As Nigeria looks to restructure its economy to be more diversified and sustainable, agro-processing is emerging as a key tool to improve agricultural value added while also bolstering the sector’s status as a driver of economic growth
As in many African countries, agriculture has long been an important part of Nigeria’s economy – not only in terms of food production, but also in terms of its economic impact and contribution to the overall workforce.
Despite its sizeable footprint, some 90% of agricultural goods are exported raw, meaning that the country misses out on crucial value-added opportunities associated with agro-processing. It is estimated that up to 80% of profits in the agriculture sector are derived from processing and retailing raw goods. Emmanuel Ijewere, vice-president of the Nigeria Agribusiness Group and CEO of agro-processing firm best foods, estimated that for every dollar made exporting raw products in 2016, Nigeria could have earned 10-fold that value had the country processed all the commodities exported.
Economic impact
The lack of processing capacity means that Nigeria essentially exports its agricultural goods abroad, where they are processed and often exported back to Africa at a far higher price. For example, it is estimated that between 2016 and 2019, Nigeria’s cumulative agricultural imports, at US$7.9bn, were four times higher than its agricultural exports.
As Oxford Business Group has previously noted, such situations are not uncommon in the region. For example, leading West African cottonproducing nations Benin, Burkina-Faso and Mali export 1.8 million tonnes of unprocessed cotton worth US$922mn, but import $2.4bn of finished cotton textiles and apparel. The result of such a model is that despite a large agriculture sector and vast arable land, Nigeria remains vulnerable to food insecurity and fluctuating food prices. These challenges were underscored by the 2014 drop in oil prices that led to a recession in 2016. Amid falling revenue, the government sought to diversify the economy and reduce the import bill by focusing on agro-processing. Development of agro-processing In an effort to address the situation, in recent years Nigeria has sought to develop its agroprocessing capacity.
In 2015, the Central Bank of Nigeria launched the Anchor Borrowers’ Programme, an initiative to create linkages between smallholder farmers and agro-processors through a series of financing options and inputs. The Bank of Industry (BoI), for its part, has supported the sector by providing loans aimed at developing the agriculture value chain. It is estimated that more than 6.9 million direct and indirect jobs were created through BoI initiatives between 2015 and October 2020.
