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EL-RUFAI ON FRIDAY
Fixing Nigeria’s Agriculture Nasir Ahmad El-Rufai
Last week, we discussed unemployment in Nigeria, asking where the jobs are. In the coming weeks, this column will explore answers to that question by focusing on the real sector, beginning with agriculture. On the differing unemployment rates mentioned last week, we erroneously swapped the numbers. At their Senate confirmation hearings, it was Segun Aganga who mentioned about 20% while Ngozi Okonjo-Iweala stated that the unemployment rate was 14-16%. The senators did not question either figure. We apologize for the mix-up, but it shows the contradictions in ministerial statistics!
Back to agriculture. Israel, a mostly desert country with only about 17,000 farmers produces a wide variety of food and cash crops. The country’s agricultural output is valued at over $2 billion, of which 70% is exported. Nigeria, on the other hand, has about 50 million people involved agriculture, with abundant arable land and water resources, yet last year spent over $4.2 billion to import food - N635 billion to import wheat; N356 billion on rice, N217 billion on sugar and N97 billion on fish – commodities we should be exporting.
In the 1960s, agriculture contributed over 60% of our Gross Domestic Product (GDP). Nigeria was the world’s second largest producer of cocoa with 15% of the world market, largest exporter of palm oil with 60% market share, and leading exporter of groundnuts with 30% of the world market. We also held dominant positions in the markets for cotton, rubber, hides and skins. Although the farmers relied on rudimentary, traditional tools and methods, the sector accounted for about 70% of Nigeria’s exports, and about 95% of our domestic food consumption.
The oil boom of the 1970s spelt a doom for agriculture in two ways - the overvaluation of the naira made our exports less competitive, and imports cheaper - a trend that has continued till date. From domestic self-sufficiency and leading exporter in 1960s, by 1982, we imported about 153,000 metric tons of palm oil at a cost of $92 million and 55,000 metric tons of cotton worth $92 million. Between 1973 and 1980, we imported 7.07 million tons of wheat, 1.062 million tons of rice and 431,000 tons of maize. In 1990, we spent $430 million on food imports; in 2000, we spent $1.25 billion and last year, Nigeria spent $4.2 billion to import food. Demand has gone up with growing population, rural-urban migration and changing tastes as we moved from the traditional staples to foreign grown foods.
Today, agriculture still employs more people than any sector and contributes 42% of our GDP. We are ranked 11th in the world in terms of arable land but with fertilizer use of 6kg/hectare, we are ranked 116th out of 138 farming nations. Though our domestic production continues to grow, accounting for about 60 per cent of the ECOWAS output, it has not met up with the patterns of demand, so we continue to import subsidized rice and wheat, to the detriment of our domestic agriculture and farmers, as well as food security strategy. Nigeria today is the world's second largest importer of rice, next to Philippines.
Agriculture has remained largely subsistence - farm sizes are between 05.-3 hectares, with national average size of 1.2 hectares militating against scale economies. Farmers have no title to land and therefore unable to access credit from banks. Loans, when available are at exorbitant rates of interest, and most banks do not really understand, or make any effort to appreciate the vagaries of farming and agribusiness. Inputs like fertilizer, improved seeds, agro-chemicals including herbicides and pesticides need to be imported at high costs and do not get to the subsistence farmers in timely and affordable manner. Produce when harvested gets lost due to poor storage technologies, absence of a price support system, infrastructure deficits, poor market access and pests. Post-harvest losses in Nigeria average between 20% and 40% depending on the crop, about the highest in the world.
Federal Government interventions to remove the binding constraints have been misguided and mostly failed. For example, in the mid-1970s, the government established sugar plantations and processing factories at Numan, Lafiagi and Sunti. All such efforts floundered proving once more that government is an incompetent businessman. The Nigerian Agriculture and Co-operative Bank (NACB) was established in 1973 to address the credit needs of farmers, and between 1995 and 1998, the government reformed the lending policies of the CBN's Agricultural Credit Guarantee Scheme (ACGS), both with little impact.
There was also the 1996–1998 National Rolling Plan with the ambitious projection that by year 2000, Nigeria would have grown the agriculture sector to ensure the country could feed her rapidly growing population and even develop capacity to process agricultural raw materials for local industries and export. None of the targets were achieved and we are where we are - a nation without food security, with little participation in global agribusiness except as an importer, and an ageing population of farmers with small farms, without much hope of being replaced by young people, new technologies or large scale mechanization. A nation with only 30,000 tractors for 50 million farmers is going nowhere.
What should be the direction of policy to ensure that agriculture returns to its pre-eminent, pre-independence position? What should we do at Federal, State, Local Government and individual levels to attract entrepreneurship, investment, and youthful energies and passion for agriculture? What would incentivize the expansion of small-holder, subsistence farms, and emergence of large scale, mechanized farms? How can we achieve food security and recover our position in the global agribusiness value chain?
The first priority is to learn from our past successes and failures. When Nigeria was a leading agricultural nation, we did not need a huge Federal Ministry of Agriculture. We do not need it now. Agriculture is a state and local government matter, with a small regulatory, standards-setting and quality control organization at national level - for exports, imports and domestic consumption. What we need are strong and active ministries of agriculture at state level and departments within local government councils. The multitude of colleges and research institutes properly belong to states and geopolitical zones, and they should be so reverted.
The second is to reorganize the institutional framework for a productive sector. The federal government has no land, said Governor Rotimi Amaechi of Rivers, so why do we budget N63 billion for a Federal Ministry of Agriculture? I agree. Each state should identify and focus on its areas of agricultural competitive advantage. Rice and wheat which we have capacity to be self-sufficient command special attention of coordinated policy support. Other export crops which we can lead the world should similarly be attended to - sharing the burden between the national and sub-national governments.
The third is to remove binding constraints that hold back agricultural production. There should be renewed focus on building infrastructure to link up production, consumption and exporting centres. Zero-interest credit for agriculture must be delivered to our farmers, and titles to their land given to them to facilitate formalization of their ventures and access to loans. Intensified extension services, visits and advice by agricultural experts must return to our farms. Access to affordable seedlings, including genetically-modified seeds, chemicals and fertilizer should be enhanced.
Finally, designing and implementing a sustainable system of subsidies, price support and market mechanisms for agriculture to be prestigious, and the farmer to make money and flourish. The EU and USA spend more than $1 billion every day to subsidize agriculture; we must also subsidize ours. but the subsidies should be strategically targeted. Something like the Commodity Boards which used to buy off all produce from farmers, needs to be re-introduced. A Price Support System for farmers which would guarantee that what all our farmers can produce will be purchased. This would incentivize farmers and boost productivity at all levels. Governments can then act as buyers of last resort and store the purchased produce at its various silos nationwide for gradual sale throughout the year. In fact, this is an avenue for the emergence of private sector participation in commodities trading, food preservation and storage. The opportunities for job creation are huge.
While there is nothing wrong with subsidies to farmers, what we have has been hijacked by bureaucrats, middlemen and politicians who often have nothing to do with farming. Even President Goodluck Jonathan admitted that only 11% of fertilizer reached farmers, yet this year, the Federal Government will spend about N4.7 billion on fertilizer 'market stabilization' - whatever that means!. This scam should stop right away and the funds used to buy all the output of farmers for storage and sale throughout the year.
Apart from fertilizer scams, even the medium and large scale farming by retired public servants and politicians have mostly been failures with poultry and livestock being the significant exceptions. The experiment of the Kwara State government with Zimbabwean farmers in Shonga has been partly successful only because it was a public-private partnership and not the much-touted 'commercial farming' because the banks own 45% and Kwara State 15%, but the state shouldered virtually all the financial and political risks, in addition to providing infrastructure. The key lesson of the Shonga experiment is that when the government is willing to provide political leadership, infrastructure and low-interest loans, agricultural production can be substantially increased.
The federal government should downsize the agriculture ministry. In the first instance, rural development should be the business of states and local governments. Out of a total budget of about N65 billion to the ministry and its agencies, over half of that amount will be on recurrent expenditure including a preponderance of research institutions and colleges that duplicate functions and have made very little impact on the sector. The parastatals in the sector account for N46 billion of the sector's budget with little justification for their existence in terms of outputs to improve agricultural production.
Government recently unveiled a four year plan aimed at “revolutionizing” the sector in a plan made public by Jonathan-led Economic Management. The plan appears laudable, but the modalities for the proposed injection of funds into the sector under the blue-print is not clear to transform agriculture without radical change in approach. Agriculture can only be largely driven by state governments. It is not clear if the EMT projections took into consideration the critical factors that have been bedeviling the sector that have been identified earlier.
Nigeria must return to agriculture. Global demand for food will continue to increase because in October, world population will hit 7 billion. If you think that our population is large today, imagine what it would be like at the turn of this century – when all our oil would certainly have dried up, or when technology would have made fossil fuels unneeded. By that time, Nigeria would have over 700 million people, 500 million of which would live in cities. What would they eat? |