The Central Bank of Nigeria’s bet on 10 key crops has opened an opportunity for investors looking to tap into the ever-growing agribusiness value chain.
Agriculture features prominently in the five-year plan of the CBN from 2019 to 2024 as the apex bank hopes to consolidate on gains made through the Anchor Borrowers’ Programme (ABP).
Godwin Emefiele, the CBN governor, while revealing his policy thrust for the next five years, unveiled plans to boost agricultural productivity through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities. The commodities are rice, maize, cassava, cocoa, tomato, cotton, oil-palm, poultry, fish, and livestock/dairy.
The choice of these 10 crops, Emefiele said, “is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next five years if efforts are made to expand cultivation and processing of these items in Nigeria”.
He also expressed optimism that these measures (which include getting importers to set up production facilities in Nigeria) “will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2bn in 2018 to $12bn by 2023”.
BusinessDay had reported Nigeria has a deficit across every type of food produce. In fact, the Agriculture Promotion Policy released in 2016 showed a 20.14 million metric tonne deficit across 13 major crops and a 60 million poultry bird deficit. Three years later, with the rapidly growing population, this deficit would have increased substantially. With these deficits, and the CBN’s plans for agriculture, there is a huge market that provides opportunities for targeted investments.
Rice
According to the Food and Agriculture Organisation (FAO), Nigeria’s rice production reached 7 million tonnes (4.2 million tonnes, milled basis) in 2017, up 12 percent from 6.3 million tonnes (3.8 million tonnes, milled basis) in 2015. The growth, according to FAO, was encouraged by high local prices and inputs assistance programmes under the country’s self-sufficiency drive. Notable in this regard is the Anchor Borrowers’ Programme of the CBN, which has extended support to farmers across different states, even though official numbers and value of funds till date are unavailable.
“Before the Anchor Borrowers’ Programme, we would cultivate rice, but will not have buyers,” said Mohammed Suleiman Ambursa, a judge of the Kebbi State High Court, who was on his farm during a recent BusinessDay visit to Birnin Kebbi. “The price was so low before.”
Now that more rice mills are springing up, there is an increase in demand for paddy. This presents an opportunity for those who want to take advantage of producing rice, which is perhaps Nigeria’s most consumed staple food.
For price of local rice to come down significantly, Rotimi Fashola, general manager, Elephant Group plc, told BusinessDay that paddy (which is the raw material) will have to sell well below N100,000 per metric tonne. Currently, it sells for N115,000 on the average, before other logistics costs are factored in, which could then take it to about N130,000.
Cassava
“All processors in Nigeria are still struggling to produce 2 percent of starch the country needs,” said Nike Tinubu, president, Industrial Cassava Stakeholders Association of Nigeria, in a phone interview with BusinessDay. Yet, Nigeria is the world’s largest producer of cassava, responsible for an estimated 20 percent of global output, which in 2017 was 285 million metric tonnes in the global cassava processing market report.
The irony is, whereas there is abundance of cassava in Nigeria, the value extracted from the tuber is extremely low. Even though Nigeria ranks as the world’s largest producer of cassava, the yield is low (at 5 to 10 tonnes per hectare against global average of 25 tonnes per hectare). More importantly, for industrial usage, the starch content derived from the best of cassava tubers is between 18 and 22 percent, whereas in countries like India and Malaysia, starch content of between 38 percent and 40 percent is derived, and there are possibilities of doing even better.
“We need to differentiate between cassava for food security and cassava for industrial prosperity,” said Segun Adewumi, national president, Nigeria Cassava Growers Association (NCGA).
Cassava has some major industrial products among which are ethanol, industrial starch, cassava flour, glucose syrup, sweetener, etc. These products are also raw materials to numerous industrial items with limitless domestic and export market potentials.
“This means cassava can trigger massive industrial revolution in Nigeria to the extent that every Nigerian village will have viable cassava industries,” according to NCGA.
Industrial starch, a major product from cassava, is used in gum/adhesives, textiles, pharmaceuticals, book binding, paper and packaging, confectionery, chemical and household products. Manufacturers of batteries, beverages, baby food, and wood finishers also make use of it. But despite these potentials, Nigeria imports over 95 percent of the industrial starch used in the country.
Potential off-takers for ethanol in Nigeria include all the pharmaceutical companies, breweries and food companies for whom it is an essential component.
Yet, most of the smallholder farmers struggle to move cassava tubers from rural to urban communities. Hence logistics, vital link between the farm and factory, is a major area of opportunity for investors.
But someone has turned that into an opportunity. Olayinka Ayowole, an agronomist and CEO of Viyola Foods, is providing hundreds of vehicles that will collect tubers of cassava from rural farmers and move them to city markets.
“Most farmers cannot get their produce to the market, so we help bring the buyers (households, firms) close to the seller (smallholder farmers),” Ayowole said.
Many manufacturers today import starch because smallholder farmers and small-scale processors do not have the financial muscle to procure the hi-tech machines needed for processing.
This is an opportunity for the big players. Mozambique is an example of a country utilising cassava to produce beer. Impala beer, made from cassava, has become a popular brand among the low-end consumers because it is cheap and multinationals like InBev are tapping into it.
Moreover, an opportunity exists for Nigerian firms to process cassava into chips for onward export to China. China is ramping up demand for Nigerian cassava pellets and import requests from China and other countries are estimated at 10 million tonnes of cassava chips annually, said Segun Adewunmi, president, Nigerian Cassava Growers Association (NCGA).
Cotton
Nigeria’s cotton demand is 700,000 metric tonnes, with a production of 200,000 metric tonnes, according to the Agriculture Promotion Policy (APP) projections. It notes that demand for seed cotton could rise to 1.0 million-1.5 million tonnes subject to textile sector revival.
The CBN recently intervened in the cotton value chain and textile industry, with the distribution of seeds in Katsina State to over 100,000 farmers cultivating an estimated 200,000 hectares of farmland. According to Emefiele, the farmers are also to benefit from extensive training on proper farming techniques, which is expected to translate into production of high grade cotton lint at much improved yields of up to 4 tonnes per hectare. These measures, as projected by the CBN, will help to improve cotton production from 80,000 tonnes produced in 2018 to 300,000 tonnes by 2020.
The sector has high growth potential, and is capable of creating over one million jobs, from cotton production across different states to factory works in the manufacturing sector, if textile production regains its lost momentum.
As Nigeria targets a return to the heyday of cotton production, farmers say obtaining quality seeds remains a problem.
“A lot of farmers are abandoning their farms because they do not have enough seeds to plant,” Anibe Achimugu, president, National Cotton Association of Nigeria (NACOTAN), said in an interview with BusinessDay.
Seeds remain an area of opportunity. Nigeria’s seed industry potential stands at N777.38 billion, according to the Federal Ministry of Agriculture. Local farms’ annual production is estimated at N252.35 billion, leaving a gap of N525.04 billion.
The total national seed requirements for eight major crops, including maize and rice, in Africa’s most populous country stood at 388,690.64 metric tonnes (MT) in 2015, while the quantity available was 126,173 MT, leaving a yawning gap of 262,518 MT.
Cocoa
The demand for cocoa in Nigeria, according to the APP, is 3.6 million MT, with the country producing a meagre 250,000 MT. The APP also noted demand is global, and will rise to 4.5million MT by 2020.
Data from the National Bureau of Statistics (NBS) show that in the first quarter of 2019, Nigeria exported N31.35 billion worth of cocoa (in different variants). The country can export not just more raw cocoa, but as well cover the deficit in local needs, particularly in the production of confectioneries.
Poultry
In 2017, the Nigerian poultry industry suffered a tumultuous period, with a number of poultry farms shutting down as most farms found it difficult to feed their birds owing to difficulty in accessing feed and other inputs.
“A lot of farms are being closed down because so many people cannot afford to feed their birds,” said Onalo Akpa, who was director general, Poultry Association of Nigeria (PAN), in a phone interview with BusinessDay at the time. “If you have a [poultry] farm and you cannot feed your birds, then you better shut it down!”
The price of maize and soya bean which are the main components of poultry feed increased by over 100 percent. The situation at the time worsened the country’s poultry deficit which has been estimated at 60 million birds. The APP document released by the Federal Ministry of Agriculture indicates that Nigeria’s annual chicken consumption is 200 million birds, while supply is 140 million birds.
The 2017 poultry industry crisis, which still exists mildly though not as bad as two years ago, was precipitated by the armyworm invasion that plundered Nigeria’s maize output by more than half. According to the APP, Nigeria’s maize deficit as at 2016 was 500,000 MT. However, the bulk of this goes into direct food consumption, leaving the poultry industry battling continually with high cost of feed. Importation has often been cheaper, particularly from countries like the United States.
Maize
Maize/corn demand in Nigeria, according to the APP, is 7.5 million MT, while production is 7 million MT. Limited importation is required but can shift due to feed demand, which primarily drives demand in Nigeria.
However, there is a need to ramp up production, as availability of maize can spur an increase in production for some manufacturers that require it as raw material. Even the poultry sector depends on increase in maize production, as higher volumes and lower prices will enable the sector to thrive.
Tomato
Nigeria is said to be the 13th largest producer of tomatoes in the world and the second in Africa after Egypt, yet the country is unable to meet local demand because about 40 percent of tomato produce is wasted due to poor packaging, transportation and storage.
Tomato demand in Nigeria is put at 2.2 million MT per annum, while actual annual production is 1.5 million MT of which 700,000 MT is lost to post-harvest wastage, according to data from the Ministry of Agriculture.
The 40 percent loss, valued at N72 billion annually, between farm and market, on face value, is another business potential if the gap can be fixed, particularly through processing tomato into paste.
Fish
According to a 2017 report by the NBS, Nigeria’s fish production data have reflected that 5.8 million tonnes of fish were produced between 2010 and 2015. In 2014, Nigeria produced 1.1 million tonnes of fish, the highest within the period. Fish production was 1.12 million mt in 2015 while demand was 2.7 million mt.
Small scale fish production has consistently accounted for the bulk, more than 60 percent annually, followed by aquaculture (fish farms), with industrial commercial trawlers contributing the least. However, Nigeria has a deficit of over 2 million MT.
With the focus from CBN, fish farms could take advantage of this opportunity to expand, and go beyond just production of catfish which they are predominantly known for.
“A lot of Nigerians are more into catfish, because it is easier to breed,” said Heineken Lokpobiri, former minister of state for agriculture, in an exclusive interview with BusinessDay. However, he noted that there have been growing investments in production of other types of fish, such as tilapia.
“Some people have started realising that tilapia is also one that they need to do because of the huge market that exists in Nigeria. Instead of bringing in tilapia from China, what is produced here is fresh, and healthier for people to consume,” he said.
Livestock/dairy
The demand for milk/dairy in Nigeria is 2 million MT, but only 30 percent of that is met through local production due to insufficient milking cows and low yields, notes the APP report.
Oil palm
Nigeria produces 900,000 to 1.3 million MT of palm oil, but demand is above 2 million MT. Presco and Okomu, two companies into production of oil palm, have in recent years recorded considerable growth on the back of prospects in the local market. These opportunities can be deepened even further, considering the yet untapped potential in the oil palm market.
With the CBN’s recent announced that it would blacklist companies importing oil palm, local producers of the commodity are likely to get an even more favourable market for their produce.
Now is time for investors to look at palm oil again. With an annual bill of over $500 million import, according to the CBN, excluding smuggled products, there is enough room for investments, especially in the cultivation of land areas for oil palm.
“The only viable means of bridging that gap now is to develop the domestic plantation industry and to support the local refineries,” Santosh Pillai, managing director, PZ Wilmar, told BusinessDay.
“However, critical long-term goals should aim at supporting development of palm oil plantations within Nigeria by providing time-bound critical infrastructural and policy support, developing the palm oil supply chain by implementing a robust small-holder scheme,” he added.
Henry Olatujoye, national president, National Palm Produce Association of Nigeria (NIPPAN), said large and established firms are only cultivating 400,000 hectares, which are insufficient.
“Smallholder farmers are doing above 900,000. However, established enterprises need to cultivate up to 2 million hectares to plug the gap. This will cost up to N700 billion,” Olatujoye said.
Perhaps, one way of identifying opportunity in the industry is the return of Ada Palm, which is now Imo VTU, and slow comeback of Okitipupa and Araromi-Ayesan Oil Palm.
ODINAKA ANUDU & CALEB OJEWALE
