Olam: Leveraging BIP to empower smallholder farmers and impact the economy

Taking advantage of Nigeria’s abundant natural and human capital resources is critical to stimulating the economy for faster recovery, growth and sustainability. Hence, the agro-sector, which contributes 23.92% to the nation’s GDP, is a crucial lever that can be pulled to deliver on the nation’s economic growth schema. This is possible where more employment opportunities […]

Taking advantage of Nigeria’s abundant natural and human capital resources is critical to stimulating the economy for faster recovery, growth and sustainability. Hence, the agro-sector, which contributes 23.92% to the nation’s GDP, is a crucial lever that can be pulled to deliver on the nation’s economic growth schema. This is possible where more employment opportunities are generated, the national food security position is bolstered and the country’s trade deficit is significantly reduced via effective backward integration programmes (BIP).

Olam Nigeria, a top agribusiness conglomerate with footprints across the wheat milling, rice production, dairy, tomato, poultry & animal feed segments, among others, has been pivotal to generating economic empowerment across the agriculture value chain. At the same time, the leading agribusiness conglomerate has been providing a mix of rich, affordable foods for the over 200 million strong national population. Coming at a time when the nation’s food security and employment generation capacity is being threatened by complex socio-economic issues and viral outbreak, Olam’s various agro value chain development efforts have been value adding.

Olam has over the years shown leadership in the adoption of BIP in its operations. For instance, to boost the supply of rice, a national staple food, the business entered into a partnership with the International Fund for Agricultural Development (IFAD) and the federal government of Nigeria on the Value Chain Development Programme (VCDP), a backward integration framework to train smallholder rice farmers, as well as supply input to the farmers. The partnership framework also involved a buy-back agreement of 70% of the rice paddy produced by the smallholder farmers at competitive market prices.

Since 2014 when IFAD and VCDP rolled out the rice value chain development project, Olam has off-taken over N 11.5 billion worth of paddy rice from local smallholder farmers on the Olam – VCDP project site in Benue and Taraba States.  Overall, about N22 billion has been injected into the rice smallholder initiatives of Olam in the middle belt states over half a decade through the buy-back agreement, contributed significantly to the economy. Data by IFAD showed that a larger number of the smallholder rice farmers who were engaged by Olam and its partners recorded a 79% jump in their incomes.

Similarly, to mitigate the negative impact of the COVID-19 supply chain shocks in 2020 on the supply of rice to Nigerians and the incomes of farmers, Olam presented an estimated N110 million grants to select farmers in Benue State. Olam’s rice value chain intervention is one of the factors that have spurred the increased supply of rice to the local market.

It’s out-grower programme, has engaged over 35,000 smallholder rice farmers, and is still on-boarding new farmers to accelerate the supply of rice. These rice value chain initiatives are in partnership with IFAD – VCDP – FGN in Benue and Taraba States, AGRA in Niger State, Grassroots Program of Japanese Embassy and ADP in Nasarawa and Plateau States and Oxfam International in Kebbi State. GIZ is the training partner into these initiatives, and these are part of Sustainable Rice Platform.

“About 50 per cent of the total milling capacity of Olam’s rice mill in Rukubi, Nasarawa State, is gotten through the direct buyback from these programmes from different states,” said Mr. Reji George, Vice President of Farming Initiatives at Olam Nigeria.

The Olam integrated rice farm and mill in Nasarawa State has a total area of 13,500 hectares with 4,450 hectares fully developed and cultivated twice a year. The facility has a state-of-the-art rice mill with a production capacity of 120,000 Mts per annum.

Mr. Reji explained that the business would consistently scale its engagement of local smallholder farmers to ensure a consistent supply of rice paddy to the company’s mills so it can keep delivering bagged rice to the local market.

“To further improve local production levels, we intend to build up additional milling capacity at our farm in Rukubi, Nasarawa State by installing another mill. This new mill will positively impact milling capacities in the country and will act as a catalyst to boost local cultivation and production of rice paddy and milled rice. This will most certainly boost the country’s self-sufficiency in rice production,” according to Mr. Anil Nair who heads the rice business in Nigeria.

The economic impact of all of the measures in the rice sector was amply captured by the then Minister of Agriculture and Rural Development, Audu Ogbeh, who in 2018 said that there was reduction in the quantity of rice imported into the country and through the measures put in place, the country now has the capacity to save about $5 million a day.

On a broader scale, Olam has been leveraging its exceptional operating capabilities to achieve real development across selected agricultural value chains through its investments in the Nigerian market. Through its subsidiary firm, Crown Flour Mill (CFM) Limited, makers of the popular wheat flour and semolina brands, Mama Gold, Olam has been working actively with the Wheat Farmers Association of Nigeria (WFAN), the Flour Milling Association of Nigeria (FMAN) and the Federal Ministry of Agriculture and Rural Development (FMARD) to ensure that wheat farmers adopt modern agronomic farming practices and can access high-yielding wheat seeds.

The collaborative efforts between Olam, FMAN and FMARD are yielding appreciable results. Currently, local wheat harvest yield has risen from one ton per hectare to an average of four tons per hectare. The scaled investment in seed trial and research, distribution of farming inputs to the farmers and the adoption of mechanized farming techniques played significant roles in enhancing the local wheat harvest yield.

The company has also been working with Dr Filippo Bassi, an expert durum wheat breeder from the Morocco-based International Center for Agricultural Research in the Dry Areas (ICARDA), to raise the quantity and quality of local wheat yields. It recently hosted stakeholders across the wheat value chain to discuss issues and distil ideas that would help improve local wheat production.

The strategic partnership and collaboration between Olam and other industry stakeholders in the wheat value chain is helping smallholder wheat farmers improve local wheat cultivation. This year so far, an estimated 847 tonnes of wheat have been collected for off-take by members of the milling association.

While the wheat harvest is expected to run through the end of June 2021, the total local wheat harvest tonnage in the current season is set to hit a new level in terms of quality and quantity. In contrast to the previous years, flour millers can look forward to the improved purchase of local wheat harvest.

With the rise in the consumption of wheat derivatives foods, the improvement of the local trade relationship between wheat farmers and flour millers would no doubt help deepen the employment generation capacity of farmers and millers.

“We believe strongly in Nigeria’s potential to grow quality wheat. The scaled local wheat harvest yield recorded in 2021 attests to the role of research and deep investment in achieving the projected national wheat self-sufficiency target. We will continue to collaborate with stakeholders in the value chain to improve local cultivation of wheat”, said Ashish Pande, Managing Director of CFM.

Like the wheat value chain, the major challenge impeding the attainment of self-sufficiency in tomato production in Nigeria is the non-availability of high-yielding tomato seeds. Olam, through Caraway Africa Nigeria, its subsidiary company, has therefore been helping local tomato farmers to access high yielding tomato seed variants which have the potential of producing fresh tomatoes suitable for processing.

To achieve this audacious tomato value chain feat, Caraway Africa Nigeria signed an MoU with the World Vegetable Centre, a renowned research institute and prominent seed producer and developer, in 2019, for the supply of 18 varieties of seeds for local farmers engaged by Caraway Africa Nigeria. Over 1,000 tomato farmers are participating in its out-grower programme.

Presently, the Caraway Africa Nigerian pilot farms in Kano and Jigawa States have achieved over 30 metric tons of tomato per hectare, as against Nigeria’s previous 7.5 metric tons tomato harvest yield per hectare.

Alhaji Uba Idris Dogara, owner of Dogara Farms, attested to the impact of Olam’s tomato production value chain development effort. He said: “I’m an old-time tomato farmer but the method Olam brought to this place is looking better than the previous method we were using. I have seen a lot of changes in better yields than what we have been getting before.”

In the dairy sector, Olam is engaging the Kano Dairy and Cooperative Union to extend its backward integration impact to the sector. Through Outspan Nigeria Limited, its subsidiary, Olam is piloting a milk collection and aggregation model in Kano. This backward integration is currently impacting the livelihoods of over 12,000 dairy farmers who for the first time have access to a modern milk collection facility.

The farmers are also provided with Napier grass to reduce open grazing and boost the flock’s health. While the farmers now have a ready market for their raw milk, their wives, who previously trekked to neighbouring towns to peddle milk, also have more time to look after the home.

In 2016, Olam invested $150 million in the Animal/Aqua feed, hatchery and poultry segments in the country to help boost the production of poultry and the growth of domestic aqua culture in Nigeria. The investment led to the delivery of the largest integrated Animal/Aqua feed mill, poultry breeding farms and hatchery in Nigeria, located in Kaduna and Kwara States.

In sum, Olam’s widening backward integration efforts underline the continued confidence that the agribusiness conglomerate has in Nigeria’s ambition for food self-sufficiency and an agriculture-led economy. The firm has pledged its commitment to continue to work with stakeholders in the agriculture value chain to continue to ensure food security.