• Wednesday, May 29, 2024
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Driving sustainable growth in Nigeria’s agricultural sector

Agricultural sector

Nigeria’s over-dependence on oil and its ability to stoke it into a fully-fledged industry over the past half-century clearly stemmed from its abundance. The potential of the agricultural industry is no longer in question – it contributes about 21 percent to Gross Domestic Product (GDP) yearly. Yet, as we strive to make agriculture “the new oil” – and perhaps, a better oil – the question of its viability goes far beyond abundance to one that asks: are we enabling the sustainability of our nation’s agriculture sector? Unfortunately, today, the answer to that is: not sufficiently.

The global population has rapidly quadrupled from 1.5 billion people to 6.1 billion over the past 70 years – one of the greatest effects of this expansion is the proportionate increase in the demand for food. It has been no different in Nigeria, where the current population of 200 million people is expected to surpass 300 million by 2036. However, food production barriers and challenges in the country have significantly stifled the performance of the agricultural sector: the high cost of farm inputs, poor access to credit, inefficient fertiliser procurement and distribution, inadequate storage facilities and poor access to markets have all combined to keep agricultural productivity low. As a result, food production has not kept pace with population growth, resulting in rising food imports and declining levels of national food self-sufficiency, as well as the stunted growth of the smallholder farmer.

In Nigeria, of the enormous percentage of individuals and groups engaged in agriculture, more than 80 percent are smallholder farmers – they usually own small plots of land of less than a hectare, on which they grow one or two crops at micro and small levels; and 72 percent of them live on less than $2 per day. Yet, the nation’s agricultural sector contributes about 20.85 percent to the GDP yearly, while the majority of its contributors live in abject poverty.

Smallholder farmers are not just at the mercy of the elements, they are also limited by limited financial and business literacy. I’ve seen countless times how the well-being of the smallholder farmer is affected by a bad harvest and by the inability to understand how to make a profit from their own toil. When my company, Thrive Agric, first went to Kebbi, we met a corn farmer named Shehu. Despite being a farmer for over a decade, Shehu struggled to cater for his growing family or improve his economic situation. He would plant and wait for harvest; he would sometimes source for traditional forms of fertiliser, but could not always afford this, or the pesticides required to keep his crops safe.

Oftentimes, while he waited, he had to take odd jobs to make ends meet. When the harvest time came, much of his harvest would have fallen victim to pests, leaving him with very little to sell. He’d put a little aside for his family, and thus began the relay race. He had an agent who would help him transport the corn to end users across different markets, but sometimes, the lengthy period would see the quality of the produce drop, as well as Shehu’s potential income. While the distributors would cash in on the gains, Shehu was paid the bare minimum, especially as his desperation did not afford him the luxury of negotiation. He made just enough to feed his family for a few weeks, nowhere near enough to see them through to the next harvest.

Shehu is, sadly, one of hundreds of thousands of people with similar challenges – individuals who drive the output of the agricultural sector, barely equipped with a sufficient amount of resources – from knowledge to finances to tools to agricultural input – to improve their output, and are excluded from investing in the necessary skills and tools and input, to create solid returns.

Over the years, the Nigerian government, having recognised this, as well as the limitations faced by these farmers, began to take deliberate steps to enable them to scale. In 2015, the Central Bank of Nigeria (CBN) established the Anchor Borrowers’ Programme (ABP) in line with its developmental mandate. This programme targeted smallholder farmers who produced key agricultural commodities such as cereals, cotton, root and tubers and legumes. They were provided with farm inputs in kind and cash (for farm labour) to boost the production of their commodities, create economic linkages between smallholder farmers and reputable large-scale processors, stabilise inputs supply to agro-processors and address the country’s negative balance of payments on food.

However, these efforts have been unable to yield the expected results, as there were many reports of non-performing loans, reinforcing the perceived high-risk profile of funding smallholder farmers. At first glance, it would be easy to chalk the ineffectiveness of the approach solely to the extenuating factors that restrict the farmers from producing a substantial enough yield to enable them to pay back; but, if one were to look even deeper, it is also evident that there is a dearth of knowledge, with most of these farmers improvising to make up for the lack of expertise. This brings to mind the question of the role of the loan provider – and where it ends.

What is a loan without the knowledge of how to make the best of it? What is a skill without the ability to enhance it consistently? This is a question I asked myself repeatedly when I met Danladi and his wife. They had been growing millet for nearly two decades, but changing climates and decreasing demand left them without a sufficient income. They sought out a microloan and were able to successfully acquire one. However, most of that money was spent on storing produce that no one would buy after a significant amount of time had gone by. I asked them why they didn’t try to grow another crop, and branch out; Danladi responded: “It’s millet we know how to grow, and since my father’s father owned this farm, it’s what we do.

We see all these people growing new things that many people buy, and we want to make more money, but either it’s too expensive to get the things we need to try new crops, or we don’t know where to begin. What if we put so much money in and it doesn’t work? It’s too risky. Even the millet that we grow, sometimes it works, sometimes it doesn’t.” With a four-child family and a house that needed new roofing, their ability to invest in or expand their business, while simultaneously improving their welfare, seemed an impossible feat.

The “finclusivity” of smallholder farmers needs to be addressed holistically in order to bring about actual results. Financial products that come with additional services such as technical training, awareness building, marketing information and warehousing services have a proven impact in driving the growth of the smallholder farmer. In East Africa, for example, One Acre Fund (OAF), in addition to the agricultural inputs provided on credit like seed and fertiliser, provided education and training on best practices to its smallholder farmers to aid better crop management techniques. The result was that these farmers in the OAF programme earned 48 percent more than those not in the programme, and this also meant that farmers were able to pay back their loans in a shorter amount of time (from 16 days to a maximum of four days). This organisation essentially mirrors what my company, Thrive Agric, has been trying to do in Nigeria over the past three years. So far, Thrive Agric has been able to provide credit to over 36,000 farmers in Nigeria linking them to technology-enabled farming advisory, as well as access to premium markets locally and internationally. This has enabled farmers to increase their yield three-fold, compared to previous practices.

If the government can invest in partnerships and work with these initiatives to reach the millions of smallholder farmers in Nigeria and also create an enabling policy environment that takes into consideration the needs of farmers,  smallholder farmers will be able to scale up their businesses and transition from micro businesses to small, medium and large businesses. This will in turn pull millions out of the existing cycle of poverty and drive the agricultural transformation that will ensure economic sustainability. This can only be realised through the provision of appropriate, affordable and timely financing, increased budget allocation to the sector, training and capacity building, innovation and skill development. Now is the time to put in the necessary effort to ensure smallholder farmers achieve the scale necessary to deliver real and long-term impact.


Uka Eje

Eje is co-founder and CEO, Thrive Agric