographical and demographic circumstances as an opportunity rather than merely a set of problems to fight policy battles against, the country stands to gain a lot more than just cheaper, more plentiful food. Agriculture – currently worth roughly 21 percent of GDP according to NBS data – could become a real source of export-led economic growth and foreign income at a time when the country desperately needs to diversify export earnings away from oil. The Netherlands for example, has 22,000 sq km of land under cultivation to our 400,000 sq km. Annual Dutch agricultural exports are worth $112bn while Nigeria’s equivalent figure is less than $1bn. This should be seen not as a problem, but an opportunity; not as damning failure, but as potential growth upside. It is only a matter of perspective.
The success of secondary agriculture in feeding Nigeria
With the aforementioned data showing that food is becoming an increasingly expensive commodity for Nigerians, one might think that the food processing industry in Nigeria is entirely having a hard time. Although, there have been a couple of challenges being faced by the industry – like FX, transportation, power supply and other issues – understanding why is central to figuring out how to fix Nigeria’s food security problems. According to a report prepared and presented by a PwC director at the AfCFTA workshop on the “Current State of Nigeria Agriculture and Agribusiness Sector”, the share of agricultural contribution to GDP as at Q1 2020 stood at approximately 22%.
On closer examination, however, the reason for the success of this secondary agric player and many others within its space start to emerge. First of all, practically all large-scale secondary players in the Nigerian agriculture value chain (brewers, millers, processors etc) have figured out their supply issues by making extensive use of contract growers. This model is a win-win because it provides a strong and reliable source of income for farmers and guarantees supply of inputs to the processors often at a price significantly below market cost. This allows the processors to pass on the savings to consumers who are thus able to access and buy relatively inexpensive food. In some cases, the contract growing model is so well established that some supply chain relationships are already many decades old.
At the medium scale end of the secondary agric value chain, some success is also being had by virtue of partnerships and creative financing. Kaduna-based food processor, Tomato Jos, is an example of this strategy. The company, which partners with smallholder farmers and processes primarily tomatoes for the Nigerian and African market, raised $4.2 million from Goodwell Investments in May 2020. Such funding allows for expansion of processing capacity to better serve the Nigerian market and fully exploit Nigeria’s comparative advantage in tomato production.
To further deepen the success of secondary agriculture in meeting Nigeria’s food needs, government policy must be reviewed to stop treating food processors as targets of cash shakedowns and multiple taxation. Effective policy geared at helping them to feed Nigeria must classify them as systemically important institutions that play a crucial role in maintaining national security. The processors themselves also need to explore greater collaboration, instead of prolonging the existing model of having large, walled-off infrastructure and contract-grower silos. In the race to meet Nigeria’s food needs, market players in the secondary agric space must recognise that it is still a virgin space with enough opportunity for everyone to be successful via partnership and collaboration. The SEC also needs to do a more robust job of weeding out fraudsters who push nonexistent or oversold agric investment products to retail investors, promising huge returns in a short time.
Fixing the problem is a matter of data-driven policy
The second thing that the Nigerian agricultural industry’s major stakeholders need to do is to respect the primacy of numbers and data – which is exactly what they did not do in 1989. A cursory examination of actual export data and agricultural output numbers would have told the government that there was absolutely no evidence that agricultural commodity traders were intentionally starving the local market of yam, rice, beans and garri so that they could export them for USD. Despite it becoming almost an article of faith in policy circles that this was happening, the numbers simply did not support this position.
The scenario was repeated between 2019 and 2020 when a series of food import bans and land border closures were enacted, ostensibly to help local agricultural production by removing access to imported substitutes. Just like in 1989, it was taken as an article of faith that food importation and local food production can only happen at the expense of each other – even though there was absolutely no data to support this position. In 2018, Nigeria’s total import bill according to the National Bureau of Statistics was $36.5 billion. Of this figure, an estimated 17 percent went for importing food and beverages – about $6.2 billion in total.
That is a lot of money, but if you divide that figure by Nigeria’s estimated population of 180 million people, the figure comes to about $34 worth of food imports per Nigerian per year. In other words, the average Nigerian consumes an overwhelmingly local diet plus roughly ₦19,000 worth of imported food every year on average – hardly a fiscal emergency. More importantly, the data showed that the entire premise of the food import ban – Nigerians’ alleged preference for food imports over local substitutes – was completely fictitious. It was not true.
Perhaps the most important element of data-driven decision making is that government and investment budgets will be allocated to the parts of the agricultural supply chain where they are actually needed. Cross River state, for example, is one of Nigeria’s premier food-growing regions, as confirmed by the subnational Agriculture GDP breakdown by the NBS. At the same time, as much as 45 percent of its annual harvests rot in the fields due to low storage and processing capacity, and limited evacuation capacity due to poor transport infrastructure. Data-driven decision making would have shown state decision-makers that investing in grain silos and processing infrastructure, as well as rural roads and railways to evacuate produce would be more impactful to Nigeria’s economy and food security, than spending $450 million on a tourist resort that now lies disused and in ruins.
On the part of players in the local agricultural space, there is also a need to employ data in making decisions regarding backward integration, consolidation and procurement. Instead of making investment decisions based on general assumptions and gut feelings, such entities must do research and avail themselves of all available data so as to avoid providing solutions to problems that do not exist. Comparative advantage and competitive advantage must be at the centre of all investment decisions and regulatory liaisons to ensure maximum chance of agricultural industry growth and food abundance.
In pursuit of the UN’s 2030 goal of Zero Hunger in Nigeria, these are some of the factors that decision makers and policymakers must bring into play. Arguably, these things have not always been done in Nigeria, but as we have seen, that is not necessarily a problem. It could also be an opportunity.
