By Abachi Ungbo
In 2017, I was co-opted into a team under the banner of a registered company that was poised to leverage on the opportunities that existed in the ginger value chain as an anchor company in the CBN-Anchor Borrowers’ Programme now under NIRSAL in anticipation of the inclusion of ginger to the list of crops under the programme.
There were more than a dozen such prospective companies jostling for position. After an almost interminable period of dithering all but about 2 to 3 companies were disqualified. The disqualification was on the basis of the want of facilities for value addition.
The idea behind value addition is basically to increase the economic value of primary agricultural commodities. There’s more to be gained in adding value to agricultural commodities than merely exporting in their primary state. The continued export of the commodities at their primary state negates the Agricultural Promotion Policy of the current administration which is aimed at unlocking the country’s agricultural potentials, reduce dependence on crude oil and promote the growth of the economy. Value addition not only inspires the ramping up of agricultural productivity but also promote import substitution industrialisation.
The agricultural revolution in Britain between the 17th and 19th centuries has been cited by historians as the trigger for the industrial revolution. Some argued that the modern world commenced during that period. Similarly, other developed economies in Europe, America, etc, and industrialized countries in Asian followed that pathway. It’s instructive, to underscore the symbiotic relationship that exists between agriculture and industry. Whereas, the former supplies the requisite raw materials the latter on the other hand, incorporates numerous agribusinesses into the supply and value chains that foster the growth and productivity of agriculture.
Agriculture contributes about 21% to the GDP and it’s a vibrant non-oil magnet for foreign exchange. The sector represents a veritable low hanging fruit for the diversification and development of the economy. The country is an important exporter of agricultural commodities like sesame, ginger, cocoa which rakes in billions of Naira annually to the economy. Nigeria top ten agricultural export is estimated to have earned the country about 289.3 billion Naira in one year (April 2019- march 2020), the sesame seed and cocoa dominated the export with the two commodities constituting about 60% of the entire products. However, the exports of these commodities undergo minimal or zero value addition processes.
Nigeria and by extension Africa is losing substantially due to the failure in adding value to their produce. According to the boss of the Nigeria Export Promotion Council (NEPC), for Nigeria and other major exporting countries of Cocoa to take a big chunk of the over 82 billion dollars global Cocoa/Chocolate industry, there was a need to attract investments in the area of capacity building and provision of cutting edge equipment for processing and value addition. Also, it is explained that Cashew farmers and marketers in Nigeria are losing about 900% of what they would have realised if they process fully and package the nuts to international standards.
The importers of our primary agricultural commodities simply add value to these products and export them back to us at extortionate prices. A good case in point is the Netherlands, it has one of the largest Cocoa processing industry globally. In 2016, the processing and export of Cocoa derivatives injected 4.2 billion dollars into the Dutch economy. This chime with the assertion of stakeholders in the non-oil sector that the agricultural export is a multibillion-dollar business with the potential to attract 40 billion dollars annually if we take agriculture seriously and deliberately build our capacity in the production, processing, and marketing of agricultural products.
According to report the developed countries add over 150 dollars of value by processing one tonne of agricultural product; developing countries add less than 50 dollars. Furthermore, while 98% of agricultural production in developed countries undergo industrial processing, in developing countries barely 30% is processed. Yet agro-processing industries in developing countries generate 40% to 60% of manufacturing value-added and agro-industrial products account for as much as half of their total export.
Nigeria is a commodity-dependent country owing to the fact that 60% of its merchandise exports in value terms are basic products. According to Food and Agriculture Organisation (F.A.O), two features have dominated world agricultural primary commodity markets over the past two decades; relatively high price volatility and a generally declining trend of real value. This is particularly the lot of Nigeria- it is so vulnerable to negative commodity price shocks and price volatility, as a result, engendering economic slowdown as growth declines and the fiscal situation deteriorates.
The World Economic Forum (WEF) re-echoed the fact that when a country’s economy is not diversified and relies heavily on basic products, it puts itself at the mercy of international market prices. When prices go down, employment, exports, and government revenue suffer. Diversifying the economy against the vagaries of the international and the effects of being in the extreme class of commodity-dependent countries will require huge investment in scaling up agricultural export commodity production and as well as increasing the value of the exports.
The significance of adding value to raw materials was reinforced by The president, Africa Development Bank (AfDB), Akinwumi Adeshina that there’s an urgent need for Africa to rapidly diversify its economies and add value to everything that it produces. Exporting raw materials only leads to vulnerabilities and no nation or region has succeeded by simply exporting primary commodities.
Value-added exports will fully integrate the country into the global market as a result attract much sought after foreign exchange, increase the agricultural sector’s contribution to the nation’s Gross Domestic Product (GDP) and as well as improved growth of the manufacturing industry. This will actuate a ripple effect on the socioeconomic development of the country which will translate into inclusive growth and social stability.
There is a crying need to upgrade the production, processing, and distribution mechanism. The diversification of the economy must be aggressively pursued so that we can achieve structural transformation of the Nigerian economy. With political will, commitment, policy intervention and continuity and solution to the issues bordering on standards a lot can be achieved.
Abachi Ungbo can be reached at email@example.com