AGRO-BUSINESS AND CBN'S BACKWARD INTEGRATION: THE NEED TO THREAD CAREFULLY AS THE POOR MAY BECOME POORER.
Nigeria is a nation blessed with arable land, rich for production of many agricultural produces, yet importing what it should ordinarily be exporting. Before the discovery of crude oil in commercial quantities and subsequent exploration, Nigeria was famous for the Groundnuts pyramid in the North, Cocoa Industries in the Western Region, Oil Palm produce in the East and South. However, the downward trend started with the discovery of crude oil. The nation got carried away by the new bide- crude oil and destroyed its other resources and most importantly its environment in attempt to prospect oil. That was the beginning of insecurity and restive agitations in Nigeria.
The communities and people of the oil rich Niger Delta region suffered the degradation, while the once booming groundnut, Oil palm and Cocoa trade were abandoned with everyone running for a share of the “National Cake” or better still, “National Cain”. See how a big blessing turned out to be a big curse. The self-inflicted insecurity was seemingly resolved by creating another monster- Amnesty. Amnesty became another project for corruption. The gains from Amnesty fueled terrorism, as a once peaceful land witnessed its first terrorist attack in Abuja on October 2010. Then, terrorist organizations saw a land that was thirsty for blood and followed their executions with subsequent attacks in the form of suicide bombings and later the full-blown insurgency. Today, Nigeria has ticked all the boxes for a high-risk country.
It is pathetic to note that, Nigeria has crude oil, yet the refineries cannot refine the crude for obvious reasons. Successive administrations have been unable to resolve the decadence as the “cabals” are feeding fat on this failed system, earning profits from the fraudulent process especially the subsidy regime. What applies today is that, the crude oil is taken out of Nigeria for cheap, processed and Nigeria pays heavy to get the refined petroleum products. The Government in turn subsidizes this cost, for the public which basically benefits the rich, while the poor continues to suffer in abject poverty. A certain group moves the subsidized product out of Nigeria to neighboring countries, like Benin, Niger, Chad and Cameroun, where they sell the products at competitive margins and making huge profits.
With the pains of economic meltdown manifest, Nigeria’s economy slid into recession in 2016. The non-oil sector declined due to a weaker currency, while lower prices dragged the oil sector down. A slump in crude prices, Nigeria’s mainstay, hammered public finances and the naira currency, causing chronic dollar shortages, as crude sales accounts for about 70 percent of government revenues. This was a wakeup call for the economic team to find a solution in agricultural production for local consumption and export. Suddenly, Nigeria woke up and started exploring the Cotton, Cassava, Cocoa, Groundnut, Wheat, Rice, Millet, Sorghum, Maize, Livestock, Fish, Poultry, among others.
The Central Bank of Nigeria (CBN) has taken the initiative and is now at the fore of the campaign for backward integration. As an approach they have engaged stakeholders in the value chain with special focus on Cassava, Cotton, Rice and Dairy. One of the strategies is the engagement of multinationals in backward integration. However, the CBN has approached this process rather aggressively, not minding the implications. Companies are coerced into the project as the initial incentives dangled, notably the low interest loan with long term repayment plan did not fast track the actions as the CBN would have wanted. Also, with the recurring farmers/ herdsmen clashes becoming more political and threatening national security, the Government proposed Ranching solution. Several Grazing Reserves were mapped out in some States with CBN part-funding the project and forcing Multinationals along in the Dairy Backward Integration Plan.
Only recently the CBN announced a Milk importation Ban, granting exemption to only six Companies, who incidentally are the major players. This is worrisome for the small players in the industry, who by the CBN’s directive cannot import milk and cannot source locally at competitive prices. The danger here is looming job loss as these Companies may not be able to sustain production in these harsh realities. Just as was the case with Rice importation ban which resulted in spike in price for rice, making the staple food out of reach of the poor. The price of locally produced milk is higher than imported ones, which gives comparative advantage to the big players who can still import the milk and force the small players out of business or source unhealthy milk for their production. The implication is endangering the health of the nation.
Today, the tough stands on Rice is somewhat yielding results as Nigeria now produces rice, enough to feed the rich in the nation, as the cost of buying a bag of rice is now out of the reach of the poor. This pricing is not competitive with global price as Nigerian produced rice is more expensive. The same applies with starch from cassava and Cotton for the textile industry.
Maximizing the Benefits
Research: To maximize these benefits from Agribusiness, there is need to revisit the moribund Agricultural Research Institutes that have now become mere farmlands. Improved breeds will yield more profit compared to the local breeds. A brand like International Institute of Tropical Agriculture (IITA) has been leading a revolution, but their effort is like a drop of water in the Ocean.
Improve Infrastructure: Also, doing business in Nigeria is challenging as Companies have to pay more to generate their power, due to the near absence of power. The deplorable state of roads and ineffective rail system, as well as unstable Government policies, multiplicity of taxes are common features which make the market unpredictable.
Inclusive Business: Linking low income communities to the supply chains of large corporations- so-called inclusive business. Global brands have attempted to work more closely with low income farmers in parts of Africa, but informal markets may offer better terms. In food and agriculture, this means including the poor farmers in the supply chains of food manufacturers and retailers, rather than the traditional trade via middlemen. There’s strong logic, given that there are more than half a billion small farm households around the developing world. Farmers get access to new sources of supply. Donors and Governments get a better development bang from trade and investment.
In all these, governance should be for the people; both rich and poor. A situation where we allow the robbing of Peter to pay Paul to go on for too long will spell doom for the nation. This is the time to rethink our economic policies.