Introduction

Nigeria has the largest economy in Africa and the continent’s top oil producer. Over 90% of the foreign exchange of the country comes from Crude Oil. However, since the recession in 2016, the price of Crude Oil has been fluctuating. With the recent Covid-19 pandemic in Dec 2019 crude oil price which sold at $61.2 per barrel had fallen over the months and at the moment is pegged at $45.12 per barrel. The sharp decline has been attributed to the comparative increase in its supply relative to demand.

It’s unclear when the pandemic will fade out and to what extent it will impact the world economy. However, if no drastic step is taken there is possibilities for adverse effect on Nigeria’s economy in terms of sustainability, food security, and safety. Thus is the need prioritizing the country’s resources to its best use.

Why do we need to prioritize food security now?

The global population is predicted to grow by 2 billion by 2050, of which over half of that growth is to come from Sub-Saharan Africa, and Nigeria is said to double its present population size by 2050. Additionally, the world bank’s development indicator shows that Nigeria’s food insecurity is on the rise with almost 13.4 percent of the population undernourished in 2017 compared with 6 percent in 2007. These alarming statistics bring to the fore, the urgent need to address the issue of food insecurity in the country.

Consequentially, as a result of the global pandemic, there have been challenges with supply chain management especially for imported commodities such as rice, wheat, raw sugar, palm oil, etc. As most countries have shut their borders to international trade due to the pandemic. This however has made it difficult for an import-dependent country like Nigeria to import its key consumable commodities. For example, over 80% of Nigeria’s raw materials are imported from China and other Asian countries. As such, companies, agro-businesses had to think of alternative means to source their raw materials which had led to an increase in prices of agro commodities in the country. More so, due to the border closure, there has been a general rise in food prices which now makes it challenging for an average Nigeria to have his basic daily meal. Thus the country needs to think innovatively finding ways to locally produce its food and source agro-inputs to maintain a food secure country and sustainable economy.

Thus as the uncertainty of foreign exchange earnings from Crude oil and food security in Nigeria persist, various tiers of government in Nigeria continue to explore alternatives to diversifying the economy especially considering the recent Covid-19. There is however no substitute to meet this present challenge except a rethink is done on Nigeria’s mainstay sector, the agricultural sector. Globally, agricultural trade has been a catalyst for growth, especially in developing countries where it is a primary source of foreign earnings and employment generation.

Speaking of Nigeria’s potential in the sector, President of the Africa Development Bank, and former minister for agriculture in Nigeria, Akinwumi Adesina, noted that Nigeria’s immense agricultural potential is a great asset for the nation in particular and Africa in general, with promises for food security when fully harnessed, The business year, (2015).

 

The place of financing Agriculture Value Chain (AVC) in economic development

Several challenges are responsible for the country’s production and exportation of agricultural goods. Prime among these constraints are lack of value-addition to agricultural produce, a dearth of modern storage facilities, poor product quality and/or understanding of the export market. Moving further the value chain, processing, and marketing activities have been plagued by poor infrastructure, low investment, inadequate value chain financing, and unfavorable government policies.

It saddens to note that over 40% of agricultural produce in Nigeria results in post-harvest losses. This factor contributes to the unprecedented hike in food commodities imported in the country as a result of poor storage facilities. Similarly, there has been a bridge of resource flow in the value chain between the producers and consumers as a result of poor logistics services. Though there have been a few effective ones in the sector, there still lots of logistics services needed in the country to move the huge quantity of agro commodities being produced.

Another major challenge with the logistics services in the country is the fragmentation of farm produce due to the subsistence nature of farming in Nigeria thus making it challenging to effectively transport food produced. A similar issue is plagued with agro-input as farmers don’t get the fertilizers and agrochemical at the right time during planting season which has led to poor agro productivity. Solving this challenge, however, needs the collaboration of both the public and private to developing a structured model to facilitate the movement of agro commodities and inputs from farmers to the end consumer to easy productivity along the value chain. However, this can only be made possible with adequate funding to aid the development and boost of logistics services in Nigeria. This will contribute immensely in reducing post-harvest losses of agro commodities and much more help fast track the goal of building a food secured nation.

Against this drop, the Central Bank Of Nigeria, CBN understands that the sector requires massive investments to increase production and to create value addition across the most profitable segments of the value chain has established new policies to enhance growth in the sector to support both smallholder and large scale agriculture production in selected staple and cash crops; created an ecosystem of factories, storages, and logistics companies that move raw materials for value-added production, and finished goods to markets. As part of the Covid-19 support intervention/palliatives, CBN recently granted an additional moratorium of 1 year on CBN intervention facilities; reduced interest rates on intervention facilities from 9 percent to 5 percent; and created an N50 billion targeted credit facility for affected households and SMEs and N1 Trillion to support the local manufacturing sector as well as boost import substitution in the country.

Adhering to the CBN new policy, Sterling bank has aligned in its drive to move the sector forward. Through its  HEART strategy, the bank in 2018 beamed its focus to five critical areas that necessitate growth in the Nigerian economy which includes; Health, Education, Agriculture, Renewable Energy, and Transport of which agriculture happens to be the rallying point for the other sectors. This is a further testament to the critical role agriculture plays as a contributor to Nigeria’s non-oil GDP. Also, the bank had set aside 10% of its total loan portfolio to enhance the sectoral growth (A significant milestone in Nigeria’s financial sector)

Re-affirming this commitment to the sector, Abubakar Suleiman, Chief Executive Officer of Sterling Bank, noted at the bank’s Agric. Summit Africa that “Beyond farmers gaining insights on how to achieve better productivity, the major key thing to do is to empower farmers to compete globally, which is key to national development”. He noted that if the potential of the sector is well harnessed, it will serve as a key driver of inclusive economic growth, attainment of sustainable wealth, massive job creation, and poverty reduction

Bukola Awosanya, Group Head, Agribusiness & Solid Minerals Finance at Sterling Bank, affirmed that the bank has been a trailblazer in the sector winning several awards among which including the best performing bank in Commercial Agriculture Credit Scheme by CBN, pioneer bank under the Growth Enhancement Scheme (GES), etc. She noted that sterling bank was the first bank to finance Smallholder Farmers under the CBN Anchor Borrower Program having understood the integral role these farmer’s players in acceleration primary production of agricultural products and their eventual export having realized the huge potential in the sector.

 

The clamor for value addition to exportable Agro-commodities in Nigeria

However, beyond agricultural production, a key area of focus is a value addition to produce which remains critical in optimizing the sector’s potentials. Over the years, the exportation of raw agricultural produce has only resulted in a significant loss in foreign earnings accruable. According to the Akinwunmi Adesina Africa accounts for over 75% of world cocoa production but only get 2% of the 85-Billion-Euro market of cholate. He noted that though the price of cocoa goes down, the price of chocolate never goes down. And also to coffee production, when the price of coffee beans goes down, the price people pay at Starbucks for drinking coffee may not go down. He emphasized that what Africa must do is get to the top of the global value chains in the things that it produces, to be competitive in the global market, Sophie (2017).

According to Food and Agriculture Organization (FAO), Nigeria’s value-added per capita in agriculture has risen by less than 1% annually, over the last 2 decades which needs to be improved to remain competitive in the global market, PWC (2019). Thus the vital role of value addition to exportable Nigeria Agricultural produces to stay competitive earning the market share in the international market.

Asides being a key prospect source of export revenues, the agricultural sector accounts for about 40% of total employment in Nigeria today. Employment is one of the most important social and economic issues in every country which refers to the number of people who either work for pay in cash or kind, work on their account, or are unpaid family workers. This figure however has been dwindling over the years due to low industrialization in the economy. This decline over the years led to increase social vices such as kidnapping, rape, online fraudsters, a different Ponzi scheme, and much more decadence in the society.

Despite this, agriculture has been in the fore-front of increasing and improving the availability of jobs in the country contributing about 40% to the employment rate in Nigeria. However, this figure can be improved through the increase in agricultural productivity and the value addition of agricultural produce. Through this, more jobs will be created as the moribund of agro-industries, factories, and manufacturing industries that have long been abandoned would be revived. This will be a source of job creation of the teeming Nigerian youths and thus circumvent the growing concern on unemployment in the country.

Though the sector’s contribution to employment in Nigeria is just about 40%, this is projected to increase to about 60% when the various untapped job opportunities in the sector have been explored. As noted by Akinwunmi Adesina that if the continent strives well to feed itself, it will not only lead to the economic stability of African countries and preservation of foreign exchange but also enhance the creation of jobs for millions of people.

The trend of agro-commodity export

Since the 1960s, Agriculture had been the mainstay of Nigeria’s economy before the discovery of crude oil. From 1960 to 1969, the sector accounted for an average of 57.0% of GDP and generated 64.5% of export earnings. Before it turned to oil, Nigeria was one of the most promising agricultural producers contributing over 1% of global agricultural export. Between 1962 and 1968, export crops were the country’s main foreign exchange earner. The country was number one globally in palm oil exports, well ahead of Malaysia and Indonesia, and exported 47 percent of all groundnuts, putting it ahead of the US and Argentina.

However, agriculture exports collapsed as the country shifted towards petroleum exploitation and by the 1990s, Nigeria’s share in world exports of Agriculture had declined to less than 0.1%, PWC (2017). An analysis by the Federal Ministry of Agriculture and rural development estimates Nigeria’s agriculture export loss is over U$10 billion annually.

Though in 2019 Sesame seeds value export rose by 170 percent since 2016 and its export valued was at US$289 million while total export stood at $1.5 trillion, Nigeria is still a net importer of agro commodities as 73.82% of the total trade value accounted for imported commodities while only 26.18% accounted for exported agro commodities.

 

The Forex earning potential of Agro – commodity export

It’s worthy to note that Improved agricultural productivity and export of surpluses are not just at the core of large and successful agribusinesses but a mainstay source for foreign exchange in the country. Nigeria over the years has depended heavily on Crude Oil as a major source of foreign exchange which figures have dwindled in recent times in face of the COVID 19 pandemic. As projected by Ndubuisi Nkekwe, that while the Nigerian agriculture sector sustains over 80 percent of rural households, the foreign exchange earnings from the sector will reach about 70% by 2050.

This seems positive as analysis by the Nigerian Export Promotion Council estimated $425 million as the untapped potential by 2021 for Nigerian exports of cocoa beans to the ten best markets of Germany, Malaysia, Singapore, Turkey, Netherlands, Italy, Japan, France, Mexico, and Indonesia.

More so sesame seeds export which is one of Nigeria’s fastest-growing non-oil exports in the last five years, rose by 170 percent since 2016 with its relatively diverse export market the export value figures promise to increase over the years. Moreover, Cashew exportation seems to be on the rise as the annual cashew nuts export potential is estimated to be over $198 million.

Additionally, the estimated worth of cocoa butter for the top ten markets was put at $81.9 million, while the value for untapped potential in the market for cocoa paste by 2021 alone stood at $6.3 million and the untapped market potential for sesame seeds to the top ten markets (China, Japan, South Korea, Mexico, Poland, France, Lebanon, the United States, Canada, and the UK) is estimated at US$170 million.

Furthermore, the prospect of Nigeria’s agricultural output is quite promising with the advent of African Continental Free Trade Area (AfCFTA) as analysts posit that the arrangement offers a huge opportunity for Nigeria’s bourgeoning economy, vis-à-vis providing increased accessibility to a large market for the country’s agricultural and other exportable goods.

 

Conclusion

Nigeria is endowed with 92 million hectares of land, out of which 82 million hectares is arable with just about 41 percent put to agricultural use. It is indeed time for agriculture value chain players in the country to scale up production of export products such as soya beans, ginger, palm kernel, nuts, and cocoa butter and adding value to them. these commodities include.

Banking on agriculture, and more importantly agro commodity export, is an idea whose time has come. Nigerian’s maybe putting its best foot forward with its most agile and innovative bank, sterling charting its way forward in the Agricultural space, the course of a reformed and transformed sector in Nigeria and beyond.