BY JOE BROCK
SAULAWA, Nigeria
Thu Jul 4, 2013
(Reuters) - Down a winding dirt track in this sleepy village in northern Nigeria lies a corn farm which looks much like the dozens that surround it. The difference is, this one is turning a profit.
"I can barely lift my 8-year-old. He's the fattest in the village," said Ibrahim Mustapha, 50, drawing laughter from his fellow farmers as he pretends to lift up his chubby son.
The Babban Gona or "Great Farm" project, in northern Kaduna state, is one of a handful where private investment is helping former subsistence farmers like Mustapha make profits for themselves and the companies backing them.
When President Goodluck Jonathan was elected two years ago, he pledged reforms that would transform the lives of tens of millions of farmers who live on less than $2 a day despite occupying some of Africa's most fertile land.
Oil remains the main source of foreign currency and state revenues, but agriculture is by far the biggest contributor to GDP, making up 40 percent of Africa's second largest economy.
With 170 million mouths to feed and a growing food import bill thanks to the disarray in the farming sector, agriculture ministry officials say there's no time to lose.
If productivity does not improve Nigeria could face a food crisis within a decade, its current account surplus would be wiped out and the credit worthiness of Africa's second biggest debt issuer would be under threat.
"If we did nothing, it would be a disaster," Agriculture Minister Akinwumi Adesina told Reuters in the capital.
"We don't eat oil, we don't drink it ... We cannot sustain the amount of money we use to import food," Adesina said, a Nigerian flag hanging behind his office chair.
In some cases, the imports substitute for things Nigerians are growing but can't get to market or lack the means to process.
The country is the second largest grower of citrus fruit in the world after China and yet it spends $200 million a year on imported fruit juice while its own produce rots, Adesina said.
It also produces 1.5 million metric tons (1 metric ton = 1.1023 tons) of tomatoes annually of which 45 percent perish, while consumers spend $360 million on tomato paste imported from countries such as Italy and China.
CURING DUTCH DISEASE
To succeed, Adesina's reforms will need to reverse the inadvertent damage done to the sector by Africa's earliest and biggest oil and gas boom, which crowded out other commodities.
In the 1960s, Nigeria was the biggest exporter of peanuts in the world and had 27 percent of the palm oil trade. It remains one of the world's top cocoa growers, but production and bean quality have declined since their heyday in the 1970s.
While an elite allied to a series of military dictatorships grew rich on the spoils of the energy sector, millions of mostly subsistence farmers were given little or no help at all.
The result: Nigeria is now the world's second largest importer of rice and the biggest buyer of U.S. wheat, while much of its own fertile land lies fallow. A booming population has sent its food import bill rocketing to around $11 billion a year - equivalent to more than a third of the federal budget.
Agriculture also offers the best chance to cut unemployment, which feeds an Islamist insurgency in the north and oil theft in the south. Unemployment is 23 percent and youth unemployment double that, national statistics suggest.
"Poverty is the source of a lot of the insecurity problems we have. A hungry man is an angry man," Adesina said.
The minister plans to create 3.5 million new jobs in agriculture and boost food production by 20 million metric tons by 2015, the year of the next national election.
To achieve this, he wants to boost access to microfinance for farmers and draw in $10 billion of foreign investment into farming and food processing.
He has received tentative praise for early successes from foreign diplomats, bankers and aid agencies, but big agro-business projects have yet to take off.
Adesina took a corrupt fertilizer subsidy out of politicians' hands and now farmers are texted subsidy vouchers directly to their mobile phones so they can recoup from fertilizer sellers, a policy used in Kenya's farming reforms.
Seventy percent of farmers now receive subsidized fertilizer and seeds, compared with 11 percent under the corrupt program previously run by state governments, Adesina said.
LONG ROAD AHEAD
Production of rice, cassava, wheat, sorghum, and corn are rising and cocoa, Nigeria's most important export crop, looks set to go up by more than a third this season.
In 2012, agriculture exports rose by 128 billion naira ($788 million) and food imports fell by 850 billion, Adesina says.
Foreign investors such as food giant Cargill, seed company Syngenta, brewer SABMiller and Africa's richest man Aliko Dangote are planning to build everything from fertilizer plants to food processing factories.
Yet rice imports still soak up $7 million a day, while poor infrastructure and policy flip-flopping have in the past seen farming potential wasted. Farmers needs infrastructure to get goods to market -- and rural Nigeria's is as woeful as it gets.
Nigerian billionaire Dangote has pledged to spend $35 million on a tomato paste plant in the northern city of Kano and $45 million in Cross River state to process pineapple juice.
Adesina says he has received $8 billion in commitments but such promises are often not kept in Nigeria. Cargill and SABMiller told Reuters they are only "considering" investing.
"I would estimate that no more than one dollar of investment actually occurs for every $100 of announced commitments," said Fola Fagbule, an Africa-focused investment banker in Lagos.
A central bank initiative has issued guarantees on around 25 billion naira of agriculture loans since it began in July last year, lifting lending to the sector to around 4 percent of total loans, from 1.5 percent at end-2009, the bank says.
The World Bank is putting in $100 million into agriculture, while British and U.S. aid projects pump in tens of millions.
This barely scratches the $10 billion Adesina says the sector needs by 2015. Smallholders say banks still don't lend to them, while the scheme doles out cheap money to big firms.
"We've heard it all before and I have never seen it get better," says Alhaji, a farmer wrestling with two scrawny long-horned cows dragging a rusty plough through a field.
"I have 15 children and ... we barely get enough food to feed ourselves," he said.
BEARING FRUIT?
A few success stories nonetheless give cause for optimism.
Farmer Mustapha says he made $1,350 per hectare from his harvest after paying back private firm Doreo Partners, which runs the Babban Gona project, compared to previous years where he might earn $200 per hectare.
"Now I want to grow my farm, I have so much space I never used. Now I will send my children to school," he said, while behind him mostly unused farmland stretched to the horizon.
Doreo is working with 600 farmers. It has ambitious plans to boost this to 500,000 by 2020, and 5 million by 2030.
"I know it sounds ambitious but it's been done elsewhere and Nigeria has so much easy-to-reach potential," said Kola Masha, the company's head.
Masha is attempting to emulate giant food cooperatives like CHS in the U.S. or India's dairy franchise Amul, who make huge profits while helping millions of smallholder farmers.
He gives farmers high-quality fertilizer, seeds, equipment and expertise on credit to massively increase their yields, while negotiating with firms like Nestle to buy the produce at higher prices than the farmers could get themselves.
Farmers working with Masha, he said, are using 40 times more fertilizer than neighbors who could never afford that amount.
"It's early days but I'm more optimistic than I've ever been," he said.
(Editing by Tim Cocks and Giles Elgood)
Source: Reuters.
Link: http://www.reuters.com/article/2013/07/04/us-nigeria-agriculture-insight-idUSBRE96305A20130704.
SAULAWA, Nigeria
Thu Jul 4, 2013
(Reuters) - Down a winding dirt track in this sleepy village in northern Nigeria lies a corn farm which looks much like the dozens that surround it. The difference is, this one is turning a profit.
"I can barely lift my 8-year-old. He's the fattest in the village," said Ibrahim Mustapha, 50, drawing laughter from his fellow farmers as he pretends to lift up his chubby son.
The Babban Gona or "Great Farm" project, in northern Kaduna state, is one of a handful where private investment is helping former subsistence farmers like Mustapha make profits for themselves and the companies backing them.
When President Goodluck Jonathan was elected two years ago, he pledged reforms that would transform the lives of tens of millions of farmers who live on less than $2 a day despite occupying some of Africa's most fertile land.
Oil remains the main source of foreign currency and state revenues, but agriculture is by far the biggest contributor to GDP, making up 40 percent of Africa's second largest economy.
With 170 million mouths to feed and a growing food import bill thanks to the disarray in the farming sector, agriculture ministry officials say there's no time to lose.
If productivity does not improve Nigeria could face a food crisis within a decade, its current account surplus would be wiped out and the credit worthiness of Africa's second biggest debt issuer would be under threat.
"If we did nothing, it would be a disaster," Agriculture Minister Akinwumi Adesina told Reuters in the capital.
"We don't eat oil, we don't drink it ... We cannot sustain the amount of money we use to import food," Adesina said, a Nigerian flag hanging behind his office chair.
In some cases, the imports substitute for things Nigerians are growing but can't get to market or lack the means to process.
The country is the second largest grower of citrus fruit in the world after China and yet it spends $200 million a year on imported fruit juice while its own produce rots, Adesina said.
It also produces 1.5 million metric tons (1 metric ton = 1.1023 tons) of tomatoes annually of which 45 percent perish, while consumers spend $360 million on tomato paste imported from countries such as Italy and China.
CURING DUTCH DISEASE
To succeed, Adesina's reforms will need to reverse the inadvertent damage done to the sector by Africa's earliest and biggest oil and gas boom, which crowded out other commodities.
In the 1960s, Nigeria was the biggest exporter of peanuts in the world and had 27 percent of the palm oil trade. It remains one of the world's top cocoa growers, but production and bean quality have declined since their heyday in the 1970s.
While an elite allied to a series of military dictatorships grew rich on the spoils of the energy sector, millions of mostly subsistence farmers were given little or no help at all.
The result: Nigeria is now the world's second largest importer of rice and the biggest buyer of U.S. wheat, while much of its own fertile land lies fallow. A booming population has sent its food import bill rocketing to around $11 billion a year - equivalent to more than a third of the federal budget.
Agriculture also offers the best chance to cut unemployment, which feeds an Islamist insurgency in the north and oil theft in the south. Unemployment is 23 percent and youth unemployment double that, national statistics suggest.
"Poverty is the source of a lot of the insecurity problems we have. A hungry man is an angry man," Adesina said.
The minister plans to create 3.5 million new jobs in agriculture and boost food production by 20 million metric tons by 2015, the year of the next national election.
To achieve this, he wants to boost access to microfinance for farmers and draw in $10 billion of foreign investment into farming and food processing.
He has received tentative praise for early successes from foreign diplomats, bankers and aid agencies, but big agro-business projects have yet to take off.
Adesina took a corrupt fertilizer subsidy out of politicians' hands and now farmers are texted subsidy vouchers directly to their mobile phones so they can recoup from fertilizer sellers, a policy used in Kenya's farming reforms.
Seventy percent of farmers now receive subsidized fertilizer and seeds, compared with 11 percent under the corrupt program previously run by state governments, Adesina said.
LONG ROAD AHEAD
Production of rice, cassava, wheat, sorghum, and corn are rising and cocoa, Nigeria's most important export crop, looks set to go up by more than a third this season.
In 2012, agriculture exports rose by 128 billion naira ($788 million) and food imports fell by 850 billion, Adesina says.
Foreign investors such as food giant Cargill, seed company Syngenta, brewer SABMiller and Africa's richest man Aliko Dangote are planning to build everything from fertilizer plants to food processing factories.
Yet rice imports still soak up $7 million a day, while poor infrastructure and policy flip-flopping have in the past seen farming potential wasted. Farmers needs infrastructure to get goods to market -- and rural Nigeria's is as woeful as it gets.
Nigerian billionaire Dangote has pledged to spend $35 million on a tomato paste plant in the northern city of Kano and $45 million in Cross River state to process pineapple juice.
Adesina says he has received $8 billion in commitments but such promises are often not kept in Nigeria. Cargill and SABMiller told Reuters they are only "considering" investing.
"I would estimate that no more than one dollar of investment actually occurs for every $100 of announced commitments," said Fola Fagbule, an Africa-focused investment banker in Lagos.
A central bank initiative has issued guarantees on around 25 billion naira of agriculture loans since it began in July last year, lifting lending to the sector to around 4 percent of total loans, from 1.5 percent at end-2009, the bank says.
The World Bank is putting in $100 million into agriculture, while British and U.S. aid projects pump in tens of millions.
This barely scratches the $10 billion Adesina says the sector needs by 2015. Smallholders say banks still don't lend to them, while the scheme doles out cheap money to big firms.
"We've heard it all before and I have never seen it get better," says Alhaji, a farmer wrestling with two scrawny long-horned cows dragging a rusty plough through a field.
"I have 15 children and ... we barely get enough food to feed ourselves," he said.
BEARING FRUIT?
A few success stories nonetheless give cause for optimism.
Farmer Mustapha says he made $1,350 per hectare from his harvest after paying back private firm Doreo Partners, which runs the Babban Gona project, compared to previous years where he might earn $200 per hectare.
"Now I want to grow my farm, I have so much space I never used. Now I will send my children to school," he said, while behind him mostly unused farmland stretched to the horizon.
Doreo is working with 600 farmers. It has ambitious plans to boost this to 500,000 by 2020, and 5 million by 2030.
"I know it sounds ambitious but it's been done elsewhere and Nigeria has so much easy-to-reach potential," said Kola Masha, the company's head.
Masha is attempting to emulate giant food cooperatives like CHS in the U.S. or India's dairy franchise Amul, who make huge profits while helping millions of smallholder farmers.
He gives farmers high-quality fertilizer, seeds, equipment and expertise on credit to massively increase their yields, while negotiating with firms like Nestle to buy the produce at higher prices than the farmers could get themselves.
Farmers working with Masha, he said, are using 40 times more fertilizer than neighbors who could never afford that amount.
"It's early days but I'm more optimistic than I've ever been," he said.
(Editing by Tim Cocks and Giles Elgood)
Source: Reuters.
Link: http://www.reuters.com/article/2013/07/04/us-nigeria-agriculture-insight-idUSBRE96305A20130704.
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