Tuesday, May 1, 2012

Nigeria's Agricultural Agenda - Fixing both the Commodity & Financing Value Chains in Agriculture


As a result of presentations recently on Nigeria's Agricultural Transformation Agenda by senior members of the Nigeria Government, the private sector, and international institutions at both Corporate Council on Africa event and the annual meetings of the U.S. Export-Import Bank, clearly there are two value chain dimensions for Nigeria's agricultural sector:

-- The commodity-structure-productivity and policy framework under the Ministry of Agriculture; and,

-- The need to fix the financing value chain - meaning such things as getting Nigerian Banks to not only lend to farmers, but understand farming needs, especially the small farm holder, and improving the insurance regulatory framework. The country's Central Bank is leading the way on reframing the agricultural finance issues.

These two comprehensive value chains (commodity-productivity development & financing) have a symbiotic relationship - both need to improve in order for the agricultural sector to not only transform, but also to provide the growth potential for the country and for the West Africa Region writ large. Both the Ministry of Agriculture and Nigeria's Central Bank have recognized the pivotal linkage of these two value chain issues, and have put forces together to change the negative paradigms of the last 30 years in the country's agriculture sector. Key efforts include unlocking more than $3 billion in potential financing through several innovative programs such as the Nigerian Incentive-Based Risk Sharing for Agricultural Lending Program (NIRL Program); incentives and initiatives for women farmers; innovative SME development in the agricultural sector, and credit and financing for small farm holders. In addition there is an effort to ensure that there are "agricultural desks" at Nigerian Banks, and that these banks also increase the number of women in senior leadership positions by 40 per cent. The Bank of Industry, an arm of Nigeria's Ministry of Trade, is in partnership with both the Central Bank and the Ministry of Agriculture and pushes for greater support for women farmers, women cooperatives, financing for women, and SME development. The flip side of course is to work with farmers so that they too see agriculture as a business.

International institutions like the International Finance Corporation (IFC) has also stepped up its focus on agriculture as it recently announced an increase of $3.5-4 billion in 2012 for sub-Saharan Africa (up from $2.7 billion in 2011) -- a good portion of this reportedly will be focused on agricultural projects. Infrastructure is the other key area of focus for these funds, along with transportation, food storage, and technology. Banks like Standard Charter is also pioneering with risk insurance for farmers and better credit terms.

This is all good news for Nigeria and for to the other 15 nations in West Africa region. Why? Because if Nigeria can transform its agricultural sector (fixing the commodity-productivity value chain as well as the financing value-chain), this can spur greater sub-regional trade (intra-Africa trade is only about 10 per cent of exports, see www.bit.ly/AFreframe); and, more economic growth for a sub-region with one of the Continent’s and world’s largest and youngest populations. We have all heard the projections that Africa will likely reach the 2 billion person mark at the same time we come close to reaching mid-Century, with one-third of the population reportedly being under the age of 30.

Here is another figure to ponder for West Africa. There are roughly 600 million people living in that sub-region today who are under the age of 30 and about 65 per cent of those work in subsistence agriculture (www.bit.ly/WesYou)). Last reports had Nigeria's youth numbers hovering around 75 million and counting. Thus, there is a demographic importance (the youth bulge) to improving agriculture in addition to the common sense driven needs of: spurring economic growth; improving trade, and increasing GDP. I have written before about Africa's youth needing to become the world's next leading farmers as well as the importance of the region becoming the next global bread basket (www.bit.ly/YouAgric . (FYI: Africa and Latin America are the two areas of the world with the most remaining arable land and water resources). More and more this is being borne out by not only the demographic facts, but certainly the reframing and resurgence in focus by many African government, international institutions, and the African and foreign private sectors on the fundamental importance of fixing agriculture's two value chain issues.