Cash-based marketing: The role of agricultural extension in Nigeria

Marketing agricultural produce remains a critical path to which food and other raw materials guarantees steady supply of services to markets, by reducing the risk of food shortages and ensuring food security for communities. This supply chain, from farming to distribution and retail creates employment opportunities for millions of people and therefore, effective sales strategies […]

Marketing agricultural produce remains a critical path to which food and other raw materials guarantees steady supply of services to markets, by reducing the risk of food shortages and ensuring food security for communities. This supply chain, from farming to distribution and retail creates employment opportunities for millions of people and therefore, effective sales strategies help farmers and agribusinesses maximise profits and reduce losses.

In Nigeria, rural markets function as the assemblage location of bulk agricultural produce and despite their significant strategic importance in agricultural supply chain transactions, these markets remained unorganised and lack formal contracts – making sales informal and based on verbal agreements, inadvertently making raw cash the preferred medium of exchange. It is also a fact that farmers often receive income only after harvests, making it difficult to maintain bank accounts or engage in digital transactions regularly and often they mostly need immediate cash, after selling their produce to pay for labour, inputs, as well as settling household expenses.

Therefore, these markets being financial enterprises for farmers considering their locations – bulk assemblage and aggregation of all kinds of commodities in high quantities for industrial, export or domestic utilisation, farmers and other marketing actors, still rely heavily on cash in exchange of these commodities, which shouldn’t be, considering the risk factors involved. Surprisingly, without cash in some instances, farmers could opt to return  home their produce, than to accept any other means of electronic payment system. This singular cash-based fixation has constituted great economic and financial lost to the farmers, buyers, as well the entire food chain system.

It has thus become a duty for any actor – an aggregator or bulk purchasers to seek for huge amount of cash at a high cost mostly from non-banking sources in cities and travel with such cash unsafely to remote market locations in rural areas, despite the attendant risk and economic consequences. After the transaction, the burden of handling, managing, transporting and securing these huge cash will be transferred to the farmer/seller who mostly resides in a rural area where banking hall is completely absent and/or not within his or her proximity. As a result the cash will be deposited in an unsafe, risk-prone traditional safe (method) in houses depriving it proper circulation and utilisation in the economy.

Above act further exposes the farmers/sellers to the evil eyes of kidnappers, bandits and other dangerous elements residing in the rural areas, constituting another round of insecurity. What a double jeopardy? It is pertinent to ask, why should this arduous, high risking and old-fashioned payment system continue to exist ceaselessly despite different cashless policies being initiated, implemented, re-introduced by authorities? Is it enough to blame a combination of structural, economic, and social factors that constitute limited access to alternative payment methods and/or financial services in our markets? It is therefore a matter of national interest to unearth these key challenges to why cash transactions dominate agricultural commodity markets in Nigeria. The most prominent and critical includes:

1. Low banking penetration: Many rural areas in Nigeria lack access to formal banking services, with few or no bank branches or Automated Teller Machines (ATMs) available. Sometimes long distance to banks where farmers have to cover several kilometers to reach the nearest banks, which is time-consuming and costly, coupled with the low financial literacy – many farmers are unfamiliar with banking systems, digital payments, or other financial tools, making cash the most accessible option.
2. Digital infrastructure deficit: Lack of internet connectivity, limited mobile penetration and unreliable electricity prevailing in rural makes it difficult to adopt digital payment platforms or mobile banking. The fact that mobile phones are common, smartphones and devices capable of supporting digital payment apps are less prevalent in rural areas in addition to frequent power outages that hinder the use of electronic payment systems and charging of devices.
3. Distrust of financial institutions: Cash is deeply ingrained in rural economies, and farmers are more comfortable with tangible money rather than digital or electronic transactions, at the same vein, farmers distrust banks or digital payment platforms due to high transaction charges, minimum balance requirement, hidden charges, account maintenance costs or lack of transparency etc., culminated as deterrent for small-scale farmers with limited profits margins.
4. Lack of institutional support: Many farmers have limited education, making it difficult for them to understand and use digital payment systems while older ones, in particular, may be resistant to adopting new technologies and prefer traditional cash-based systems, but at the same time there is limited government intervention to promote digital financial inclusion or provide infrastructure for alternative payment systems in rural areas. Furthermore, agricultural extension services that could educate farmers about digital payment options are often underfunded or unavailable. It is a common practice for governmental organisations promoting cashless policy to refuse collaborating with agricultural extension agencies whose sole mandate is to enlighten and create awareness to farmers in all nook and crannies of the country about technological breakthrough, innovations like National Agricultural Extension Research and Liaison Services (NAERLS), Agricultural Development Programmes (ADP) etc.
5. Risk of digital fraud: Cybercrime concerns left most farmers in constant fear of losing money to scams or hacking when using digital payment platforms at the same time many unaware of how to protect themselves from digital fraud, making cash a safer option in their view.

It is important to reiterate the indispensability of rural markets as essentially vital for sustaining and bridging the gap between producers and consumers, creating a more resilient and equitable food system, that paves for livelihoods, food security and fostering economic and social development.

Putting the aforementioned and other related issues before hand, it is evident that tackling and addressing these challenges require a multifaceted approach that considers the peculiarities and uniqueness of these challenges with the deliberate policy plans aimed at reducing cash-based reliance and improving financial inclusion in the Nigerian rural economy, through:

1. Improved extension service delivery. Sensitisation and awareness creation to aggressively educate rural populations about financial literacy – how to use digital financial tools and understand it is benefits through workshops, local radio, community and local leaders. This is a typical role that can be handled effective by National Agricultural Extension Research and Liaison Service (NAERLS).
2. Partnering with banks and fintech companies to develop simple interface that are user-friendly, operate with low data and with menus in local languages to make it easier for rural users to navigate.
3. Collaboration with telecommunications companies to work out affordable data plans and airtime for rural users and developing financial products that combine mobile money with other services like insurance or savings.
4. Addressing cyber security concerns through implementing robust fraud prevention measures to protect users and build trust as well, establishes clear mechanisms for resolving and addressing complaints.
5. Rural infrastructure development initiatives with specific focus to provide reliable internet connectivity and electricity, which are essential for digital payments.

These strategies should be piloted in selected rural location to test efficiency, effectiveness and use feedback from users to refine and improve solutions before scale-up nationwide. While cash-based trading among rural farmers in Nigeria still persists, there is significant potentials and opportunities to reverse the current trend. Addressing barriers such as low financial literacy awareness, lack of trust in digital systems will be critical to increasing adoption. Government policies, private sector initiatives, and technological innovations will play a key role in driving this transition, ultimately improving the efficiency and inclusivity of rural agricultural markets.

A financially literate farmer will no doubt embrace digital financial option to fulfill personal, family and agricultural transaction such as purchasing of seeds, fertilizer, payment for labour to end with the selling of finished product or crop, thereby eliminating the need for physical cash that burdens the nations’ economy.

 

 Musa, PhD, National Agricultural Extension and Liaison Service (NAERLS),

Ahmadu Bello University, Zaria.