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What should agriculture policy look like?

Our agriculture policy has been in the news recently, mostly relating the border closure. I am kind of tired of talking about the border closure and its effects to be honest. But agriculture policy does not begin or end with trade restrictions. There is lot more to policy besides stopping or attempting to stop imports. So, what should agriculture policy also be focused on? A while ago I had a chat with a friend of mine who runs a farm and who has been able to do amazing things with his maize and tomato out-grower program. But before that, a little background to Nigeria’s maize farming industry.

Nigeria’s maize industry has grown significantly over the last two decades. Since 1999, farmers have grown from using about 3.5 million hectares of land to grow maize to about 6.5 million as at 2017. Production, as expected, has grown just as much from about 5.5 million tons to a high of 11.5 million tons in 2016. The problem however is that yields, the amount produced per unit of land, has remained mostly stagnant. In 1999 our maize yield was about 16 hg/ha according to the Food and Agriculture organisation and all through the period to 2017 our yields remained at about 16 hg/ha. Even though we used a lot more land for maize and increased our production a lot, we did not actually get better at growing maize.

For context, our maize yields on average are one of the lowest in the world. Maize yields in South Africa are twice as large as ours. They are almost three times as large in Brazil and almost five times as large in the United States. This is particularly important when you consider the reality that the average farm size in Nigeria is about half a hectare. So, even though we have had a lot more production, it has been driven by a lot more people just using more small sized pieces of land. The combination of low yields and small farm sizes means that most farmers remain at or near poverty. The policy challenge is clear. How do you improve the yields of these small holder farmers?

Enter, Tomato Jos. Despite the name they do more than just grow tomatoes. Their maize out-grower program has been of interest to me lately especially after seeing the results. As part of the program they work with some local farmers and try to get them to increase their yield. At the last harvest this year their out growers ended up with yields that were almost four times as large as that of the average farmer in Nigeria. Their yields were even higher than that of the average South African farm. For those farmers, this increase in yield means they probably doubled or even tripled their incomes and are probably now further out of poverty. How did they do it? The out-growers were essentially handheld through the process from field preparation, to planting, to tending farms, to harvesting, to storage, to the sale of their produce. Plus, financial support to help the farmers make the needed investments. The outcome has been a win-win for all.

A farm can do this here and there but once you start to think about scaling this type of arrangement to small holder farmers across the country then you cannot avoid the policy question. One business can try to build their extension worker program but to do that for millions of farmers you need a proper extension services policy with training schools for those who will train the trainers. One business can try to organise the financing requirements for a few out-growers but once you are talking of millions of farmers you need a financial system that can properly service the sector with interest rates that make investment feasible.

No, intervention funds by the central bank and an interest rate environment where the risk-free rate is 14 percent do not help. A business can try to help farmers market their extra output but once you think of extra output for millions of farmers then you need an export or domestic utilisation and storage strategy. The experience with the Tomato Jos out grower farmers show that increasing yields as a strategy for reducing poverty for those in agriculture is possible. The question now is how to scale that and if the policy environment can focus on the things that really matter.

 

NONSO OBIKILI

Dr. Obikili is chief economist at BusinessDay

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