Agriculture in Nigeria: Identifying opportunities for increased commercialization and investment by International Institute of Tropical Agriculture

Agriculture in Nigeria: Identifying Opportunities for Increased Commercialization and Investment

Summary Report Y.M. Manyong, A. Ikpi, and J.K. Olayemi

This research was funded by USAID/Nigeria Implemented by International Institute of Tropical Agriculture (IITA) In collaboration with Un iversity of Ibadan (UI)

September 2004

ÂŠ InlernaUonal Institute of Tropical Agriculture (IITA), 2004 Ibadan, Nigeria Telephone: (2342)24 I 2626 Fax: (2342)241 2221 E-mail: iita@cgiar,org Web: www.iita,org To Headquarters from outside Nigeria: clo Lamboum (UK) Ltd Carolyn House 26 Dingwall Road , Croydon CR9 3EE, UK Within Nigeria: PMB 5320, Oye Road Ibadan, Oye State ISBN 9781312378 Printed in Nigeria by IITA

Acknowledgements The authors acknowledge with thanks the contribution of the following persons to data collection and field reports in the six development domains: Southwest Zone-Dr (Mrs) B. Akanji (Nigerian InstitUte for Social and Economic Ikscarch, NISER, Ibadan) and Dt v. Okoruwa (UnivctSity of Ibadan, Ul), Southeast Zone-Dr S.A. Yusuf and Mr Samuel Awoniyi (UI): South- south Zone-Dr R. Omonona (Ul) and Dr E. Udoh {University of Uyo, Uyo); North-ccntral Zone-Dt G. Ayoola (Federal University of Agrirulture, Makurdi); Northwest Zone-Dr B. Ahmed and Dr (Mrs) Sanni {Ahmadu Bello University, Zaria}: Northeast Zone-Dr P. A.maza (University of Maiduguri, Maidiguri) and Femi Agbool. (UI). Staff of UTA were helpful in various areas: Mr R.T. Alabi of the UTA Goo-spatial Laboratory for the spatial analysis, Mrs R. Umelo and A. OyetUnde for the editorial .ttention, and Mr T. Akinwande for the design of the cover. IFPRI provided the technical baclcsropping on the IFPRI DREAM modd to the team of this Study. Their contribution is highly appreciated. Many thanks to all the organizations that accepted to be interviewed during the course of the study and completed the survey forms, the source of primary data used to produce this report. The AIN study greatly benefited from the guidance by members of a Steering Commirtce made up of represent.tives from the following institutions: the Federal Ministry of Agrirulrure and Rural Development (FMARD), the Nigerian Association of Chamber of Commerce, Industry, Mines, and Agrirulture (NACClMA), the Nigerian Institute for Social and Economic Research (NISER), the Farmers' Association and Development Union (FA.DU) , the Central Bank of Nigeria (CBN), Union BankofNigeri. Pic (UBN), the International Fertilizer Development Corporation, DAIMINA Project (IFDCIDAIMINA), the United St.tes Agency for International Development, Nigeria Mission (USAIDlNigeria), the Depattment for International Development in Nigeria (DFIDlNigeria), the Depattment of AgricultUral Economics, University of Ibadan (UI), and the International Institute of Tropical Agriculture (UTA).

iii

Contents Acknowledgem.nts... ........... .......... ................. .............. ............................................ iii Executiv. Summary ..................................................................................................

Vll

Chapt.r 1: Introduaion.................... .......... ........................ ............. ........................

Socioeconomic and development chall.nges in Nigeria's agriculrure ...................

Objectives of the .rudy .... .......... .... ........... .......... .... ....... .... ............. ........ ...... ......

Th. Int.rf.ace among the AIN srudy and strategic objeaives of IEHA and USAIDINig.ri................ ......................... ..........................................................

Chapt.r 2: Conceptual Framework and M.thodology .............. ............ ........ ...... ......

Concepru.aJ framework ..... ............. ............ ............. ............ ............ .............. ......

3 4

Sources of data and m.thods of data collection .................. ............. ............. ...... Chapt.r 3: Results and Discussion ........................... .. .......... ....................................

Th. performance of Nig.rian agriculture.. ........ .. ......................... .......................

S S S

Review of agricultural policies in Nigeria.......... ............... ...................................

Assessm.nt ofinvestm.nt in Nig.rian agriculrure ........ ..... ............. .....................

Defming the dev.lopment domains of Nigeria ...................................................

Investment options in Nigerian agriculrure ....... .... ................... .......................... 16 Chapter 4: Recommended Strategies for Accel ....ted Commercialization and Investm.nt in Nig.ria's Agriculture .................................................................... 2S Strategies for comm.rcialization ............. ....................................... ........... .......... 2S

Strategies for mitigating negative impacts of commercialization on gender and equity ..... ...... ........ ................. ...................... ............... ........ ................ ......... 26 Strategies for .nhanced food security ....................................................... ........... 26 Strategies for sustainablâ&#x20AC;˘â&#x20AC;˘ nvironm.ntal manag.ment .... .............. ...................... 26 Sectoral policies for specific priority commodities .................... .......................... 27 Regional developm.nt hubs... ........................................ ....................... ...... ........ 27 Recommended furur. srudies .... ........ ... ........... ... ............ ... ................................. 27

Tables I. Indicators of agrirultural sector performance: mean annual values......... ......... .... 2. Indicators of agrirultural sector performance: mean annual percenage

growth rates .•...••..... ..•..•... .... .•.••.... ....•....... ..............•..........•...... ............•.•••.... •...

3. St2keholders' perception on performana: of Nigerian agrirulture by dt:vdopment zones ,ina: 1999 ......................... ...............................•.................. 4. Summary of direction of fureign and domestic investment flows to agrirulture by development domain·: respondents perception ...•....................... 5. Attractiveness of agrirultura1 enterprises to foreign and domestic private investors by development domain............ ........................ ....................... 6. Agricultural commodities in which devdopment domains have comparative advantage in dte domestic, regional or world market by devdopment domain .......... 7. Commodities widt comparative advanage ror investments as ~ by ,takeholders in each devdopment domain ...... ......... .............. ........................ 8. Commodity ranking by total benefit in each development domain of Nigeria (relativity to crop tanked I in each domain) ......................................

8 10 18 19 21 24

Figures I. Development domains of Nigeria. ........ ............ ........................ ............. ............. 2. Relative frequency distribution of consttaints to fureign and domestic investment in Nigerian agriculture (percentage of responses) .............................. 3. Intensity of constraint to foreign and domestic investments across development domains of Nigeria (% of responses by domain) ...................... ........ ................... 4. Mapping of vety severe constraints alfecting investment in agriculture in Nigeria.. ............ ........ ..... ......... .............................. .. .................... ............... .... 5. From DRFAM analysis: identifYing ror investments in research and development in Nigeria based on streams of benefits to producers and consumers by 20 IS as a result of existing portfolio of technologies ....... .......

5 II 14 IS

Executive Summary The USAID/Nigeria Mission contracted the lnternationallnstitute ofTropical Agriculture (UTA) to ronduct a study on Agriculture in Nigeria (AIN). UTA teamed up with the Universiry oflbadan to implement the study. The Irtrernational Food Policy Research Institute (IFPRI) provided timely support for some of the models used. The key issues in the study were the identification of ronstrainrs to investment in the agricultural sector and the evolvement of strategies and prioriry .,.,., for intervention by USAID/Nigeria, other donors, the home governments, and the private sector to provide catalytic support for the flow of investment into the agricultural sector. Nigeria was divided into six development domains, which roincided with the six geopolitical zones in the country. Two states selected from each development domain and the Abuja Federal Capital Tertitory (Fen constituted the primary frame for data collection. Primary data were collected from policymakers and implementa15, the private scaor, associations, and individual investors using a combination of field survey methods, such as in-depth interviews, focus group discussions, individual completion of questionnaires, and taped interviews. Secondary data were obtained from local and international publications and reports. Methods of data analysis used included descriptive statistics, constraint mapping. development domain mapping, regression technique, and partial equilibrium models. The assessment of agriculture in Nigeria presented in this study covers an assessment of the performance of N igeria's agriculture sector, a review of past policies afl'eaing agriculture, an assessment ofinvestmenr processes in Nigerian agriculture, an analysis of constraints to pri-

vate sector investment in Nigerian agriculture, and an evaluation of investment options. Evidence from literature gencraily indicated that there was inconsistency in the growth performance of the agricultural sector in the period 1981 to 2000, with some evidence of Oucruating trends, probably due to policy instabiliry and inconsistencies in policies and policy implementation. Both lia:rarurc and stakeholders' perceprion of the performance of Nigerian agriculture agreed that there had been improved performance in the lasr four years. Major reasons were an increased demand for agriculrural products, bcra:r access to agricultural inputs, and a more favorable economic clima(e. Factors constraining agricultural performance in the country included those relating (0 rechnical, resource, socioeconomic, and organizational constrain",. A review of pasr government policies in agriculture showed that the pre-1970 era was characterized by minimum government intervention which changed to maximum intervention in the period before strucrural adjustment and back (0 minimum intervention in the period of suucrural adjustment. Identified mnstrain", to the effectiveness of past agricultural policies were policy instabiliry, inconsistency in policies, narrow base of policy formulation, and poor implementation of and weak institutional framework for policy coordination. The proposed new agriculrural policy is not signiflcandy different from the past policy as both arc morc focused on the primary production subscctor than on the downstream subseaor of agriculture. However, it is too early to make any meaningful evaluation of the new policy. vii

A review of past investment trends in the Nigerian economy revealed that both domestic and foreign /low of private investment into the Nigerian economy as a whole suffered a declining trend and wide variation which was worse fOr the agricultural sector. The patterns of domestic and fOreign private investment over this period were highly corrdated with the changing states of political and policy instability. Thinecn categories of constraints to investment in the agriculture sector were idencified from both the literature search and stakeholders' pe"pectives. Infrastruerural constraints (poor or bad state of roads, poor processing facilities and marketing oudets, irrcgular power supply, poor state of ,e\ecommunication facilities, etc.) were ranked highest by more than 90% of respondents throughout the Federation. These were fOllowed, in decreasing order of imponance, by financial, technical, and economic constraints; macroeconomic policy and sociocullUral constraints; labor. environmental. and political oonscralntsj and microeconomic policy, institutional, health, and land tenure constraints. The sevaity of constraints was found 10 vary among developmenl domains except for those relating ro infraslructure. Those who gained from the persistence ofconstraints within Nigeria included some of the civil servants who derived benefits from fraudulent practices. At the foreign levd, the main gainers were some of the fot<ign investors, technical panne", and foreigne" who look advantage of the precarious siruadon. Among the losers as a result of these sharp practices were cnrrcprcneurs, marketers, bankers and lenders, and government. Much more alfecred were the vulnerable groups in the society such as fal1'Jlers and women.

There are thirreen types of economic activities in which investors (foreign and domestic) are willing to commit their resources. These arc input production and supply, livestock production, ftsheries, forestry, and commodity processing and storage enlerprises. Others are commodity marketing, agroindustry manufacturing, agricultural commodity exporr, and agricultural supporr services. Investors (foreign and domeslic) do not rush to inves( in the upstream producrion activilies. Small-scak F.umers are likely to remain the major 'inv<stors" in primary crop production. Given the current level of the technology portfolio available to stakeholders, cassava is a priority commodity that gives the highest returns 10 invescmenl and is worthy of investmen' in to induce Iargc-scale agricultural growth. The nexl nine ranked commodities are yarn, maiz<, millcc. groundnur, rice, sorghum, poullry, leafy vegetables, and cowpea. The priority commodities in the second group arc pepper, beef. oil palm, fish, melon, (OmaIO, soybean, onion, rubber, and cocoa. The lower ranked commodities are ginger, pork, goat meat, multon, benisced. and cashew nut. However, there are regional dif&rences that need to be considered in targeting agricullural investments 10 a specific development domain. The AlN study recommended the application of an integrated commodity chain approach with respect to me priority commodities to increase: commercialization, mitigate negative effectS on gender, and enhance equity. The study suggested thrcc regional development hubs for consideration by USAID and other donors for invcsrmenl in the Nigeria agricultural sector: the northern, the middle belt, and the southern. Subhubs could be deftned as well depending on the interests and priorities for the investor. Three major inrclVcmions were considered critical to the attainment of the stated strategic objoctives in the COunlry's agriculture sector. They were nOI invesligated during the course of this study. Therefore, they arc recommended as furnre in-depth studies: a subsector conccncrarion 2.nalysis study, a downstream agriculture activities' study, and an integrared moniloring and evaluation program design. viii

Chapter 1

Introduction SocIoeconomic and development challenges in Nigeria's agriculture Agriculrure constitutes one of the most important sectors ofNigetias economy. The sector is particularly important in terms of generating employment and contributing to gross domestic product (GOP) and export ccv<nue earnings. Nigeria is rich in agricultural resource endowments; despite this. the agricultural sector has been growing ac a very slow race. Ir is recognized thac agricultural commercialization and invesrment arc che key strategies for promoting acce:lerated modernization. sustainable growth and development. and. hence. poverty reduction in the country. The USAID/Nigeria Mission contracted the International Institute of Tropical Agriculture (IITA) to conducr a study on Agriculrure in Nigeria (AIN). IITA teamed with the UnivetSiry of Ibadan to implement the study. The International Food Policy Research Institute (IFPRI) provided timely support for some of the models used in this study. The focus of Nigeria's agricultural development priorities has been the development and adoption of programs that tended generally to support only increased production.

ObjectIves of the study The primary purpose of the AIN study was to provide USAID/Nigeria with the analytical basis for the Mission to design irs new Agricultural Strategy that contributes to unlocking constraints to commercialization and investment in the Nigerian agricultural sector for sustained economic growth; enhanced food security; increased competitiveness of products in the domestic, regional, and international markets; swtainable environmental management; and poverty alleviation. The specific objectives of the srudy were, therefore. to: • Define development domains within the Nigetian political economy framework. • Analyze the perlOrmance: of Nigeria agriculture and make a review of agricultural policies. • Identiry. assess the effects. and explain the persistence: of constrainrs to

commercialization and investment in Nigerian agriculture. • •

Evaluate returns to investment and identify prioril)' rommodities worthy of large payoffs. Design appropriate strategies to accelt:rate commercialization and investment in Nigerian agricultute.

The Interface among the A1N study and strategic objectives of IEHA and USAlDlNigeria The AIN srudy is in line with the new US Presidential Initiative to End Hunger in Africa (lEHA) whose objective is to end hunger by 2015 through agricultural growth led by small farmers. The five pillars of the initiative are: (i) providing technological support. (ii) improving agricultural trade and market systems. (iii) building human capital. infrastruaure. and institutional capacity. (iv) promoting swtainabk environmental management. and (v) supporting eommunityorganizations. The study is also in line with the Mission Strategic Objectives for 2004-2008 about swtainable agricultural and diversified eeonomic growth.

Chapter 2

Conceptual Framework and Methodology Conceptual frameworK [n its broad perspective, the research issue in this srudy lies in the dynamics of investment /low for the development of the agriculrural sector of the economy. The importance attached to this invesrment /low is derived from the theoretically and historically valid assumption that the sector requires an increasing dosage of investable capiral from all feasible sources. This capital translates into investment, which, in turn, uansforms various dc:velopmental variables in and outside the agricultUral sector [0 create the ultimate impact, which is economic growth and sustainable development. The relationships among the variables are very complex and elaborate. To make it simpler, the link between commercialization and investment will form the core of the conceptual framework for this srudy. Investment in agriculrure can or will lead to the commercialization of the agriculture sector while

commerciaJization, o n other hand. can also spur investment . Investment and commeccializacion are the keys to suscained economic growth, enhanced food security, increased competitiveness of products, poverty reduction, and susrainable environmental manage-

ment. Investment in mis study is defined as me additions to stocks of capiral ,hat are the sources of future income streams. CommerciaJiz.•uion is the movement from subsistence production to a markel-based sySlem of production. The conceplUaI framework used in rhis study indicates that investable capital, which is made up of both priva« and public capiral, /lows in from foreign privare and public sources as wdl as from domestic privare and public sources. This capiral from various sources creates investment. which. in turn, creates increasing commercialization and. employment and generates increasing outputS of various kinds as driven by the panern of demands. The slUdy also «cognizes the challenges and opportunities inherent in Nigeria's diverse agroecologies, resource endowment, and agricultural production sys«ms, hence rhe study wiU define Nigeria's development domains based on a composite set of factors which include market acuss, populadon density, ecology, agricultural production sysrems, and geopolitical considerations. For each development domain and the Federation as a whole, the Sludy will assess investment opcions and recommend priority commodities with rhe largest payoffs from investing in agricullUre. Finally, appropriate straregies will be idendfied for facilitating me process of agriculturaf investment flow ilnd commercialization in the development domains across the country.

Sources of data and methods of data collection Studyorea The defined devdopment domains plus Ahuja Fcdc:ra1 Capiral Territory (Fen were adopted as the frame for data CDllection. Two states were then selected per domain for the survey, in addicion to the Ahuja FCT. The states were Benue and Kogi in the North-ccntral zone, Borno and Adamawa in the Northeast wne, Kaduna and Kano in the Northwest zone, Abia and Ebonyi in the Southeast wne, Akwa-lbom and Cross River in the South-south wne, and Oyo and Ondo in the Southwest wne. Methods of data collection For primary data, the respondents were selected in each wne to CDver policyrnakers and implementer., the private sector, and other stakeholders such as associations and individual investors in agriculture. The CDmbination of field survey methods employed included in-depth interviews, focus group discussions, individual completion of questionnaires, and taped interviews. Secondary data were CDllected from local and international publicacions and reports. Methods of data analysis Methods ofanalysis included development domain mapping, descriprive statiscical analysis, constraint mapping, regression analysis, and partial equilibrium models wing the IFPRI DREAM model.

Chapter 3

Results and Discussion Defining the development domains of Nigeria The AIN study based the defining development wnes of Nigeria on such factors as ecology (potentials for agricultural production), population density and road density (potentials for agricultural intensification and diversification and the commercialization of both inputs and outputs), farming systems (potentials for conversion of natural resources into crop

products), and the geopolitical divisions of the country (that are the basis for the overall guidance of investment and political decisions in Nigeria). Overlaying maps of the above features resulted in tho d.finition ofsix development domains for Nigeria. Thes< are Northwest (NW), North....t (NE), North-o<n<ral (NC), Southwest (SW), South... t (SE), and South-south (SS) (Fig. I). Thes< development domains match very well the current six geopolitical wnes ofNig.tia.

The performance of Nigerian agriculture This summary is from chapter three of th. main report. It assessos the performanc< of Nigerian agriculture from both th. lit<rarur< and stakeholders' perc<ption. The anal)'sis of data from literature (i.e., secondary data) on the performanc< of Nigeria's agricuitur< shows a mixed performanc<. The share of agriculture in both aggregate GOP and non-oil GOP incr....ed only marginally in th. period covered 1981-2000. The share of toral bank

+ 200ft.....

tiliNe

... O NE

[ill ""

MI 0 50 11lDKiornNrs

E:3 ss If3 SW

Figure 1. Development domains of Nigeria.

Table 1. indicators of agrtcu"ural sector performance: mean annual valueâ&#x20AC;˘. Indicators

1981-1985

1986-1990

1991-1995

1996-2000

30 195.1 5212.0 1290.0 1379.0 38 075.9 99 320.7 86445.0 38 44

35745.0 5825.0 1390.0 1765.0 44 725.0 III 705.0 99 160.0 .. 0 45

104.6

228.2

3600.4 25013.2 14.4

15789.0 89 285.1 17.7

37819.6 391036.8 9.7

910.7 8529.4 10.7

2125.2 24644.1 8.6

6338.2 159591.6 4.0

Mean GOP at 1984 constant factor cost (N MilliON)

Crops LivCSl:ock F~try

Fisheries TOI2I agricultun: GDP TOI2I GOP TOI2I Non-Oil GOP Share of agrkultun: in total GOP(%) Share of agriculture in non-oil GDP (%)

18 134.2 4306.8 1258.7 1322.1 25229.2 67 n 3.0 58368.8 37 43 44.2

Mean guarameed loan under ACGSF (N Million)

24 n3.3 4959.0 1328.6 1167.6 32228.5 78681.0 68486.0 41 47 103.4

Mean toea1 bank credit (N Million) Total cmUt to agricui tuR' Cmiit to the economy Agriculture's $harc of total (%)

1000.5 12007.8 8.3

Mean capital expenditu'" of Federal Government (N Million) Expenditure on agricuirwe Expenditure on all seeton Agriculture's share of total (%)

985.4 6516.4 15.1

Shore of total labor Force employed in agricultun: (%)

59.4

55.6

57.0

45.0

2.9 71.8

4.7 79.1

2.0

n.8

2.4 84.5

Agriculture's share of expon value

Share of toral expon Share of non-oil c:xpon

S4llrce: Computed with d.alll esUllaed from: Centr.al Bank of Nigeria (CBN): Statistical Bulletin Vol. 11(2), December 2000.

credit going into the agrirultural seclOr first increased rapidly between the 1981-1985 and 1991-1995 subperiods and then declined in the 1996--2000 period. The share of the Federal Government's total capital expenruture going 10 the agriculrutal seclOr declined alm05t persistently over the period. The share of the total labor force employed in the agricultural sectOt also declined over the period (Table 1). Anomer inrucator of agricultural performance on growth rates of agricultural sector showed an improvement in the 1996--2000 period compared to the previous years (Table 2) . GeneraUy, there was a lack of consistency in the growth performance of the agricultural sector in me period 1981 to 2000, with some evidence of unstabk or fluctuating trends, probably due to instability and inconsistencies in policies and in policy implementation. However, recent performance (1996--2000) was better than in the earlier periods (i.e., 1981-1985, 1986--1990). 6

Table 2. indicators of agrtcultural sector peo1onnance: mean annual percentage ll rowth - . lndkators

1981- 1985

1986-1990

1991-1995

1996-2000

GDP ac 1984 conSWlt faaor cost (% pal Crops Livestock Forestry

Fullen.. To'" agriculnm GDP To... GDP

2.5 5.7 0.4 -16.1 2.1 -1.5

4.7 2.3 -<i.O 24.6 4.5 6.7

3.1 1.5 2.3 -10.2 2.3 2.2

4.9 2.7 2.0 11.7 4.8 2.8

4.3 - 1.3 3.8 - 16.7 -1.2 2.1

104 604 9.1 5.2 2.6 12.2

0.2 -0.8 1.6 - 3.9 1.8 2.6

3.0 5.3 2.2 5.7 1.3

10.3

16.1

13.1

22.0 10.2

2604 1504

48.6 37.0

5.8 21.3

20. 1 21.3

33.6 38.4

57.5 54.6

6.8 3.8

27.5 26.5

74.7 36.3

9.2 47.8

70.5

68.5

18.2

Indes of agricultural produaion (% pal

Staple crops Otheraops Livestock

Fisheries Forestry Sector aggrepk Guaranteed loon under ACGSF (%)

Total bank credit Credit (0 agriculture Credit to the economy

304

Consumer price index (% pa)

All items

Food

items

Capiral expenditure of Federal Government (% pal

Expenditure on agriailture Expendiru~ on all sectors Agriculrural expon value

31.0

SMtrrr. Computed with data c:xt:r.IICt'ed &om: Genua! Bank of Nipia (CBN): Sutistical Bulletin Vol. 1 L(2), D=mber 2000.

The stalu:holders rated the performance of agriculture in the last four years better than in the past periods. thus supporting the results obtained from literature (Table 3). The main causes for the observed improvement were the increased demand of agricultural produCtS due to higher putchasing power of workers (increased public sector salaries). better aceess [Q

agricultural inputs, and a morc favorable economic climate.

There are still factors that continue to hinder the perfocrnanee of the agriculture sector in Nigeria. Those are related to rechnicaJ. resource, socioeconomic, :and organizacional constraints.

Table 3. Slakeholders' perception on performance of Nigertan agriculture by development domains since 1999. Indicarors

Food security

3 3

4 4

Poverty SQWS of

4 4

4 3 4

3 3 3

4 4 4

4 3 4

5 4

F..rming households Agricultum export

Employmcm in agr1rultUK Rate of rerurn to

3 3

NW 4

agriculruraJ emerprises Economic climate for invcscment in agriculrurc

Bridging gender gap Overall average

All

Much better . 5; slighdy Ixttcr .. 4; about the same .. 3; WOrK than bcf'cn - 2; WOnt than befo~ '" 1. Key: NC • Norm-antn.l; NE .. Northeast; NW '"' Nonhwrst; SE - Southeast; SS .. South-lOUth; SW Southwest Sollrcr. Field Survey. Fcbruary/Mm:h 2003, K

Review of agrirultural polides in Nigeria This summary from chapter four in the ma.in report descrWcs the past agricultural policies and the proposed new Nigerian agricultural policy. It also analrus the stakeholders' perspectives on the effectiveness of policies, regulations, and institutions on the performance of Nigerian agriculture in recent years. Past agricultural policies in Nigeria could be put into three distinct periods. These wet< the periods pre-I 970, prestructural adjustment, and during structural adjustment. In the pre· 1970 era, the Government's philosophy of agricultural development was characterized by minimum direct intervention. As such, the government's anicude to agricuJture was relaxed, with the private sector and, particularly, the millions of small traditional farmers bearing the brunt of agricultural development e/forn. Government e/foro were merely supportive of the activities of these farmers in the form of agricultural research, extension, expOrt crop marketing, and pricing activities. In the pre-structural adjustment period (1970-1985) , there was a fundamental change in the philosophy of Government towards agriculrural development from one of minimum intervention to one of almost maximum intervention, particularly by the Federal Government. The decade of the 1970s and early 1980s witnessed an unprecedented deluge of agticuiruraJ policies, programs, projects, and institutions. The agricultural policy during the structural adjustment period conceived agriculture: as essentially a private-sector business in which the role of Government must be largely facilitating and supportive of private·sector initiatives; market forces must be allowed to playa leading role in directing the economy. Generally, each of the programs/schemes in the past agricultural policies succeeded in increasing food production only momentarily. There were no inbwl, components that purposely carered for the processing andlor commercialization of the food OUtput. g

Thus. understandably. they failed as efforts aimed at developing the agriculture sector. The effectiveness of past agricultural policies was ronstrained by policy instability, policy inconsistencies. a narrow base of policy formulation. poor policy implementation. and a weak institutional framework ror policy coordination. In 2001. a new policy documenlwa5 proposed. The new policy proposal had most of the features at the ~Id policies. but with a more: focused direction and better aniculation. The objectives of the new proposed agricultural policy were (i) the achievement offood ..Ifsufficiency and food security. (ii) increased production of raw materials for industries. (iii) increased production and proccssingofexponcrops. (iv) generation of gainful employment. (v) rational utilization of agticultural resources. (vi) promotion of increased application of agricultural technolog)'. and (viii) improvement in the quality of rural life. The new proposal spelled out definitive roles and responsibilities for federal, state, and local governmcntli as weD as the private secto r to eliminate duplication of functions.

The results of the analysis of stakeholders' opinion on the effectiveness of agticultural policies revealed that current policies are more effective in the: primary production subsector of agriculture than in the downstream subsc:ccor and in the commercialization of

agriculture. Impact of policies on the wdfure status of the people and on the environment remains weak.

Assessment of investment in Nigerian agriculture This summary is from chapter five of the main report. The summary describes the levels and trends of investment in Nigerian agriculture and anal}",,,s the determinantli of

investment in Nigerian agriculture. Levels and trends of investment in Nigerian agriculture In this subsection. levels and trends of inveStment were assessed from both literarure and evidence from field surveys. Generally speaking. available data on investment in Nigerian agriculture are very scanty for both foreign and domestic investments. The levels of total rcaI domestic public invesrmenl by the three tier.; of government indicated an increase. The Federal Government of Nigeria acooumed fur a very high share of about 86% in 1996. 1997 and 1999; 79% in 1998; and 53% in 2000. Local government contributed the least. As f.or as the attracrion of foreign investment is concerned, agriculture's performance was worse than tha, of the whole economy during the review period. In general. the pattern of all types of investment in Nigeria was unstable and particularly bad fur investment in agriculture.

The proportion of the gross foxed capiral formarion (GFCF) . a measure of rhe real gross domestic investment, accounted for by the private sector declined over time such that the public sector's sbare was as high as 75% by 1985. Most public sectOr investments were in large-scale commercial enterprises that were mismanaged and failed. Public sector enterprises were competitive rather than complementary to commercial initiatives. Both the domestic and foreign flows: of private investment into the Nigerian economy as a whole

suffered declining and flucruating trends. GFCF for the agriculture sector foUowed the same

pattern as the aggregate GFCF of the economy. However, an improvemen' was noticed in 1996-2000 compared lO the 1981 -1985 period though the agricul,ural sector share of the aggrega,e GFCF was very low, averaging only abou, 9% lOr the encire 1981-2000 period. The results of primary data analysis from field surveys corrobora,ed those of the above secondary da", analysis. The Bow of private investmen, (both foreign and domestic) imp roved more than tha, of public inves,ment (both foreign and domes'ic). In general, domesric public investment, as claimed by respondenrs in four domains (North-central, Northeast, South-south, Southwes,), was declining while two domains indica,ed that foreign public investmen, had improved a little in the country. On the othet hand, IOreign private inves'ment flow was petceived be increasing in five domains, with the strongest indica,ion given by respondents in ,he South-south domain of the country. Domestic private investment was also perceived to be increasing in five of the six domains. But respondents in ,he North-<:enrral domain claimed that inves,men' from differen, sources had either remained Slagnan' or had declined (Table 4). The main faCtors responsible for the improved. flow of private investment into agriculture were improved economic climate, high fawns to investment, and the availability of markers. On the other hand, inconsisten, policies and poor infrastructure combined '0

constrain the: inflow of private investment. Publi.c investment was constrained by political instability. poor grassrootS participation, and insecuriry. However, domestic public invest-

mem was positively influenced by ,he policies of government on food self-sufficiency and poverty eradication.

Determinants of investment in Nigeria's agriculture Extensive literature search revealed that investment flow ioto the economy and the agricultural seClor within the economy was de,etmined by a number of f.oc,ors, such as size of public capiral investmen" growth of the economy, inll.ation rate, real exchange rate, economic instability, debt service. etc. Paucity of da", did no' allow for a disaggregated analysis tha, could lead the iden,ification of key de,erminants ofinves,men, in agriculture. On an aggregated basis (i.e., for

Table 4. Summary of direction of foreign and do ....stlc Invest.... nt flo_ to agriculture by development domain": respondents' perception.

ALL

Foreign private

0.2

0.6

0.3

0.8

0.1

0.3

Foreign public

-0.1

0.3

0.5

-0.1

0.2

Type of investment

Domestic private

0.4

0.3

0.6

0.4

Domes'ic public

-0.1

-0.2

0.3

0.5

-0.4

-0.1

Notes: Neg2tive (-) values imply decre.uing investment; pruicivc (+) values imply increasing investment

while uro mans no change in invc:stmau. Upper limit is +1 and lower limit is -l. .. Development doma..in: NC _ North-central. NE .. Nonheast. NW _ Northwest. SE z SoutheaS(, 55 = South-<outh, and SW - South"",

the economy .. a whole) and for domestic private investment. rCiults indicate that investment in infrastructure positively influences domestic private inverment. whHe variables on investment in noninfrastrucrura1 goods and on the inAation race have a negative influence. The negative sign of the codfkient of noninfrastrucrural public investment confirms the crowding out of domestic private: investment by public sector investment. The variables that have a positive significant effect on foreign direct inVCitmcot are public investment in infrastructure. the growth rate of the economy, and the inflation rate. Finally. the economic instability index and debt service ratio do not significantly influence either domestic private or foreign direa investment in Nigeria.

Constraints to private sector investment in Nigerian agriculture Evidence &om literature summarized. constraints affecting investment in the Nigerian economy in general and the agricultural seemr in panicular inm eleven caICgories: technical. infrastrucnua1. economic. financial. political. social, policy, insricutional. environmental, external environment. and labor market constraints. The stakeholders identified five critical conscrainrs affecting foreign and domestic investments in agriculture: infrastructure. financial, technical. economic. and macroeconomic policy/sociocultural. in that descending order ofimporrance (Fig. 2). The other identified constraints were sociocultural. environmental. political. and ,insti[utional, also in labor. health. and land tenure. The nature of constrainrs associated with infrastructure centers on poor or poorly developed infrastructure, poor state or condition of available infrastructure, etc, Infrastructure, in this instance, is construed to include physical infrastructure, such as the roads and railway syscems. educational and health facilities. and social services such as potable water. 100

90 80

8. eo

~50

~ 40 ~ 30 20 10

,#- ÂŤ-~ ..;; ,~.

<c)

""~ â&#x20AC;˘.fi "S'

'l. .",(}. .; ~

J' .# y(}.~ ./ oF',;,.,,'f' ..:I

<r,$'.

.S' ...f' ",,,

"'.,<!>

, ..

-$I' Type of constraint Figure 2. Relative frequency distribution of constraints to foreign and domestic Investment In Nigerian agricuhunt (percentage of responses).

electricity supply. and communication systems. The infrastrucrural coll!!traint has persisted due to government neglect. poor governance, poor political leadership, poor maimenance

culture. and poor funding. The financial constraint is mainly in the forms of inadequate supply of credit. inadequate financial services. and the high external debt burden. The fmancial constraint has many economic and social dimensions. Among the factors identified by respondents as being responsible for me persistence of me financial constraint in Nigeria's agricultural sector arc ineffective financial policies. inefficient financial mOlket. inadequate financial facilities. low credit supply. high risk of lending. corruption. bureaucracy. unstable exchange rates. poor agricultural funding by governments. and low returns from farming. Technical constraints take the forms of poor technological base. inadequate availability of viable technology and inputs. low productivity. high production hazards. etc. The technical constrain! in Nigeria affects both me upstream and the downstream segments of agriculture. The constraint manifests itself in poor technology. poor quality of raw materials. and an inadequate supply of inputs. in particular. of fertilizer. The main causes of the constraint include low support from government. poor government policy. poverty. low level of awareness. lack of adequate research. and increases in the prices of inputs. The specific nature of the economic constraint includes

me poor economic and invest-

ment climate. economic mismanagement, the high COSt of production. poor access to market information. high invcnment risk, etc. The persistence of economic constraint is a function of some socioeconomic factors. These factors. as identified by respondents, include political instability. poor governance. ineffective government policies. high inflarion rate, low investment, inadequate flow of credit (0 agriculture, poor resource management,

and corruption.

The macroeconomic policy constraint is associated with an unfavorable external economidpolitic.al environment. Its nature includes poor counuy credie rating, poor image of the coUn!ty abroad. unfavorable perception by foreigners of me countty's investment

climate, and lack of confidence in country's economy. The sociocultural constraint is mainly in fonn of corruption, indiscipline, insecurity

of life and property. social instability/crises. etc. This has been a persistent constraint for a number of reasons that include the heterogeneous nature of

me country i.n terms of religion

and ethnic nationalities resulting in variations in attitudes and beliefs. The constraint is aggravated by unemployment. nepotism. corruption. gender discrimination. and poverty. The labor market constraint consists of a lack of or an inadequate supply of human capital. inadequate skills. and low productivity. The labor constraint in agriculture continues unabated due to me rura1-urban drift. lack of skilled laborers, poor technology. and high wages in other sectors of the economy. The environmental constraint is the consequence of a combination of human activities

and natural occurrences. These result in me pollution of me air. land. and water. Pollution of water from the extraction of crude oil in the Della Region i.s a major manifestacion of the environmental constraint. Others are soil erosion and deforestation.

The political constraint is mainly in the form of political instabiliry. high counrry risk. and poor governance. The persiSlence of this constraint is a function of poor political leadership. political instabiliry. poor governana:. and nonparricipalOry governance. In 43 ye:m of independena:. Nigeria has wimessed only 14 years of civilian rule with the remaining years spent under different military regimes. This is clear evidena: of political instabiliry. The microeconomic policy constraint is associated with micro/mxroeconomic instabiliry. poor policy environment. unstable exchange "'te. etc. The persiSlena: of the microeconomic policy constraint derives panty from the macroeconomic policy constraint. There does not seem to be proper synergy between the different sectors of the economy. thereby leading to disjointed sectoral policies. which are sometimes oontradictory or constitute duplications across the sectors. The institutional constraint is largely in the forms of a weak legal and regulatory framework. instabiliry of the national research system. market fragmentation. underdeveloped properry rights. etc. The dements of institutional constraint that make it persistent are related generally 10 the banking sector. These include inefficient banking procedures fOr services. including cumbersome loan processing. Institutional instabiliry. complociry. inefficiency. and weakness are the most often mentioned examples of me institutional consuainr. The health constraint has persisted due to govertunent inactiOn/neglect. poor leadership. inconsistent policies, lack of good drugs. poor environmenral management, and poverry. The land tenure constraint has persisted in the oounrry principally because of rapid growth in population, the traditional land tenure system. weak enforcement of land policy. and gender discrimination. The intensiry of the above constraints differs across the six devclopmenral domains as indicated by the respondents (Fig. 3). The five most important conSlraints. in desa:nding order of importance. hindering foreign and domestic agricultural investments in the various domains are:

For tht North-em,.",/: technical, infrastructural, financial. environmental, and political.

Fo,. th~ Nomuast: technical, infrastructuraJ. economic, financial, and microeconomic policy. For tht Northwtst: infrastrucrural. technical. sociocultural. financial , and economic. For tht Southtast: infrastruaural, economic, financial, sociocultural, and political. For tht South-soutlr. infr.ostructural, environmental. labor. land-tenure. and financial. For tht SouthwtSt. technical, financial, macroeconomic policy. sociocultural. and infrastructural. The mapping of consrraints showed a wide heterogeneiry in the geog"'phic distribution of the identified constraints. For example. infrastruaural constraints were ","ked very severe throughout the COURlry while the severiry of environmenral conSlraims was assessed high only in the South-south development domain. Seven constraints to investment in agriculrure with a very high level of severiry (> 75% of respondents) in the Federation as a whole or part of it appear in Figure 4. 13

.""""

.lMMI ......

IlliJ E'"Gu,'''

BI-D .._ la_a". pol. . _ o, .. _ ~

I11III.c::l9 ........ ImIIlE_ H3~Â

iÂ§;ljr_

Development dOO'8ins

Fig .... 3. Intensity of constraint to foreign and domestic Investments across dev.lop....nt domains of Nigeria (% of responses by domain,.

Gainers, losers, and nature of gains and losses from the persistence of oonstraints In Nigeria. gaine .. include some of the civil servants and local private entrepreneurs. These civil servants derive benefits ranging from fraudulent practices such as the receipt of financial kickbacks, traffic of documents. outright awan:! of coneract to their cohorts, access to hard currency~ etc. Some of the local private investors, contractors, marketers, etc. gain through charging exorbitant prices, marketing low-standard produces. reduced paymenr of taxes. etc. At the foreign l<vel, the main gainers from the pe.. istence of the ahove constra.ints in Nigeria are some of the foreign inv<stors, technical parmers, and foreigners who take advantage of the precarious investment dimate in the counrry. This group imports all sorts of goods to derive undeserved maximum benefits. Some of the constraints benefit specifIC groups such as stakehokle ... Losers include a wide range of stakeholders. Entreprroeu .. , marketers, and processors are affected in rhe area of low capacity utilizarion, high cose of power generarion, and reduced ourpUt. Bankers and lenders are also affected by the persisrence of financial constraints. The narure of their losses includes high transaction costs, low investment, lack of investable capital, and loss of employment. Farme.. and women are among the most vulnerable groups in the society. The governmenr loses too from low rerurns to the economy. 14

Maaoeconomic ~icy consb"aints

Infrastructural constraints

........

.-_. ---

. . ... .

Financial constraints

Sociocuhural constraints

----

Tedmical constraints

Economic constraints

Environmental constraints

..-_ ---.

Figure 4. Mapping of very severe constraints affecting Investment in agriculture In Nigeria.

Fanners' losses take the form of low access to modem inpUls. reduced outputs. low income. and high incidence of poverty. Consumers will have to bear high costs of food and orner processed products. Effecrs of constraints on commercialization and investment in Nigerian agriculture The effects of the identified constraints on commercialization and investment in Nigerian agriculture are low output/productivity, high cost of production, low returns to investment,

lowlpoor level of investment. high price of agricultural products. collapsddisruplion of businesses, insufficient working capital. low capacity utilization, poor investment climate. loss and or poor quality of products. poor economic growth. loss of invested fund. loss of life. loss of assets or property. loss of confidence in the economy. high marketing costs. high transportation costs. excessive importalion/dumping of fake and substandard products. uncompetitiveness of products in me world market. drudgery of turning. insecurityl violence. poverry and suffering. capital flight. sickness/poor healm conditions. destruction of natural production resources. and loss of biodiversity. fu a result of above effects. the private sector is not encouraged to make substantial and sustainable investments in the Nigerian agricultural sector.

Investment options In Nigenan agriculture This summary is taken from chapters six and seven of the main report. The summary describes the attractiveness of agricultural enterprises [0 private investors, the prioriry commodities for investment in Nigerian agriculture in terms of their comparative advantage,

stakeholders' ranking of mesc commodilies. and me returns to invesanent in them. Attractiveness of agricultural enterprises to private investors Investors are always willing to put their money in anracrive enterprises. The general inference from analysis is that agricultural enterprises in Nigeria are f:Urly amaclive to domestic investors while they are less attractive to foreign investors. This study identified thirteen types of enterprises or economic activities wormy of investment in Nigerian agriculture. These are: input production and supply. staple food crops. industrial crops. livestock. fisherie:s~ forestry, commodiry processing. storage. 2grkultural commodiry marketing. agroindustry/manufacturing. agricultural commodity expon. and agricultural support services. Nine out of the thirteen enterprises are hardly attraclive to foreign investors (Table 5). Foreign investors will he much more interested in input production/supply of inputs. processing of commodities. and agroindustrial or manufacturing enterprises, all of which are downsneam activities and highly capiral intensive. Domestic investors will be willing to invest in input produc<ion and supply, commodity processing. commodity marketing. and agroindustry/manufacture. The primary or upstream production activities seem not to attract much investment interest from either foreign or domestic private sectors. Therefore. small-scale farmers would remain me main investors in the primary production subsector. Regional differences in areas of investment interest were observed across the counny.

Table 5. AttractIve..... of agricultural enterprises to foreign and cIomestIc: private Investors by development domaIn".

lnpuI produaionl ruppIy cnocrpriscs Sap" crop produaioo

EconOmlc entcrprisa

FRN DMT FRN DMT FRN IJMT FRN IJMT FRN DMT

FR.~

3 <I <I 3

<I <I

2 <I

5 5

3 4

3 2 3 3 3 3

2 3

3 <I

3 2 <I 2 2

2 2 3

3 5 4

3 3

3 <I

All

DMT FRN IJMT <I

4 4

<I <I

3 4

3 3

4 <I

3 3

3 3 3

4 2

3 3 3

3 3 4

enterprUcs

Ind....,w aop

production entuprises

l.M:stodc produaion

Fisbcria

For=y Commodil)' procasing

5 4

3 <I

Agriallaual stun&< Agriallaual tnruport Co........tiI)'m.ukcDng Agroin<lwuyl manuf.auring Commodil)'aport

3 2 <I 5

3 2

enterprises

Support """"'" o.m.u.~

3 3

3 3 <I <I

3 <I

5 3

3 3

Ranking: I - not: attJ"aCtM; 2 - weekly aancti"fC; , • atttactive; " • fairly attracri~ 5 - very altractiw: FRN • 1'0.... ; OMT. Domcaic 'Ne • Nonh-an ..... NE. Nonh<.r. NW • North...... SE • Sourhcast. 55 • Soum·"",,,. SW • SOUm..... .s....., Field Sunq. Fd>ruuy/Mad>. 2003.

In the Nonh-a:nttal domain. the en.erprises fairly attractive to roreign investors are inpur production and supplyenrerprisa, proassing, and marlc.ering of agriculrura.l commodities. Similarly. the economic enrerprisa of strongesr attl2Clion are indusuial crops. roresrty, and agroindustriallmanu&.cturing enterpri5es. On the other hand. staple crop production is not a. all aruactive for focc:ign invesonent while livestock production and agricultural transpon service are only wcddy attractive. In the Nonheast domain, seven agricultural enterprises have the porential to atuact invesonent from roreign investors. These are agriculrura.l input production/supply, livestock production, agricultural commodity processing, agrirulrural storage. agroindusuyl manuf.ocrure. agrirultural rommodity expon. and agrirultural support services. Industrial crop production enterprises are wea1dy attractive to foreign investors. For the domestic investors. nine enterprises were found to be attractive for investment. In partirular, input production/supply and the provision of suppon services could be very attractive for local 17

investment. Funher. industrial crop production and agricultural transport are fairly attractive areas of investment to domestic investors. In the Northwest domain. three areas rurly attractive to foreign investors are input production/supply. commodityproccssing. and agroprocessinglmanufacturing. However. the areas weakly attractive to fureign investment are staple crop production. forestry. agriculrural storage, transportation, and commodiÂŁy marketing. For domestic investors. the most a.ttractive economic enterprises are production and supply of agricultural inputs. staple crop production. commodity processing. marketing. and agroindustry/manuF.acture. The rurly attractive enterprises are industrial crops. livestock. Asheries, agricultural transport. and commodity export. Forestry enterprises are adjudged to be weakly attractive fur domestic investment. In the Southeast domain. fuur rurly attractive enterptises for foreign investment are input production/supply. industrial crop production (in particular oil palm and rubber). commodity processing, and agroindwtry/manufacturc. Three enterprises arc considered. to be weakly attractive for foreign investmenc fisheries. agrlcultural storage. and agricultural transport service. The local investors can invest in staple crop production (high demand fur food products). industrial crop production. livesrock production. commodity processing, marketing, and agroindusny/manufacturc. Enterprises weakly attractive to domestic

investors in the Southeast domain are furestry based. In the South-south domain. the rurly attractive economic e",erprises for foreign investment are input production/supply; production of staple crops. livestock. and fisheries; commodity processing; agriculrural storage; agroindustry/manufacrure; and commodity export. The weakly auractive enterprises fur foreign investment in the wne are those in agricultural support services. The domestic investors would And investment attractive in staple Ctop production.livesrock production. and commodity export. They would. however. not invest in forestry and support services.

In the Southwest domain. four economic enterprises would be rudy attractive to foreign investOrs: indusuial crop production. forestry. commodity processing, and commodity export. Similarly. local investors would be rurly anracted to invest in staple food crop production. industrial crop production. fisheries. forestty. and commodity processing enterprises. Across the domains and enterprises. three main reasons stand oU( as accounting for

[he attractiveness of enterprises to foreign investors. These are a high level of demand for both primary and processed products. the availability of raw materialslinputs. and a high rare of returns. However, the huge capital requirement (0 begin a new business or run an old one is a disincentive for domestic investors' involvement in input production/supply

enterprises and agricultural commodity processing. Similarly. land fragmentation is a major disincentive for domestic investors' participation in forestry enterprises in both the Somheast and South-south zones. Priority commodities for investment in Nigerian agriculture: stakeholders' ranking Under this subsection. the report identifies agricultural commodities of comparative advantage. describes reasons for the comparative advantage. and stakeholders ranking of commodities. The agricultural commodities in which me different domains have a comparative

advantage in the domestic. regional. or world market have been divided into two groups: procc.sed and unproc=ed commodities (fable 6). For the unprocc.sed commodities. field survey resulrs show that the southern domains have a comparative advantage in the production of root and tuber crops (ca.ssava. y=t. and cocoy=t). palm produce. cocoa. and some other tree crop commodities plus timber. The Northeast and Northwest have their comparative advantage in the production of cereals and legumes. cotton. gum Arabic. vegetables (tomato. pepper. onion. etc.). and livestock products. The North-centtal is a transitional zone between the northern and southern domains. Hence. it has comparative advantage in the production of some commodities that are produced in the north and the south. These include soybean. y=t. cassava. groundnut. maize, palm produce. cirrus. and cashew. Although most of the commodities can be produced with comparative advantage in more than one domain. there are also some commodities that are specific to only one or two domains. Good aamples of these are crayfish and shrimps in the South-south domain. shrimps in the Southwest. and gum Arabic in the North.... t. The processed products in which the domains have a comparative advantage are derived from the unproc=ed commodities listed above. In the North-cenual. these are Table S. Agricultural commodities In which development domalna haw eomp_lve advantage In the domestic. regional or world mRet by deve",,",*,t domain. Development domain

Nonh-antrod

Northeast

Unprocessed Soybean. pm. cassava. bcn"-l. gmuodnuc, noem, fruits. honey, mango. cash.,.. palm kemd. maW:. ciuw. Vegetable: production (tomato, pepper.

Vcgeablc pro=sing ([omaro. pepper.

onion etc); oil ,seed. prodUaiOD (groundnut); Gum Arabic production.

onion etc); cotton lint; Gum Arabic products.

Soy oil and meal, canned fruits. orange juice. vegetabJe oiL

anton. Northwest

Ginger. tomato, cotton , sorgbwn.

groundnu[. pIic. gum Arabic. soybean. sesame, cowpea. and ...neat.

Touiles. beer. groundnut oil. hides and skins. tOmalO paste. resin, leather.

Southeast

Oil palm. cassava. pm. rice. poultry. cocopm. plantain. bananâ&#x20AC;˘â&#x20AC;˘ vegetables. ginger. timber, cashew nuts, oocoa. maize, melon, rubber, and copra.

Palm oil. cassava chiPS/X.';, pm 80ur, fruit juice. canned fish. cocoyam chips, plan'ain chips. vegesable oil. ca.ssav:l Row. boney, plantain Aour, rubber produen. cashew producta. and koI.

South-south

Coooa. palm frui(, rubber. timber,

Cassava chips, palm oil. lata. ca.ssava roasted granuleslganl. cocoa powder and chocolarc. and palm .. mel oil and cake.

nuts. noncimber forat products, cassava, fish.

crayfish. and shrimps. Cassava. pafm produce, cocoa, timber,

Southwest

oil palm. fish. and shrimps.

s...."" Foeld Sunq.

February/Much. 20C13.

fish and shrimps, yam. timber, cassava, and cocoa cake.

ortngt juice. vegetable oil. soy oil and mal. and so on. In me Northe2St and Northwest. processed commodities in which mere is a compatative ad~tage are processed vegetables, cotton lint. textiles. and hides and skins, among others. In me southern domains, processed commodities mat are commonly produced across mcsc wnes include ClSSava products such as gari and fofo. and ClSSava chips. and elubtJ from yam. Those commodities mat are specific to me Soume2St include yam flour, rubber products. ClSSava products, and plantain chips. Those specific to the Soum-soum domain are cocoa powder and chocolate, and rubber latex. The Soumwest domain has, among cxhet$. timber, cocoa products, and ClSSava products. Each domain attributed meir comparative advantage to me availability of suitable agroclimatic conditions for production and of resources required in me production of the unprocessed commodities. Besides this. me Northeast domain mentioned that me high demand for the products, availability of infrastructure, and high rate of returns on investment were responsible for its competitive advantage. In the North-central domain, the rdativdy low cost of production and large local production base conferred on it the comparative advantage. The NorthwCSl domain, identified me availability of irrigation and cheap labor as factors accounting for its comparative advantage. The Soumcast domain recognized good high resource productivity, skilled labor, low cost of production, and the rclativdy large production base for me ctops as me reasons responsible for its comparative advantage in the production of those unprocessed commodities. Tbe good quality of soil was one of other re2SOns mentioned in me South-south domain, wbile tbe good quality of products was one of the re2Sons identified by the respondent groups in the Southwest as being responsible for their comparative advantage. The most important commodities with ,he highes, domestic consumer demand and ,he greatest poten,ial for commercializa,ionltrade. especially within the Wesr Africa subregion. in Nigeria, and the various developmen' domains arc (in descending order): • for th~ country as tl whok: cassava. yam. maize. millet, groundnm, rice. sorghum. poultry. vegetables, and cowpea • for the North-cmtraf. cassava. groundnut. maize, yam, oil palm. pepper. and soybean • for the Northe4ft: maize, vegetables. sorghum, groundnut. and pepper • for the Northwt1t: maize. sorghum. groundnut, vegetables, pepper, and soybean • for the Southeast: cassava, maize, oil palm, pepper, plantain, and groundnut • for the South-south: cassava, oil palm. cocoa, rubber, maize. and pineapple • for the Southwest: cassava. cocoo. maize, pepper, and vegetables Priority commodities for investment in Nigerian agriculture: ex-mIte evaluations of returns to investments This section presents results from a quantitative evaluation of returns to investment in agricultural commodities in Nigeria. This evalualion is based on the ranlcing of priority commodities in the previous subsection where stakeholders idcndfied 46 commodities for which Nigeria or a devdopment domain within the coun,ry could have a comparative advantage in the domesric, regional. or inlem.lional markets (Table 7).

Ex-ante evaluation of returns to investment was completed fot 26 commodities for which data were readily available to run the panial equilibrium IFPRI DREAM model (for example, all the forestry rommoditics or plantain for the South-south or COlton for the Northeast did not enter the analysis because of lack of data). Given the current level of technology portfolio available for each rommodity and its consumption, elasticity of supply, and elasticity of demand, cassava emerged as commodity number one to invest in for estimated gross returns of US$S70 M per year over the simulation period of 17 ycus from 1999 to 2015. The next ten [anked rommoditics with returns greate[ than US$I billion are yam, maize, millet, groundnut, rice. sorghum. poultry. leafy vegetables, cowpea, and pepper. The second group of priority commodities (with returns of US$ 100-1 000 million) includes beef. oil palm, fish, mdon, tomato, soybean, onion, rubber, and cocoa (Fig. 3.5). The lowest ranked commodities arc benisccd and cashew nut (less than US$IO million over 17 years). Major regional differences were recorded in this priority setting exercise of commodities us ing the criterion of retu rns to investments (Table 8). For roors and tubers, cassava

gives the highest returns in the North-central, South-south. Southeas[, and Southwest in decreasing order of returns. Yam stands high in the North-central followed by the Southsouth. Patterns are uneven for cereals: rice is exclusive in the North-central. maize is better

promoted in the Northwest, North-central, and Southwest. Millet is profitable only in the No rthwest and Northeast, while sorghum is the crop for the three nonhem development domains. Grain legumes (groundnu[, soybean, and cowpea) give high returns in the thrcc northern domains. The patIerns for grain legumes were also observed for the group of vegetables except for leafY vegetabLes that grow well throughour the country. As expected, tree crops such as oil palm (South-south and Southeast). cocoa (Southwest), and rubbe[ (South-south) are produced better in the humid domains of the country. In cont ... t, cashew nur and ginge[ arc commodities for the North-cemral and No rthwest. There is an indication of specialization in livestock production across development domains; Ruminants (came. goats. and sheep) are important in the three northern domains although goats have a smaller hut significant presence in the southern domains. Pigs and fish are important in the South-south. As expected. poultry are found everywhere with a major presence in the South-south.

As said earlier. there are some other commodities widt great potential for international trade and which, though commetcially important in certain development domains. did not show up in the partial equilibrium analysis either because of lack of data or their limited zonal-specific distribution and comparatively small total national output. These include: • gum Arabic in the North-central and Northwest domains • prawns, shrimps. and plantain in the South-south domain • beef and dairy products and associared hides and skins in the Northeast and North-central domains • cotton in the Northeast and Northwest domains • other forestry trees in humid parts of the South-$Outh and Southeast domains.

First ranked commodlies (> US$1 bilion by 2015)

12000 10000

2000

~.~. ~~~. ~/ ~'l~/cI~~';

900 800

Second ranked com modlie. (US$lOQ-l000 mllion by 2015)

700

-600

搂soo

g400

~300

200

100

~.f '<路X/,l~c//

(jf'''~ qcf

cI"/

Rgure 5. From DREAM ....IysIs: IdenUfylng for Investments In ....arch and development In Nlgeria-baud on atreams of benellts to producers and c-........ by 2015 a. a .. ault of e.lsting portfolio of technolog ....

Chapter 4

Recommended Strategies for Accelerated Commercialization and Investment In Nigeria's Agriculture This summary is taken from chapter eight of the main report. It identifies the strategies for commercialization. mitigating negative impacts of commercialization on gender and equity, enhanced food security. sustainable environmental management. the sectoral policies ror specific priority commodities. regional development hubs. and some recommended areas ror future studies.

Strategies for commercialization The AlN study recommended that intervention strategies for increasing investment in Nigeria's agriculture should apply an integrated commodity approach. As regards the selection of a priority commodity as the basis for investment activity support. its commercialization has to be encouraged through the adoption of anyone or all of the following rour suggested modules: Module 1: The Integrated commodity marketing system module This requires a symbiotk link or association being formed between large operators (producers and/or processors of a named commodity) and small/medium enterprises (SMEs) in the same commodity subsccror. Module 2: The publlc-private sector agroindustry investment module The state government initiates a commodity agroindustriallmarkcting investment by leading in providing the bask infrastructure and "warehousing" of it fot a limited period before handing the emire investment over to selected private-sector stakeholders. Module 3: The cooperative enterprise module This is purdy ror areas where there is a spirit of na<utal cooperation exhibited among certain commodity f.umers. The module requires the members to form and register an association through which they establish simple. jointly owned. and low-scale processing and marketing facilities for their produce.

Module 4: The Sangha; Project module This involves the identification and use of really dedicated and knowledgcable agricultural investors to establisn integrated. resource-reqcling. multi-enterprise farm facilit\es/centers in the country for the snort-term training of different commodity farmers. Theseâ&#x20AC;˘ .fter completing their training. set up and/or operate their own agroenterprises with the understanding that they can sell their produce (raw. processed. or semi processed) through

these cencers.

StrategIes for mitigating negative Impacts of commerdallzation on gender and equity Increased commercialization in the agriculture sector might result in negative impacts on gender and equity. This could be ameliorated by the promotion and facilitation. of more involvement by women in the postharvest, ÂŤonomk:., and marketing activities of commercialized agriculture; assisting women to get organized into marketing groups that can effectively carry out the commercialization of key agricultural commodities; and facilitating the establishment of other groups to empower women that will promore an early Start to improve girls' access to education and rraining in modern technical skills as well as in leadersnip. For the above-suggested strategies to be d&ctively implemented. it will be necessary for any donor agency promoting agricultural development in Nigeria to render supportive activities.

Strategies for enhanced food security Food security could be enhanced by increasing a science-based agriculrural productivity that reduces yield gaps; intervening in postharvest processing and preservation activities of the commodity continuum; promo ting the establishment. hosting. and management of an easily accessible and comprehensive national database/center; and building the capacity of government officials from the various states of country in monitoring status of food security.

Strategies for sustaInable environmental management Increased investment in the agricultural sector of Nigeria will most likely pose an increased threat to the physical environment either through land degradation and the poUution of the ecosystem by the diluent of processed agricultutal commodities. or thtough tne exhaustion of agricultural resources. The agricultural environment will be sustained by the promotion and the adoption ofptoper cultural practices associated with variouscommodiries. adoption of postharvest processing technologies. and the use of crop and/or livestock mixed enterprises that prevent erosion and minimize soil degradation.

Sectoral polides for specific priority commodities [n promoting inves.ment in priotiry commodiries wough seaoral (>Olicies, effort should

be direcred a. rhr foUowing: •

• •

Ci-.a.ion and promorion oflobbying groups '0 look after the interests of the commodiry. A mixrwe of aClolS with a Slake in the commodiry will consriru.e the lobbying group. Design and adoprion of grades and SWldards tha. favor rhr u.ilization of ruring produa. and the devdopment of new produas with added value. Creation of an enabling macroeconomic policy environment for the commercialization of prioriry produa.. rhrreby conrribUling to their appeal to private investors.

Regional development hubs [n order to achieve a remarkable result, invesrments must be geographically concentrated in well-idcnrified high potcn.ial:=as. Three regional devdopmcnt hubs. northern, central and southern seem to be: emerging with respect [0 the priority commodities for consideration by USAJD or any other development investor. • The northern development hub could be built on grain legumes and cereals. Cowpea. groundnut. soybean. maize. and sorghum arc emerging as leading commodities. Rotating these commodities will be environmentally sound, especially if combined with livestock enterprises. Crops sucb as gum Arabic, ginger. and Iivesrock (bides and skins) offer high potentials for ox(>Ort. This regional hub will greatly benefit from national research cen •.,s located at the a'reme west of the area. such as Institute of Agricul.ural Researcb (IAR). and the extreme east, such as Lake: Chad Agricul.ural Research [nSlitu.e (LCARI). • The central development hub is characterized by a mix.ure of cereals and root and .ubers. Rice for ceneals and yam for root and tubers could form the leading commodiries for the hub, which will benefi. from research cemelS such the Na.ional Ccneals Research inSlitu.e (NCRl) loca.ed in the middle bdr of the zone. • The southern developmen. hub would include many Sta.es of southern Nigeria. Cassava and yarn are the dominant commodities. Cocoa, fish. and plantain offer additional opponunities for export, food. serurity, and income generation. The Narional Roots Crop Research InsrilUt< (NRCRl) and Cocoa Research Institu.e of Nigeria (CRlN) are rhr na.ional research insri.uoons to back up the implementa.ion of the Slra.ogy in this hub. Subregional development could be defined as well. depending on the interests and priorities for investor.

Recommended future studies

Three future in-depth studies are recommended in Ibis section as action plans be implemented by USAIDfNigetia and/or other development investors in the country. These studies are a natural follow-up to the presenr AIN and would center on thr..

"(>0"

major intervention areas that are considered critical to the attainment of the stated strategic

objectives in the country's agriculture secror. I. A ,ubuetor eoncmtration analysis ,tudy ,h., will iden,i/y meaningful imerven<ions for optimal project impacts along the major commodity continuum sections. 2. A Mwmtrtam agriculturt activiti,,' study ,ha, spÂŤ:ifies which produc<s and processes are needed for increased high value-added ou'pu<s of <he selected commodi,ies. 3. An inugraud monitoring and ~!uatian program tk'ign <hat will develop. saa<egic knowledge management and evaluation sys<em with well-defined imp.c, indices for each selected priority commodity in the regional hubs of the country.

AboutliTA The Intemationallnstitute of Tropical Agriculture (IITA> was founded in 1967 as an intemational agricultural research institute with a mandate for improving food production in the humid tropics and to develop sustainable production systems. It became the first African link in the worldwide network of agricultural research centers known as the Consultative Group on Intemational Agricultural Research (CGIARl, formed in 1971. IITA's mission is to enhance the food security, income, and well-being of resource-poor people primarily in the humid and subhumid zones of sub-Saharan Africa, by conducting research and related activities to increase agricultural production, improve food systems, and sustainably manage natural resources, in partnership with national and intemational stakeholders. To this end, IITA conducts research, germ plasm conservation, training, and information exchange activities in partnership with regional bodies and national programs induding universities, NGOs, and the private sector. The research agenda addresses crop improvement, plant health, and resource and crop management within a food systems framework and is targeted at the identified needs of three major agroecological zones: the savannas, the humid forests, and the midaltitudes. Research focuses on smallholder cropping and postharvest systems and on the following food crops: cassava, cowpea, maize, plantain and banana, soybean, and yam.

Printed by IITA