How forex restriction, border closure could unlock N1trn for farmers

Despite the vast agricultural potential, Nigeria is a net food importer, with the vast majority of people engaged in agriculture operating at subsistence level.

The country spends an average of US $22 billion (7.92 trillion) annually on food imports.

However, the paradigm is gradually changing through the restriction of foreign exchange to a number of food items and lately, the closure of land borders through the Exercise Swift Response by the Nigeria Customs Service (NCS), Immigration and other security agencies to curtail smuggling.

Daily Trust in this analysis, dissects the opportunities provided by these actions to famers who would be willing to explore the window for wealth creation.

Available data shows that famers will have the opportunity to earn around N1 trillion by venturing into six food crops that have been restricted by the CBN and aided by the recent land border closure to prevent smuggling.

Milk

Nigeria consumes an estimated 1.7m tonnes of milk yearly, but produces only 34 per cent to meet demand. The over 1m tonnes deficit is imported, and this costs $480.3m (N173.3bn).

PricewaterhouseCoopers (PwC) Nigeria in a recent report said Nigeria consumes an estimated 1.7m tonnes of milk annually, but her production output only meets about 34 per cent of demand.

It added that Nigeria’s annual production deficit of over 1m tonnes of milk is being met by importation, which costs an average of $480.3 million, about N173.3bn, annually. It attributed the country’s low milk production output to low yield.

A private sector-led push, through backward integration, to raise Nigeria’s level of local milk production and create jobs has reached advanced stage, riding vigorously on the back of integration between pastoralists and processors.

Experts estimate that Nigeria’s population will rise between 207 to 210 million by 2020. This is why billionaire businessman Alhaji Aliko Dangote planned to develop dairy plants and develop home-grown milk production to reduce importation.

Rice

The Anchor Borrowers’ Programme (ABP), has been a major game changer for the cultivation of rice in Nigeria.

The Food and Agriculture Organisation (FAO) said Nigeria’s rice production reached 7m tonnes (4.2m tonnes, milled basis) in 2017, up 12 per cent from 6.3m tonnes (3.8m tonnes, milled basis) in 2015.

Official, accurate data to ascertain consumption and the gap with production is not readily available. However, when the smuggling market is considered, the opportunities become more obvious.

Before now, Nigeria was said to expend N1bn daily on rice import, the bulk of that expense now goes into the pocket of rice farmers in Nigeria, especially as the federal government is trying to stem the tide of imported rice.

In 2018, the federal government announced plans to halt rice imports entirely. In doing so, it hopes to save a great deal of money.

Cassava

In the case of cassava, the gap is not exactly in growing but processing. Nigeria is the world’s largest producer of cassava, responsible for an estimated 20 per cent of global output, which in 2017 was 285 million metric tonnes in the global cassava processing market report. Even though Nigeria ranks as the world’s largest producer of cassava, the yield is low (at five to ten tonnes per hectare against global average of 25 tonnes per hectare).

Cassava has some major industrial products among which are Ethanol, Industrial Starch, Cassava Flour, Glucose Syrup, Sweetner etc. Despite these potentials, Nigeria imports over 95 per cent of the industrial starch used in the country.

Ashish Deshpande, a manager at Allied-Atlantic Distilleries Limited (AADL), an ethanol producer in Nigeria, said a litre of ethanol in the market is sold for N300. It means that Nigeria is spending N115bn annually to import 385m litres of ethanol.

“We produce 9m litres of ethanol annually, it was gathered that other local producers of ethanol across the country produce about 6m litres annually which brings the annual ethanol production in Nigeria to about 15m.

On starch production, the Chairman, Harvest Feeds AgroProcessing, Goke Adeyemi, said Nigeria requires about 600,000 tons of starch annually, while our annual production is about 100,000 tons, leaving a deficit of 500,000 which is imported.

Adeyemi further explained that a ton of starch is sold for N200,000 in the market, which means that Nigeria is spending about N100 billion annually, importing 500,000 tons of starch.

Recently, the CBN Governor, Godwin Emefiele announced forex restriction for starch, syrup, ethanol and other raw materials from starch. He said Nigeria imports cassava derivatives with over $600m each year. This is the opportunity for Nigeria.

Tomato demand in Nigeria is put at 2.2m metric tons per annum, while annual actual production is 1.5m metric tonnes but 700,000 metric tonnes is lost to post harvest wastage, leaving only 800,000 metric tonnes supplied to the market, according to data from the Agriculture ministry.

The 40 percent loss, valued at N72bn annually, between farm and market, on face value, portrays what could be a viable business, particularly in processing for tomato paste.

Fish Tomato

According to a 2017 report by the Nigerian Bureau of Statistics (NBS), 5.8m tonnes of fish had been produced between 2010 and 2015. Year 2014 recorded the highest tonnes of fish produced with 1.12 tonnes.

Artisanal fish production has consistently accounted for the bulk, more than 60 percent annually, followed by Aquaculture (Fish farms), and the least from industrial commercial trawlers. However, Nigeria has a deficit of over 2m metric tonnes.

Nigeria spends $60m, which translates to N21.6bn on the importation of fish annually, the former Minister of Agriculture, Chief Audu Ogbeh, once said.

Oil Palm

Oil Palm in Nigeria has a demand of 8m metric tonnes but production is 4.5m MT, which refers to fresh fruit bunch (FFB) from which oil is extracted at a 10 per cent - 15 per cent efficiency rate.

Emefiele has said palm oil importation is $500m annually. With the recent restriction announced by the CBN, local palm oil producers are likely to get an even favourable market for their produce.