• Friday, July 19, 2024
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Maximising dividend potential in agri-food sector requires participation of all sectors – AGRF boss

Maximising immense dividend potential in agri-food sector requires participation of all sectors

Debisi Araba, managing director, African Green Revolution Forum (AGRF), speaks on the lessons of 2020 as it relates to smallholder farmers and how these lessons can be applied going into 2021, how Nigeria can address the impediments to access to finance for these farmers, the roles government can play in creating an enabling environment for smallholders, among many other key issues.

The year 2020 presented a myriad of challenges for many businesses across the entire agricultural value chain in Nigeria and the rest of the world, leaving behind long-lasting and far-reaching consequences for the whole industry. Smallholder farmers were among the hardest-hit within that value chain. What are some of the biggest lessons learned from 2020 as it relates to that subset of the value chain?

I believe that we are still unpacking the impact of these multi-faceted shocks on agriculture and food systems. Personally, the most revealing lessons from last year came from a report published by Michigan State University (MSU), where they examined the drivers of government policy decisions. They concluded that some of these decisions had a net negative impact on the sector because they were made based on five preconceived myths which I paraphrase here:

(i) Nigeria needs imports to be food secure – The reality is that imports make up less than 10 percent of food consumed.

(ii) Rural areas dominate the food economy and rural households purchase little food – The reality is that urban areas dominate the food economy and rural areas purchase more than 77 percent of the food they consume. Subsistence agriculture is not prevalent.

(iii) Small farmers are still using traditional technologies and are poorly connected to markets – The reality is that a lot more farmers now use improved inputs and supply most of the food consumed across the continent.

(iv) SMEs in food supply chains are stuck in a stagnant, underdeveloped “missing middle” between subsistence and commercial scale – The reality is that there is a growing and vibrant logistics and supply chain sector that gets stronger by the year.

(v) Wholesale and retail markets and logistics services are not critical to food security – The reality is that producers depend heavily on logistics and supply chain service providers both to receive inputs and to distribute their products. We witnessed last year how a ban on movement between states in the early phase of the pandemic caused significant disruptions to production and supply systems, leading to spikes in the price of food.

This study reinforces our call for government to base decisions on clear evidence. Most of Nigeria’s agri-food sector is informal in critical hubs, so we must invest in the data systems which can help us make better, more robust decisions.

We may not be able to predict what the next major shock will be but investing in data systems will enable us to respond better.

How can we apply these lessons in 2021 and what should the key priorities be for the private sector and for the policymakers?

The priority for this year and beyond should be to improve resilience. The transformation of the agri-food sector should be public sector-enabled and private sector-led. As I have already explained why we need to invest in data systems, and to have these systems inform public policy, I would also like to make a case for governments at all levels to develop multi-sectoral partnership systems in the agri-food sector. There are multiple dimensions to the process of producing, processing, transporting and consuming food. This food system requires the collaboration of the public, private, research and civil society sectors.

Later this year, in September, the UN will host a Food Systems Summit where the world will gather to affirm contributions to ensure that we can deliver food systems that are safe, equitable, environmentally sustainable, improve human health and are resilient to shocks and stresses. To this end, I would suggest that non-aligned multi-sectoral platforms such as the Nigeria Economic Summit Group be used to chart, monitor and assess progress towards prosperity. We will need the active participation and investment of all sectors for us to maximise the immense dividend potential in the agri-food sector.

Formal financial services industry players in Nigeria often shy away from providing access to finance for smallholders because of the risks and costs involved. Drawing from other countries in Africa like Kenya and South Africa who have recorded much success in this regard, how can we address the impediments to access to finance for these farmers?

To be fair to the Nigerian financial services sector, there is quite a lot going on here. Since you cannot examine agriculture finance in isolation from the wider economy, it is important to understand that on the supply side, entrepreneurs are working to design affordable, risk-adjusted products within an economy that has high inflation. We have witnessed over the last few years the rise of fintech solutions to address issues such as micro lending, improving savings, extending financial services to millions of people who were previously not in the formal banking ecosystem. Nigeria is a global hub for technology startups, and we are beginning to see leapfrogging and market-creating innovations emerge to meet the needs of an untapped and unserved market.

As I mentioned earlier, transformation requires the public sector to create an enabling environment for the private sector to lead. It would be better if the government focused on macro-economic stability, withdrew from market-distorting interventions, allowing the private sector to compete and allocate resources to areas that stimulate growth. Hopefully, this improves the productivity and critical competitiveness we need to see across the wider agri-food sector. There are no easy answers, but it is clear that we need to be more entrepreneurial in the public and private sector approaches to increasing affordability and access to financial services.

Nigeria currently lacks a centralised smallholder database as well as a cohesive national identity structure compounding the access to finance challenges. Earlier last February, the director-general of the National Identity Management Commission (NIMC) expressed intentions to harmonise the country’s national digital identity data management system. While a necessary first step, will this be sufficient to improve access for smallholders? What innovations, policies and partnerships need to be in place to ensure that smallholders can benefit from being identified?

Creating a harmonised digital database for the entire country could stimulate the creation and growth of a multitude of innovative products and services. Specifically, for financial services, this could help create unique digital identifiers, a record of transactions and credit history, and additional secondary information which would help improve the profiling of customers, leading to the design of targeted financial services. I would urge the government to see this as a critical national task and accelerate the process for completion this year. We also need to strengthen our data protection frameworks and laws, to protect sensitive personal information and avoid abuse.

Between 2010 and 2012, the Nigerian government began to build a database of smallholder farmers. However, this was truncated between 2015 and 2016 due to problems in the public sector and inadequate advocacy from the private sector. How should the Federal Government approach the development of a harmonised database to ensure it is completed and implemented successfully?

Nigeria has a track record of pioneering a digital database and a digital payment system for SMEs in the agriculture sector. This level of entrepreneurship thinking and action in the public sector needs to be maintained to ensure that we deploy our creativity to design products and services that meet the needs of smallholders and other entrepreneurs in the agri-food sector. We are not reinventing the wheel. I believe that we have the expertise and leadership to deliver this database in a way that serves the country.

What roles should the federal and state governments play in creating an enabling environment for smallholders as well as to drive incentives and innovations?

Agriculture is a business. To be a successful player in this business at any scale, one needs to be highly competitive and productive. Governments should support entrepreneurs to eliminate barriers to competitiveness and higher productivity and invest in enablers. One way is by investing in public infrastructure like roads, power, ICT services which improve productivity and perhaps also refrain from directly engaging in service sectors in competition with the private sector. Governments should invest in industrialising the agri-food sector as a stimulus for growth.

Looking back at 2020, what would you say are the most important lessons from Nigeria and across Africa that must be taken into consideration as we move into 2021?

We need to imbibe the spirit of Ubuntu – I am because we are. On January 1 this year, trading began under the African Continental Free Trade Area (AfCFTA). The AfCFTA is one of the largest free trade areas in the world since the establishment of the World Trade Organisation (WTO), covering a market of more than 1.2 billion people and up to US$3 trillion in combined GDP. The agreement also creates the opportunity to increase intra-African trade by more than 50 percent, adding an estimated US$76 billion in income to the rest of the world.

For Nigeria and other African economies to maximise the opportunities in the $8 trillion global agri-food sector, we will have to improve both how we collaborate and trade in unique and ubiquitous goods and compete on stronger terms with the rest of the world. I am convinced that with the right leadership across economic sectors, Africa will feed herself and can feed the world. This is our vision at the AGRF, where I have the privilege of leading the world’s largest, most diverse and inclusive platform for fostering the necessary pan-African collaboration and partnership needed to transform the agri-food sector for shared prosperity for millions. The AGRF supports governments, private sector at all scales, civil society academia and research institutions to collaborate and spur each other on to achieve mutually beneficial economic goals.

What innovations and policies need to be implemented and scaled by the public sector to encourage the success and scaling of private sector-led innovations and ensure that smallholders are able to withstand the shocks presented by the recession?

Let us begin with implementing the ones we already developed. In 2014, Nigeria launched its National Agriculture Resilience Framework (NARF), as a roadmap to guide public and private sector investments and build resilience to shocks and stresses. Adopting the NARF could help align multiple stakeholders under a shared vision and afford everyone the room to iterate and innovate based on evidence. We need to be more kind to public policy stakeholders and afford them room to try new ideas and let go of those that do not show promise. Culture is eclectic. We should imbibe a culture that seeks, from around the world, ideas that may improve our productivity, competitiveness and resilience and take whatever we find useful.

Finally, I would encourage governments to eschew the soft bigotry of low expectations and take on the bold and ambitious challenge of ending hunger, achieving food security and improved nutrition and promoting sustainable agriculture. In the words of the late Nelson Mandela, “It always seems impossible until it is done.”