Developing the Nigerian Agriculture Value Chain: Some Challenges and Solutions

Agriculture is Nigeria’s single largest economic sector and accounted for 24.4% of the country’s GDP in 2016. The sector is concentrated on crop production (90 %) while Fishery, forestry, and livestock account for the remaining 10%. However, the impact of the sector on government and export revenues is very small accounting for only 4.8% of total foreign earnings in 2016.

The agricultural potential in Nigeria is high as the country has 82 million hectares of land and only 34 million hectares have been cultivated. However, agriculture in Nigeria is focused on production which accounts for only a small part of the total value chain rather than enhancing value addition through processing, marketing, and retailing.

The sector is characterized by several setbacks including the use of poor inputs which has resulted in declining yields across key crops. The country’s share of global production of key crops remains low and agro-processed exports have declined as a result of declining production and quality. This low production is promoting import dependency and the increase in population has resulted in increased food consumption.

The agriculture value chain in Nigeria includes several interconnected segments. It includes the core agricultural sector which include the Input Supply, Production, Processing and Marketing/ Trade subsectors; Regulators such as Federal Ministry of Agriculture & Rural Development (FMARD) Standard Organization of Nigeria (SON) National Agency for Food & Drug Administration (NAFDAC); Finance Institutions such as Central Bank of Nigeria, Development Finance Institutions (Bank of Agriculture (BOA), Bank of Industry (BOI)), Nigeria Sovereign Investment Authority (NSIA), Commercial banks and private equity firms; and Research Institutes such as International Agricultural Research Centre (IARC) and the International Institute of Tropical Agriculture (IITA).

This value chain is highly underdeveloped and is characterized by several challenges. Local farmers in the country lack the required input supply such as seedlings, fertilizers, and water for production activities. Also, the process of securing land is time consuming, expensive and discourages agricultural activities. There is a low investment in water and irrigation systems and this has negatively impacted the quality and availability of water for agricultural production. There is slow adoption of mechanization which has significantly reduced the quality of agricultural products, limited accessibility to modern agriculture equipment and limited availability of skilled workers.

Development in the value chain segments is also hindered by the poor transportation system in the country and inadequate market information. The financial, research and regulatory institutions servicing the segments of the value chain are weak. They are characterized by inadequate funding, poor research infrastructure, lack of skilled manpower and weak linkage to the agricultural sector. The financial institutions have not been sustainably been able to provide long term and affordable financing across the value chain segments. The regulatory intuitions in the agricultural value chain in Nigeria are weak and non-compliance with regulatory and documentation requirements for food imports to the European Union and the United Kingdom consistently results in food exports rejection.

There is a need for massive investment to increase production and create value addition across the most profitable segments of the value chain. For instance, in the production of a bar of chocolate, only a marginal 6.6% of the value addition is in cocoa production, the remaining is the processing, marketing, and retail segments of the value chain. In Nigeria, only about 30% of cocoa beans are processed, with the remaining exported.

The Nigerian value chain can be developed by strategical investments in quality inputs, agro-production, agro-processing, marketing/trade. Research institutes should be well funded to develop improved inputs such as seedlings and agrochemicals while the government needs to partner with cooperatives, for effective distribution of these inputs. Most of the agricultural produce in Nigeria are being exported at prices that discourage investments in agro-processing within the country. An introduction of export tariff could discourage the exportation of farm produce, encourage investment in processing them within the country and optimize the revenue potential across the entire value chain.

Agriculture infrastructure should be developed to accommodate the storage needs of the industry. The instalment of cold chain technology and silos at railway terminals, inland water ports and seaports will improve the market and trade segment of the value chain. Farmers and processors should be made to certify their products with internationally recognized certifications like UTZ and Rain Forest Alliance certifications. This can improve the quality and yield of agricultural produce and products which in turn could increase productivity and guarantee farmers a fair price for their produce in the international market.