GBEDEDO: Investors In Agro-Allied Sector Need Assurances Of Policy Consistency, Stability
How would you assess the state of the economy as it affects agriculture, food and beverage sector
THE present state of the economy has impacted seriously on the Organised Private Sector (OPS) and there has been devaluation of the local currency; the foreign exchange market has been streamlined and now everyone now goes to interbank market and of course, the parallel market too. That has influenced negatively the import of raw materials, spare parts and other goods that come into the country.
Since the devaluation, even foreign exchange is not readily available because people are holding back, not knowing what will really happen. So that has created some difficulties for the sourcing of raw materials, sourcing of spare parts to the industries and especially the food and beverage investors.
In addition to that, the General Election time has disrupted the market, so much and it becomes almost unpredictable and thirdly the disposable income of most people is being degraded and undermined especially in the public sector; many states are not paying salaries regularly and so the purchasing power is being eroded and therefore, Organised Private Sector are not able to fully pass the problems of devaluation and cost of input to the consumers.
The market is very dull, that is the situation generally that we are facing and with the result of the last election, it has brought another perspective entirely to how we are going to look at short, medium and long term investments in the country especially, because the food industry, and manufacturing generally play by the rule. It is the government and its actions that mold the enabling environment for them to continue to do their businesses and add their quota to the GDP of the country.
One very critical aspect is the fiscal policy and that has huge impact on the workings of the industry. We are expectant that the incoming government will do things in such a way that will enable the OPS do their businesses, supporting the economy of the country, providing the food needs of the country and of course help food security as well.
What are your anxieties for the coming government?
On what will be expected of the government, what one will be worried about is what has been happening in the past, policy inconsistencies and policy somersault. I think we will do less of these because investors’ confidence is very important. If investors are not sure that policies that will come will be extended overtime, then that may be a drawback to the country.
We want to see what new things the government is going to do with policies that have been in place, for instance, agricultural policies. Due to the policies in agriculture that has been put in place in the last few years, many have made investments based on them and so what will now happen?
One typical example is the Nigerian Sugar Master Plan, which makes provision for sugar refineries to do a backward integration. What that means is that if you remain a refiner of sugar in Nigeria, you should have a backward integration; cultivate sugarcane and produce raw sugar, and huge investments have gone into these in the last few years and they have not yielded any results yet.
Another is the Cassava Inclusion policy to produce composite flour for bread and confectionaries. That is an aspect that Flour Mills have committed themselves to, the third one is the fertilizer policy, with the Growth Enhancement Support (GES) scheme, whereby the government subsidises fertilizers directly to the farmer. These policies are just germinating and have not really yielded much. I am not saying that they are not good, but is it going to be the ‘baby and the bath water thrown out,’ so we need to be careful about this to be sure that policies are not just for short term and will be healthy to the investors.
The other is funding, the government will have to keep working on these areas; everywhere in the world, government creates funds to ensure that agriculture can grow. Single digit funding is what has been helpful in the last few years, through CBN or BOI to ensure that investors and farmers can have access like the Commercial Agriculture Credit Scheme (CACS) that provides investors with nine per cent, even though it’s still high, but it is better.
The third aspect is infrastructure; there is no way it wouldn’t be in the front burner for the new government. Infrastructure in power, water, roads and rail should be looked into entirely and could be run by organised private sector other than being government-driven affairs. It should be privatised to make these things functional; without that, moving things from Lagos to Kano by road makes it difficult and so the rail network needs to be improved and should come alive again to aid transportation.
Is there anything that shows that the rail sector is working so far?
They did something and had good intentions, but the success rate is what you look at in any project, which has been low. It is not enough and I think it is partly due to management and level of government’s attention to the rail system. Things can work if government thinks through and gets private sector to get involved. The new government should focus on agriculture and make it business-like to get more people involved in it to contribute to the GDP of the country.
For government, we expect a team that will be able to drive its objectives and strategies; as a new government is coming, it must choose its team very well, otherwise it could be the same old story and particularly now that some progress has been made in certain sectors and so it shouldn’t be that we are going back again. It should be people, who understand what is going on and probably do some fine tuning, but continue in that thread if the policies are right. My expectations are that the new team will be those who will continue with good policies and ensure that policies are inclusive.
In addressing food preservation and market, do you think a commodity board arrangement will help farmers shore up prices?
I think we should first of all fix the upstream; too many people are really investing much in upstream agriculture, the agronomic issues and factors are very important.
Looking at maize for instance, many people do maize, but what is the yield? The average in Nigeria is about one and half metric tons per hectare, while in South Africa, it is over five metric tons and Mexico, up to eight. So, until we can help the average Nigerian farmer move into four or five, we will not make money and we can do this by having the right things – fertilizer and its proper application, teaching farmers how to prepare the land, use of seeds – we need to ensure that the yield is good.
Also, once we have the produce from the farm, how do we ensure that the price is right and that is where we talk about commodity exchange and it is very important. We should fix that aspect so that the market price is guaranteed and the farmer knows what he is getting out of his farm. We have to review the commodity boards and exchange to help the farmer have competitive prices, but the farmer will not be competitive until we ensure we fix the yield, seeds, input and the agronomic practices so that the farmer can be assured to get the right prices for his produce.
Then on the processing, post-harvest losses, we produce a lot of tomato in this country, but 40-50 per cent of it is wasted before you move it from one location to another and therefore, the farmer losses completely. We need to limit post harvest losses to preserve our produce, but also to improve technology that will guarantee that we can keep it for long without spoilage. We have to look at the entire agricultural value chain so that Nigeria can move forward in this revolution.
Can local content apply in such areas?
First, Nigeria has to look at the crops where we have comparative advantage; there is no point for us experimenting and wasting money, when we have crops in which we have the advantage. We need to focus these ones and that can increase our local content.
For example, maize grows very well in Nigeria, also millet and cassava in which we are the biggest producer in the world; we also have sugarcane. By concentrating on these, we will be able to supply the local industries that can convert these to food products. While it is true that there are certain crops that we import into the country like wheat, it is something that we should work on and do research, if it will be viable. However, we already have crops that we can concentrate on. Why import maize when we have the land to do it or rice? We can get there within a reasonable time with the support of investors and research.
Nigeria produces the biggest volume of cassava in the world as statistics show, about 37 – 40 million metric tons annually, but if on the basis of that figure you set up a cassava plant, you will be disappointed. The fact is that we eat whatever we produce, it is not for industrial use and so we need to start thinking of how we can produce cassava for industrial use to guarantee regular input into the processing plant. Like in animal feed mill, we need to ensure that there is a regular supply of maize; we cannot just think of one side of the chain, it has to be the entire value chain that will guarantee food security and good industrialisation for Nigeria.
What is the impact of devaluation on the sector?
It has been very difficult for the Organised Private Sector, Naira has been devalued, especially for those who are import based, and it has been very difficult. All the OPS depends on foreign countries to bring in their spare parts and naira has been devalued and even access to foreign exchange has been limited, especially in the last few months. So, the situation in the Nigerian economy is very difficult and challenging.
We have seen volumes dropping because of the low disposable income and therefore, many companies are playing the margin game, even at that, they cannot pass any high price to the consumer. It is a very difficult and critical time for industries, but we just hope that naira will stabilise and we know exactly it will be like, the fundamentals are not looking too good, but I believe in the Nigerian spirit. I believe that the predictions for the Naira may not hold, the informal sector is very strong and therefore, will help to balance the valuation of the Naira. If Naira goes into a free fall, it could be very devastating to the industries because the market will not be able to absorb the increase in Naira price and it could kill many industries. So, we want the government to think of how to stabilise the Naira and reassure the sector of the stability of the Naira.