The rebuff of a number of Nigerian agricultural exports in global commodities markets has fast become a trend that, sadly, impacts negatively on the country’s drive to enthrone an economy less dependent on oil.
Some agricultural commodities of Nigerian origin are at a disadvantage when subjected to meeting international standard requirements, especially of health related conditions set by importing regions.
These standards serve as parameters that influence the value attractable to such produces and their ability to stay strong in the face of competition. For Nigeria, the failure to meet these set standards, the result of poor production quality and low packaging standards, among others, is not new to Nigeria, which has received many knocks in the form of heavy sanctions on its produces.
One of such heavy sanctions is the seemingly unending ban placed by the European Union (EU) on Nigerian beans. This followed the rejection of sixty-seven processed and semi-processed food products from Nigeria, including brown and white beans, melon seeds, palm oil, mushrooms, bitter leaf, pumpkin leaves, shelled groundnut, smoked catfish, and crayfish, in 2016 and 2017.
In a more recent instance, about 72 tonnes of yam that left the shores of Nigeria through Apapa Port to the United States in June 2017 was also rejected. Despite the government defying its own regulations to test its export strength, the yams arrived the US in rotten conditions.
Under Nigeria’s Export Prohibition Act, certain exports are prohibited for purposes of domestic food security, value-added considerations, and preservation of cultural heritage. Currently, the ban covers raw hides and skins, timber (rough or sawn), scrap metals, unprocessed rubber latex and rubber lumps, rice, yams, maize, beans and artifacts, and antiquities.
The growing concern among stakeholders, however, is that the narrative does not appear poised for positive adjustments as fundamental issues surrounding local production have not improved significantly.
According to the Nigerian Export Promotion Council, Nigeria’s leading non-export, cocoa, for instance, has constantly struggled with value debasement because of poor alignment with premium quality standards.
The council, in a study of the US market behaviour towards Nigeria cocoa, said: “The outcome of the
search is the need for Nigeria to increase its cocoa production as well as improve its quality to conform to global market requirements. There is the need to address the issue of low quality and poor packaging in order to have access to cocoa import markets.”
Poor quality, according to farmers who spoke to business a.m. on this matter, but who would like to remain anonymous is a bone of contention that could not be treated in isolation of other conditions of production. As long as critical gaps of funding, infrastructural support such as warehousing system, roads and electricity supply, absence of off-taking channels and most imperatively an efficient commodities exchange gap still exists, improved quality of yields may not be guaranteed.
Oluwatimilehin Samson, a cocoa farmer operating on 30 hectares in Iseyin axis of Oyo state told business a.m. that the poor quality upshot of cocoa was an offshoot of the layers of delays the product suffers, from the farm gates to its final destination. This gap, he said, is created by the lack of direct interface with ex-
“The reason why our products do not meet standard is that it suffers a lot of delay before exportation. And it is government policy that causes these delays. Whatever we want to take abroad, the clearing process has to be expedited because we have already packaged them in bags, and they get diminished, under hot temperature. This makes the value of cocoa to drop before reaching its destination. That’s the major problem we are faced with. And
since there is no direct market for us producers, it is the intermediaries that take them off. It is from them that the exporters would then buy. It could go through several intermediaries before reaching the final export destination,” he explained.
Besides that, Samson believes the exorbitant rate of preventing pest attacks on plants could be bearish on practicing best farming standards. Many smallholder farmers like him cannot afford to keep up with the spiking rates of farming materials, a setback which amounts to pared harvests. According to him, the challenge contributes to why Nigeria cocoa output still hovers around 250,000 metric tonnes yearly when its regional counterparts, Cote D’Ivore and Ghana boast of production level of about 1.7 million metric tonnes and 800,000 metric tonnes, respectively.
Samson said: “Plant pests have really affected our cocoa yield. A product like cocoa has to be treated regularly. And we can hardly combat these issues because the chemical we use have become unaffordable, more than double of the price we used to purchase them.
The chemical we bought for about N3,000 before has risen to about N7,000. Consequently, we now have
to manage. In an instance, where we used two or three packs before, we now use one instead. Hence, the
production will not yield as it ought to. Instead of getting 10 yields, for instance, we now get just about six.”
According to Maria Semedo, deputy director-general of the Food and Agricultural Organisation (FAO), at the opening of IPPC annual meeting this year, an estimated 10-16 percent of global harvest valued at $220 billion is lost to plant pests each year. The International Plant Protection Convention (IPPC) in a recent report of combating pests, Oriental Fruit Flies cost Africa an estimated $2 billion in annual losses due to fruit export bans. The highly destructive fruit-attacking Bactrocera dorsalis originated from Asia but has spread to about 65 countries
Substantiating the farmer’s stance, Ade Adefeko, the vice-president, corporate and government relations at Olam Nigeria, said Nigeria has not been able to maintain erstwhile dominance in the world cocoa market on plethora of reasons such as non-availability of good quality inputs like fertilizers and chemicals; inconsistent quality of beans, dearth of modern seedlings, high-interest rate and operating costs, occasioned by relative lack of investment in cocoa sustainability initiatives. He noted that chocolate industries were mainly dissuaded from investing in Nigeria because of the insecurity perception. Notably, in February, John Bray, the United States Consul General, identified security challenge as a major factor hindering American investors from picking interest in Nigeria,
saying herdsmen/farmers clashes, the Boko Haram insurgency, vandalism, kidnapping, and hostage-taking, among other security challenges, left depressing impact on the choice of Nigeria as investment
Decrying the current economies of scale, Adefeko further noted that Nigerian cocoa processing factories operated at very small scale as compared to other West African and global counterparts, adding that the country’s processing industry operates at about 40 percent lower than ideal capacity of 85 percent, making it struggle with lack of beans to process optimally.
“The cocoa processing segment of the value chain is also plagued by inconsistent availability of power, high cost of fuel, shortage of domain expertise, high local interest rate, lack of currency hedging options, zero economy of scale, very high security costs, inconsistent application of export expansion grant (EEG) policy and lack of coordination between regulatory authorities. Presently, NDCC Certificates discount rate has shot up from 7-8
percent to 40 percent. There is no liquidity for NDCCs leading to capital constraints and higher interest cost,” he explained.
His observation also touched on the inability to target US Butter Markets due to pesticide residue issues which have made it arduous to compete against Malaysian/Indonesian manufacturers in the Far East Markets. For instance, uncompetitive
Duty Regime in Europe constitutes a bane as Nigerian cocoa derivatives attract a differential import duty of 6.1 percent for cake and powder 4.2 percent while 4.2 percent on cocoa butter attracts around $300 PMT duty for Nigerian butter.
Proffering a way forward, Olam’s Adefeko urged the government to strengthen policies at sustaining conducive operating climate, saying it would go a long way to attract global companies with large-scale and expertise to set up state of the art processing facilities. This could reposition Nigeria processing industry to the forefront of the global map and help the country compete
He said: “I am an apostle of production first before processing as you can only process what you pro-
duce enough of. This Large-scale manufacturing set up to give economies of scale and global competitiveness adds to direct employment and improves the economy of the country. For this to happen, Federal and state government’s support is needed.”
He proposed that the license to export cocoa beans should be given mainly to processors who have up to two times based on the bean equivalent export production quantity over the last three years or export tax.
On Olutwatimilehin’s part, assistance in the shape of farm implement subsidy, chemical provision, and capital support would largely encourage farmers as well as generate increased quality output, he said.
Equities December 24, 2019