Why agro-processing will drive Nigeria’s new economy

Therefore, the economic diversification model that the country needs is one that can help absorb fiscal shocks, fend off monetary instability, provide employment for the teeming work-age population as well as generate more revenue for the government to meet its commitments to the people. Agriculture represents the low hanging fruit in the quest to structurally […]

Therefore, the economic diversification model that the country needs is one that can help absorb fiscal shocks, fend off monetary instability, provide employment for the teeming work-age population as well as generate more revenue for the government to meet its commitments to the people. Agriculture represents the low hanging fruit in the quest to structurally transform the Nigerian economy. Even the downward trending of food commodities in the past few months only further raises concerns about global food security. If lower food prices stifle new investments in agricultural production, the downward pressure on prices can only continue for so long before it stirs a sharp reversal as a consequence of ensuing supply shortfall.
Beyond this, global agriculture itself is undergoing multiple layers of transition. Population growth and changing consumption habits have started to drive up demand for food in multiple varieties. By year 2050, the world population will reach nine billion. That means additional two billion people would require food in 35 years’ time, compared with now. But the upward projection of demand for food is met with constraints to expansion of supply by the traditional international producers.  
This means that sub Saharan Africa and Latin America will be the food baskets of the world in the future. According to World Bank data, Nigeria’s arable land continued to expand between 2000 and 2014. In this period, the available arable land as a percentage of Nigeria’s total land mass increased from 36.2% to 38.4%. It is a trend that is unique to only a few countries. However, low level utilisation, in which Nigeria became dependent on a number of imported food items – including mostly those that can be grown in the country – might have exerted the greatest influence on supply of arable land in Nigeria.
In line with the statutory mandate of Nigerian Export-Import Bank as the Trade Policy Bank of the Federal Government, we see Nigerian agriculture from the prism of agro-processing. This is because agro-processing inspires the virtuous cycle of increased agricultural productivity, industrialisation in the value chain, sustainable growth in the export of secondary agricultural products, creation of domestic employment, and poverty reduction. For this reason, NEXIM Bank in the past five years has put forward agro-processing, with other three sectors, as the major frontiers of economic transformation in Nigeria. The other three sectors are manufacturing (which I recently devoted an op-ed to), solid minerals and services. The sum of these sectoral focus constitute the MASS Agenda of NEXIM Bank.
The factors that constrict the agro-processing sector, which include poor integration of agriculture with markets, lack of know-how by SME agro-industrialists, inadequate investment in equipment and poor storage system, are solvable. With the fertiliser subsidy conundrum already solved, government can deploy fiscal tools to provide massive support for farmers in the acquisition of equipment. NEXIM Bank’s credit guarantee instrument could be strengthened to provide much stronger support for industrialists in the post-harvest value chain to acquire equipment and tools.
 The business savvy that is required to attract funding interests from commercial banks into agriculture can best be initially provided in the post-harvest production segment. Food processors, agro-traders and packaging businesses can then, either through backward integration or by providing more liquidity to farmers, bring financial buoyancy into farming. Ahead of the provision of the needed elaborate infrastructure by the government, food manufacturers can bring technology and improved haulage hardware that will ameliorate post-harvest losses. Similar solution has propelled Nigeria to being one of the world’s top cement producing countries.
On the back of strong support for domestic food production and processing, Nigeria can launch an era of food diplomacy with her trading partners. In a number of situations, lack of access to export markets by existing Nigerian agro-manufacturers are down to competition from other exporting countries. Although Nigerian exports of food and semi-processed produce are often denied access in some foreign markets based on issues of standards and safety concerns, without diplomatic efforts, it is unlikely that the putative technical requirements can be met. Without seeking to circumvent the technical standards, the country can start to look at using bilateral agreements as a trade tool.
The food security objective of the government cannot be altogether served by foreign multinational companies. As such, it is important that foreign capital is not allowed to crowd out indigenous agric-food companies. Again, this suggests stronger financing role for government; although not altogether through direct public funding. Existing PPP frameworks to bring financing to agriculture should be strengthened. Public institutions involved must be subjected to stern performance metrics.
The most important recommendation for promoting Nigeria’s agro-industrial sector is the potential for job creation across the agric value chain. The value chain of the agric sector is well capable of generating additional ten million jobs over the next decade, and it can serve as one of the centrepieces of capital formation in Nigeria’s new economy. Indeed, agro-processing promises exciting prospects for inclusive growth and social stability.
Orya is MD/CEO, Nigerian Export-Import Bank and wrote from Abuja.