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Grain Industry in Nigeria
Straddled between Cameroon and Benin is Nigeria, Africa’s most populous country. The country is home to an estimated 217 million people which roughly translates to 15% of Africa’s population and over 60% of West Africa’s population. Given the size of its population, the country has to produce a staggering amount of food, grains included. The International Grains Council (IGC) puts Nigeria’s total 2022-23 grains production at 21.6 million tonnes. Maize and Sorghum, the country’s major cereal staples account for much of the product at 12.5 million tonnes and 7 million tonnes respectively. Rice takes the third position at 5.4 million tonnes.
Despite Nigeria having the most substantial arable land in Africa, what it produces is not enough to meet local needs. According to the United States Department of Agriculture, Nigeria relies on imports to meet its food and agricultural needs (primarily wheat, rice, poultry, fish, food services, consumer-oriented foods, etc.) worth about US$10 billion annually. For the 2022-23 season, IGC forecasts that Nigeria will import 2.1 million tonnes of rice and 5.9 million tonnes of wheat.
Still, the country has not lost its eye on import substitution with locally grown alternatives. A number of sectors from wheat to rice are receiving considerable government support to boost production. This has become even more important today when the Russo-Ukrainian war has disrupted global Agri commodities markets resulting in a spike in food prices.
A COUNTRY RELIANT ON WHEAT IMPORTS
Nigeria is not known for wheat production despite it being the third most consumed staple behind maize and rice. Nigeria has traditionally relied on imports particularly from Russia and the Baltic states to meet demand. This trend is expected to
continue in the medium term. “Nigeria imports more than 50% of its wheat requirement from Russia and other Black Sea countries,” an attaché of USDA’s Foreign Agricultural Service post in Lagos said. “To reduce the domestic price of wheat flour and sustain profitability, most Nigerian flour mills buy cheaper wheat from Russia, Latvia and Lithuania. Mills are enhancing their practices of blending cheaper, low-quality wheat with more expensive high-quality hard red winter from the United States.”
With Russia’s blockade of Ukrainian ports and the effect of sanctions imposed by the EU and other Western countries causing a surge in wheat prices, Wheat millers have increased the cost of wheat flour to accommodate the high price of logistics and diesel cost. In response, the Association of Master Bakers and Caterers of Nigeria (AMBCN) ordered its members to increase the prices of bread and other products by 30% “due to the prevailing economic situation in the country.” As bread becomes more expensive, many lower-income houses are opting for substitutes like maize, yam, and sweet potato products that are relatively affordable. To avoid closing shop, bakeries are on the other hand are exploring the options of blending wheat with cassava flour, millet flour, and sweet potato flour, said the FAS Lagos report.
Golden Penny is a brand of Flour Mills of Nigeria, the largest milling in Nigeria by market share.
closing shop, bakeries are on the other hand are exploring the options of blending wheat with cassava flour, millet flour, and sweet potato flour, said the FAS Lagos report.
In the short term, Nigerian officials are collaborating with the private sector in diversifying the country’s wheat sources. For instance, the Ministry of Industry, Trade, and Investment approved Crown Flour Mill’s request to import wheat from India. The strategy is working thus far. For example, during the first half of 2022, Nigeria’s wheat imports came mainly from North and South America. Still, industry players are calling for the government to do more to stabilize local wheat prices. In July last year, the Premium Bread Bakers Association of Nigeria went on strike, demanding the government remove the 15% duty paid on all wheat imports to lower the cost of wheat-based commodities. This however did not bear frit as the tax is still in force to date.
WHEAT IMPORT SUBSTITUTION GATHERS MOMENTUM
To unshackle itself from the chains of wheat importation, Nigeria has embarked on a robust local production program and is already making major wins although it still has a long way to go in its wheat self-sufficiency agenda. According to the FAS lagos report on the grains sector, Nigeria will produce 160,000 tonnes of wheat in 202223, up from 90,000 in 2021-22. This comes as Wheat production in Nigeria is experiencing renewed attention from the government, the African Development Bank, and researchers.
So far, rainfed wheat has been successfully grown in Nigeria’s three highlands — Gembu (Taraba State), Jos (Plateau State) and Obudu (Cross River State). The Central Bank of Nigeria through its Anchor Borrowers Program (ABP) is collaborating with the Wheat Farmers Association of Nigeria (WFAN) to extend wheat production from 5 states to 15 states. The bank provides loans to support the farmers and gives seeds (with short gestation period) imported from Mexico to assist the farmers. About 13,000 tonnes of heat-resistant seeds imported by CBN in 2021 have undergone multiplication in Jos, Plateau State and are ready to be distributed to the farmers. “Yield per hectare is forecast to improve by 18% (1.3 tonnes per hectare) as compared to (1.125 tonnes per hectare) reported for marketing year 2021-22,” the report noted.
Private companies including Olam Flour Mills, in tandem with other research institutes such as the Lake Chad Research Institute (LCRI) and International Center for Agricultural Research in the Dry Areas (ICARDA), have set up a N300 million (US$720,000) 10-year community seed project (heat tolerant variety) for Nigerian farmers to increase production of wheat and to strengthen agricultural production in northern Nigeria’s wheat farming belt, the attaché said. In July last year Nigeria became the latest country to approve imports of Buenos Aires, Argentinabased Bioceres Crop Solutions’ proprietary drought-tolerant HB4 wheat variety, according to Reuters. Nigeria follows recent approvals by Brazil, Colombia, Australia and New Zealand for use of HB4 in food and feed.
Both local and imported wheat are serviced by a flour milling sector that is highly consolidated. In 2021, the largest company in the sector, Flour Mills of Nigeria PLC, acquired a majority stake in Honeywell Flour Mills PLC, its major competitor. Flour Mills of Nigeria has a flour milling capacity of about 12,000 tonnes a day, while the capacity of Honeywell Flour Mills is about 2,500 tonnes a day. The two companies have a combined market share of 70%.
In general, the large flour mills owned by FMN, Honeywell, BUA and Olam are highly integrated. Efficient purchasing, transporting and processing systems strengthen their competitive advantages. The top milling companies — FMN, Olam, Dangote, Charghoury and Honeywell — control 32%, 24%, 19%, 11% and 10% of the market share, respectively, while all other small millers account for 4%. Analyst KMPG said the three largest players in Nigeria’s flour milling market account for approximately 75% of total revenues.
INSECURITY IMPACTS CORN AND RICE PRODUCTION
FAS Lagos estimates Nigeria’s MY2022/23 corn production at 12.1 million metric tons (MMT), a roughly 5 percent decrease compared to the USDA MY 2021/22 figure of 12.5 million tons (MMT). Regional insecurity across Nigeria’s corn belt hampers corn production as farmers abandon their farms and escape to nonviolent areas in cities. In the Northwest, farmers pay taxes to armed gangs to access farms and this could be the reason for a 3% decline in the total area under corn production in MY2022/23. Production costs have increased significantly for corn farmers further limiting their ability to grow. For example, a bag of fertilizer currently cost more than 22,000 naira (US$52) compared to 15,000 naira in 2021. Production may however rise in future as the government will begin national performance trials (NPT) for GE TELA maize in a few months as Nigeria makes another leap toward increasing productivity, especially for smallholder farmers
Maize production in Nigeria is forecasted to contract in MY2022/23 due to insecurity across Nigeria's corn belt region.
Consumption however remains steady as Corn is the staple meal for many Nigerians and is the most critical ingredient in producing animal and aquaculture feed. Nigerians consume corn meal, especially for breakfast. The demand for breakfast food made from fermented corn has increased due to rising prices for wheat-based products – bread in particular. Imports are minimal as CBN forbids banks from issuing foreign exchange form (Form M) to importers. Nevertheless, Post estimates imports for MY2022/23 at 50,000 metric tons (MT), a reduction from 200,000 metric tons (MT) recorded last marketing year by Post. Multinational companies producing food and animal feed products in Nigeria were the leading importers in 2021 as they have import approvals from the CBN.
Just as maize, rice production is expected to contract 7% to 7.8 million metric tons (MMT) due to insecurity in the northern part of the country. Flood incidents are also expected to impact upland rice cultivation. With a rice consumption forecasted at 6.9 million metric tons (MMT), a 5 percent decrease from last year, Nigeria can be considered self-sufficient. The country is however forced to import as most Nigerians generally prefer imported rice because of the white color and the absence of impurities such as “rocks”. FAS Lagos estimates MY2022/23 imports to be 1.5 million metric tons (MMT) compared to USDA’s 2.2 million metric tons (MMT) projection for last year. Importing rice is however an expensive affair as the CBN prohibits rice importers from accessing funds through the Importers and Exporters (I&E) window. Import tariff on rice also exists and it varies according to the importer’s role in the value chain. For example, a rice trader will pay an import duty of 10% and a levy of 50%. In contrast an integrated miller with a verified backward integration program (i.e., rice farms) will pay an import duty of 10% and a levy of 20% for importing rice paddy.
With Nigeria’s population rapidly growing, Rice self-sufficiency is a key political goal of the government and the central bank. As part of its efforts to strengthen rice production and milling capacity, the government approved an intervention fund to complete 10 large-scale rice mills with a total capacity of 320 metric ton per day in 10 states. In addition, government supports are underway to strengthen existing dams in Nigeria for irrigation purposes. In addition, the government is encouraging technology start-up companies to enter the agricultural sector- to transform rice farming, processing, and selling across Nigeria.
SORGHUM SURPASSES 7 MILLON MARK
As the world’s largest sorghum producer, Nigeria is forecast to produce 7.2 million tonnes of the ancient grain in MY2022/23, according to FAS Lagos. The rise is attributed to the military’s counter-insurgency program which has reduced insurgency and improved communal farming activities in Nigeria’s Northeastern states where Guinea sorghum is widely cultivated. FAS Lagos estimates Nigeria’s total sorghum consumption (including food, feed, and industrial usage/ FSI) in MY 2022/23 at 6.8 million metric tons (MMT), an increase of 3 percent compared to approximately 6.6 million metric tons (MMT) recorded the previous year by USDA.
Most drivers of consumption are households, particularly in the Northern states where sorghum is the staple food. In addition, sorghum is proving its worth as a valuable source of food assistance – as a suitable food ration for internally displaced people across the northern part of the country. Industrial end users are predominantly companies producing beverages, cereals, and confectionery. Increasingly, animal feed producers use a small percentage of the grain. Meanwhile, industrial sorghum companies use less expensive sorghum-based intermediate products - to lower costs. FAS noted that in early 2020, several exporters made efforts to export sorghum to the United Kingdom. However, the Covid-19 pandemic destroyed prospective export deals.
Meanwhile, the country could become a major producer of soybean in Africa. In June last year, FAS Lagos forecasted Nigeria’s soybean production for MY 2022-23 at 1.35 million tonnes, 20% up on the previous year. “Soybean is a crop well suited to Nigeria’s topography and ecological conditions,” the report said. “Consumption is strong due to growing demand in the food processing and feed use sectors. Food processors use soybeans to produce soy milk, soy cake, soy yogurt, and to fortify local carbohydrate-based Nigerian food staples (e.g., garri and rice).”
Bread consumption in Nigeria is declining due to high prices
FOOD SECURITY WITHIN REACH
As earlier stated, Nigeria has one of the most substantial arable land in the African continent which if fully utilized could fully feed its population that continues to expand by the day. Radical and concerted efforts by the state and other actors is however needed to unlock the country’s true food security potential. The barley malt ban of the 1980s is a good example of how certain measures could actually spur local production. Nigeria’s sorghum production reached a peak of 11 million tonnes. As climate change beckons, resources however need to be diverted to climate-smart agriculture, and its good to see that the country is embracing genetically engineered plants as one of the pathways to food security. More however needs to be done, particularly in the areas of providing sufficient extension services to farmers, provision of quality and affordable certified seeds and fertilizer, and increasing farmer access to loans in order to incentivize them to produce more. If these challenges are addressed, I am confident that nothing will stand in the way between Nigeria and her lofty food security ambitions.
