How to make warehouse receipt system work for Nigerian farmers

By Onome Amuge

The magnitude of post-harvest losses of farm produce remains a daunting challenge to Nigerian farmers, particularly the smallholder farmers who make up over 60 per cent of the country’s agriculture sector.

This persistent challenge, largely attributed to inadequate storage and processing facilities  has resulted in huge financial losses and has consequently, weakened the country’s capacity to address food insecurity.

According to Mustapha Shehuri, the minister of state for Agriculture and Rural Development, the total cost of post-harvest losses in Nigeria’s agriculture industry stands at N3.5 trillion.

Speaking at a presentation of the International Standard Organisation (ISO) certification for Nigerian Stored Products Research Institute in Abuja, Shehuri

 This was disclosed by the Minister of State for Agriculture and Rural Development, Mustapha Shehuri, at a presentation of the International Standard Organisation (ISO) Certification for Nigerian Stored Products Research Institute in Abuja.

The minister, who was represented at the event by Shehu Bello, the director, Lands and Climate Change Management Services in the ministry, said:  “Post-harvest losses is a worrisome situation that threatens Nigeria’s Food Security.

“In fruits and vegetables, it could be as high as 50 – 60% if poorly managed, unfortunately not much attention is paid to address this problem as much as it is done for production.

”The economic cost of post-harvest losses as reported by our partner, Action Aid indicates that N3.5 trillion is lost annually due to post-harvest losses. This has a negative effect on the agricultural component gross domestic product (GDP).”

With a large number of the  Nigerian populace in a continuous struggle to meet food consumption demands amid rising food inflation, experts in the agriculture sector have pointed out the need for concentrated investments in warehouse receipt systems (WRS).

Warehouse receipt systems, according to SNV Netherlands Development Organisation,a not-for-profit international development organisation, is a process where farmers deposit their products in certified warehouses. After weighing the amount of product brought into the warehouse,the warehouse operator(s) issues the farmer a warehouse receipt also known as ‘warrant’ as proof of ownership. These receipts, most often, backed by legal provisions that guarantee quality, provide a secure system whereby stored agricultural products can serve as collateral, be sold, traded or used for delivery against financial instruments. The system can also be used to facilitate credit from local banks for the products held in storage.

Also, it offers smallholder farmers access to professional storage services from certified grain warehouses at a minimum cost, while the farm products can then be used by both private and public industries due to the guaranteed quality and quantity of the system.

Among other benefits, WRS helps reduce risk in the agricultural market by facilitating sales throughout the year rather than just after harvests and improving food security; increases market power of smallholder farmers as it enables them to choose at what point in the price cycle to sell their commodities; helps develop the standards and transparency of the storage sector; creates commodity markets which not only enhances competition, but also promotes market information and international trade; and helps curb post harvest losses due to better storage conditions.

Sule Haruna, the  director, Strategic Grains Reserve Department, Federal Ministry of Agriculture and Rural Development (FMARD), describes the WRS as an approach with the capacity to enhance productivity and reduce poverty among farmers.

Speaking during the 2022 Feed Nigeria Summit’s fireside discussion session, tagged, “Unpacking the Power of Saved Receipts”, the FMARD director noted that the WRS will also solve the middlemen transaction barriers while serving as collateral for grants and loans.

Haruna further pointed out that the essence of the WRS was to allow farmers direct access to the operators of the warehouse, such that farmers are given a receipt and allowed to determine the approval of the storage process.

“The warehouse receipt system is a way of drawing farmers out of poverty, because of the exclusion of the incidences of middlemen that buy from farmers at a very low price and later, send to the market at a very high price.

“Farmers will be ‘receipted’ at their convenience, and when they see that the prices are appreciated, they will be able to go to the warehouse, submit their product and take it for sale or produce the receipt offered at the warehouse as collateral in banks and other financial organisations,” he explained.

In the same vein, Nancy Olisakwe, the vice president, AFEX Commodities Exchange, noted that the WRS was a powerful tool for farmers and food processors, such that it was capable of addressing low productivity and post-harvest losses.

Despite the numerous benefits  of  the WRS, some local farmers have registered their  distrust of its operations, noting that the system was not established to protect their interests.

In his remarks on the transparency practices in the system as practised in some parts of the country, Folorunsho Aminu, a cocoa farmer based in Idanre,Ondo State, said the lack of transparency is among the challenges hampering an effective and efficient system.

Aminu argued that farmers do not really have the power to negotiate prices as claimed because costs of the commodities are in many cases, predetermined by the operators.

The cocoa producer further stressed that lack of sufficient storage facilities in the country is affecting the capacity of the WRS.

According to him, some of the licensed warehouses lack relevant and modern facilities such as computers and well functioning logistics.

Speaking further on why many farmers prefer traditional selling of crops to middlemen, he noted that the farmers are dissuaded by insufficient infrastructures, hike in  transportation cost and other challenges which lead to  congestion of  warehouse facilities.

Among other challenges, market reports show that many farmers have a little or no knowledge about the system and how it operates and in some instances, are forced to sell their crops without understanding the modalities, resulting in exploitations.

Also,some local farmers claim that the WRS is concentrated in urban areas rather than rural areas where most of the agriculture activities take place.

To ensure a firm and effective warehouse receipt system, industry experts have called on stakeholders including government and private firms operating in the sector to provide competency-based training to operators of the WRS as well as the farmers, to bridge the gap of public unawareness of their respective sections.

Public dissemination of comprehensive and timely market information which includes daily or weekly release of demand and supply conditions, as well as prices has also been suggested to serve as reference for farmers in making assessments and decisions.

In addition, licensed warehouse operators have been advised to adopt modern storage facilities that will enhance their daily activities and spur them to attain the expected goal. Guaranteed policies and maintenance of high-quality products has also been indicated to  improve the Warehouse Receipt System.