An initiative of UNDP Africa Facility for Inclusive Markets, Agribusiness Supplier Development Programme presents potential solutions to problems tha have plagued agricultural development in Nigeria for decades.
Since the dissolution of commodities boards as a result of the trade liberalization policy during the SAP era, competitiveness of Nigeria Agricultural commodities even within the country suffered a major setback. Majority of Nigeria’s local industries gradually closed down due to challenges associated with poor product pricing and a lack of access to adequate raw materials to keep factories in operation.
Nigeria’s poor competitiveness in agriculture is reflected in relatively low crop yields per hectare which is only between 20% and 50% of what obtains in countries. at a similar level of development. This situation is compounded by acute wastage of agricultural produce, occasioned by poor state of infrastructure particularly storage and processing facilities, and weak market systems. To stay open, agriculture based businesses have had to adopt extraordinary approaches for developing supply chains from the vestiges of agricultural produce markets. Many times such endeavours are at great costs and often with minimal effect because of disintegrated market information systems, limitations to available technical and financial resources, weakened SMEs and poor policy environment.
In spite of successive government policies to discourage the practice, it became easier and more cost effective for businesses to source raw materials from the international commodities markets. The result of that is that Nigeria now has a food import bill in excess of 1 trillion naira in foreign exchange every year and food import continues to grow at an unsustainable rate of 11% per annum. Continued reliance on importation to keep factories open fuels domestic inflation displaces local production and supplies and creates unemployment with cumulative negative fiscal, economic and political effects.
Supplier Development as a Strategic Approach for Reestablishing Local Supply Chains
Agriculture forms a significant portion of the Nigerian economy, in addition to being the source of more than 70% of employment and other livelihoods. Still most of Nigeria’s agricultural commodities are either consumed locally or exported in their raw form with minimal value addition. The current ATA of the Federal Government emphasizes a policy shift from subsistence agriculture and repositions agriculture as an industrial and economic spring board for real economic growth, through job creation and increased incomes. This has resulted in the resurgence of interests in the sector by lead firms involved in agricultural processing and marketing.
Challenges for lead agribusiness firms are associated with a dearth of suppliers, smaller firms and producers, who operate at an appropriate standard of quality and are able support efficient and effective operations and to deliver financial benefits. Many lead firm supplier relationships in Nigeria are price based with little trust and no interdependency.
An Agribusiness SDP for Nigeria would help to address many of these challenges, in addition to delivering benefits to lead firms that include shorter supply chains, more flexible suppliers, cost reduction and potential for product development partnerships. Smaller firms and producers (SMEs) will also stand to benefit from access to markets, information about markets, technology and knowledge transfer, better lines of credit for expansion and becoming lead firms themselves. All of these will result in increased economic impact of agribusiness investments, job creation and improved livelihoods especially for farmers.
The Nigeria Agribusiness SDP should be designed to bring about technology and knowledge transfer and crystallise existing potential for capacity improvements especially of agribusiness SMEs. With increased capacity and development of local businesses, Nigeria will gradually increase levels of value addition and become less dependent on expensive food importation, while ensuring inclusive economic growth. Sustained uptake of local supplies will also result in increased production and increased competitiveness in Agriculture. Another aspect that must be promoted is Supply Chain Management especially for those SMEs that operate within the vagaries and uncertainties of the typical agricultural commodity value chains. Effective management of supply chains should trigger better aproaches to planning and improved agronomic practices. A long short but certainly achievable