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Building on the Successes of the Agricultural Transformation Agenda (ATA)

Building on the Successes of the Agricultural Transformation Agenda (ATA)

Agric Minister, Audu Ogbeh

This policy document is the outcome of an intensive consultative process starting in November 2015 through April 2016, and involving multiple stakeholders. From farmer groups to investors to processors to lenders to civil servants to academics, many stakeholders provided detailed input, commentary, and support. We are grateful for the resources, energy and intellect put at the disposal of the Federal Ministry of Agriculture & Rural Development by parties too numerous to mention. Thank you for your continued dedication and resolve to build a next generation agribusiness economy in Nigeria

Crowding in Private Investment

The discussions which follow are designed to deepen the financial sector’s engagement with the agribusiness value chain. The target outcome is a lower cost of financing and a greater availability of such financing as measured by cost of capital (%) paid, number of loans issued versus overall credit provision, levels of private capital formation, and the number of participants in the sector.

Note that while they are not explicitly listed here, there are a number of APP priorities for which crowding in of private investment is a key goal. These include Storage, Processing, Marketing & Trade, and Infrastructure. While FMARD will continue to make selective interventions in these areas, encouraging private capital to take the lead on driving projects into these spaces is a key shift.

Access to Finance

Agricultural finance is critical for producers of all sizes (from smallholder farmers, medium size farmer and larger commercial farms) as well as to properly-functioning input supply markets, processors and traders. Beyond the access to capital – defined as volume and price of capital, a related issue includes competition.

It is vital that finance and risk management tools be available from multiple sources (channels), other than the conventional banking system; examples are public capital markets, private equity and other non-bank channels. However, the current policy efforts to mitigate these issues while partially successful (e.g. raising lending from 1% in 2011 to ~6% in 2015) can do even more.

Based on prior discussions between CBN, the Bankers Committee, FMARD and NIRSAL Plc, a 10% of all formal credit provided should go to agriculture by 2017 – 2018. Access to insurance contracts also remains a challenge. While new providers have been licensed by the Insurance Commission to retail agricultural insurance (e.g. IGI), NAIC remains the dominant supplier. However agricultural insurance penetration remains below 3% (measured by farmers enrolled and cropping area covered) versus 10% target (using India and China as proxies) which would be a reasonable target by 2021.

Constraints

Insufficient  access to credit and insurance products; prohibitive interest rates for the agricultural lending;  non-recognition of cooperative and other farming-based organizations by financial ; institutions; Inadequate capacity of financial institutions to lend to the agricultural sector, and; inadequate capacity of FMARD to facilitate agribusiness investment.

Policy Thrust

Policy to enhance availability of credit for all farmers and agribusiness through:  stimulating cooperative banking and affordable loans through commercial banks increase in capacity and size of market-driven guarantee and risk schemes (e.g. NIRSAL)legislation recognizing alternative finance mechanisms e.g. warehouse-receipt financing, commodity-trade financing, crowd sourcing, private equity, etc.deepening of FMARD’s capacity to facilitate agribusiness investment agreements:

Engagement with legislature to increase public sector funding to the minimum recommended;

 10% of the national budget Access to savings Improved financing for agro-dealers to offer trade credit;Policies that support quasi-equity financing for growth of agribusiness companies, etc.  Access to multi-year finance as well as seasonal shorter-term capital.  Review structure of agricultural insurance markets in partnership with the Insurance Commission to intensify competition and product innovationPartner with Nirsal Plc to expand access and grant making to support actuarial training;  Drive for mass market access to insurance contracts including multi-peril insurance, improvement of leasing, lowered transaction costs for financial services Improved use of existing collateral (and asset-based lending)

Revision to existing subsidies regimes e.g. GES to more pareto optimal targeting and structure e.g. ATM cards pre-loaded with cash and redeemable only at inputs suppliers

Agribusiness Development

Background/ constraints

One of the policy thrust components of the present Government is prioritization of private sector as an engine to drive growth of Agricultural sector. This has required the development of some effective institutional frameworks to facilitate and coordinate the delivery of Agribusiness and Investment Services.

The post-harvest handling of agricultural produce is an important component of value chain development, and a catalyst for progressive and sustainable expansion of agribusiness, investment and agro-processing activities, thereby eradicating waste and ensuring import substitution, food security, wealth creation, employment generation, human capital development and security of human life and property.

Lack of government coordination (100%), inconsistencies in policy, regulatory, laws, taxes and administrative practices (94%), lack of security of raw material supplies to food processors (75%), lack of human capital (50%), were identified as top constraints facing agribusiness investors in Nigeria from two recent surveys commissioned by FMARD in 2013.

Major Constraints:

Absence of appropriate and adaptive processing technology at small scale level;  Absence of rural infrastructure to support rural primary processing;  Inadequate capacity for processing or crude processing methods; Lack of quality control and standard; Low private sector investment in agriculture/agro-processing; Absence of low cost, market-oriented research prototyping;  Inaccessibility and high cost of fund for agro-processing; Low level of capacity of local fabricators; Poor quality of information and irregular dissemination impedes investors’ abilities to properly plan investments

No single point of contact: Investors do not know how to find available services and are compelled to interact with resources across multiple MDAs to achieve their objectives;  Ill-timed service delivery: Delivery of Government service are frequently delayed, while contracts and MoUs with MDAs and State Governments can go unfulfilled

Policy Thrust

Promotion of access to agro-processing through both public intervention and facilitation of private sector investment; Revitalization of Staple Crops Processing Zones, Agribusiness Incubation Centres and Agro-industrial parks; Partnership with State Governments to incentivize agribusiness development including safeguards for small holders, rapid collateralization of land, and focused infrastructure access; Provision of rural infrastructure, roads, water, electricity and others; Harmonization of standards, quality and other food safety measures for food security; market and trade;  Facilitation of provision of modern paddy handling equipment in key clusters; Establishment of price discovery mechanisms and selective use of supports; Establishment and leverage in a consultative capacity of a National Agribusiness

Consultative and Advisory Forum.

FMARD’s Institutional Realignment

The discussions which follow are designed to deepen the capacity of the Ministry and its key partners to regulate the sector, engage previously excluded stakeholders, lead policy dialogue and broker the necessary agreements to improve the ease of doing business in Nigeria’s agriculture space. The target outcome is a more engaged agribusiness market space and ecosystem as measured by ease of doing business in the sector.

Institutional Setting and Roles (Federal vs. State Government vs. Local Governments)

Though the two tiers of government – Federal and State – have authority over agriculture, collaboration has not always been smooth, nor desirable results generated. Therefore, in order to ensure full potential henceforth, both parties have to focus on greater collaboration, implementing policies jointly approved at the National Council on Agriculture. Both parties have to set-up mechanisms to remove conflict and focus squarely on implementation. Beyond the obvious, at the farm level, delivering results is truly about local government areas (LGAs). LGAs are truly the field operators with whom investors often deal with, and therefore cannot be a footnote in economic reform discussions. Important that ALGON be consulted and actively engaged to improve operational effectiveness of agriculture.

Constraint:

Apathy in states for key programmes driven by federal government; History of non-involvement of LGAs in policy execution due to implicit control issues between States and LGAs

Disturbance by government intervention of market processes and hampering development of the private sector; Scattered, incompatible or inefficient policy processes and programmes of the various stakeholders at federal and state levels

Policy Thrust

Identify ways of boosting cooperation and accountability at the State level to ensure reform is carried out consistently; Create explicit partnership with LGAs with a focus on operational and investment execution issues from infrastructure to community relations to access to high quality talent; Leverage improved federal-state dialogue to engage other investors and improve levels of communication in the agribusiness economy further

Youth and Women

The joint issue here is the need to maximize the contributions of women and youth to agricultural production and elimination of discriminatory practices in the employment of women and youth in the sector. In a number of cases such discrimination is explicit (e.g. via cultural inheritance practices), or inadvertent. A key goal of policy should be to shift behaviors that result in negative outcomes for youth and women, and reinforce such shifts by expanding wealth creation opportunities for youths and women.

Constraints:

Poor enforcement of gender based policies, as well as institutional bias; Lack of capacity and employment opportunities for internship and mentoring; Limited access to finance; Lack of mechanization serves as disincentive to women and youths; Lack of synergy between and among MDAs and other non-state actors in respect of implementation of women and youth programmes

Policy Thrust

Develop and launch entrepreneurship platforms that create a pathway for youth and women to enter agribusiness economy;  Expand cooperation with CBN’s intervention funds targeted at women and youth e.g. MSME;  Facilitate investment advisory support for potential entrepreneurs; Review the subsisting gender policy document with a view to improving the implementation activities; Expand training of key leaders and influencers across FMARD to ensure gender / youth considerations integrated into decision making; Expand capacity building for women and youth for entrepreneurship, including technical training and access to financial services; Facilitate dialogue with farmer groups and service providers (for women and youth) to expand; pool of ideas FMARD can pursue to institutionalize change.

Infrastructure

The policy recognition for rural development relates to the need, as a responsibility of the government, to reduce poverty in rural areas, alleviating the suffering of rural dwellers and creating enablers for economic take-off in the rural areas. These will be achieved through the systematic provision of individual infrastructural facilities and also through the integrated approach to rural development.

Constraints:

High mobility of rural population to the urban area in search of better life; Implicit urban-biased of development policy authorities that ignore the rural areas;  Sluggish growth and development of rural economy to support rural development efforts; Poor state of rural infrastructure to attract investment in rural areas;  Absence of database for rural infrastructure planning and perpetual reliance of government on old database

Policy Thrust

Government will ensure that all stakeholders play their roles in the provision of rural infrastructure. As approved by NCA already, government will resuscitate and review the Rural Infrastructure Survey project of FMARD, with a view re-establishing the old database for rural infrastructure planning: Aggressive promotion of rural infrastructure buildup will be embarked upon; Economic activities will be promoted in rural areas; Aggressive promotion of rural infrastructure will be undertaken; Improve the enabling environment for investment opportunities

Climate Smart Agriculture

The notion of climate smart agriculture was sponsored by FAO, as an approach to developing the technical, policy and investment conditions to achieve sustainable agricultural development for food security under climate change. This entails (i) sustainably increasing agricultural productivity and  incomes; (ii) adapting and building resilience to climate change; and (iii) reducing and/or removing greenhouse gases emissions, where possible. At the COP21 Summit, Nigeria presented its preexisting position on climate smart agriculture, the Nigeria Agriculture Resilience Framework (NARF). NARF has not been implemented and that will be a key focus area going forward.

Constraint:

Limited awareness of climate issues, and therefore key changes required to protect agriculture; Poor management of land, water, soil nutrients and genetic resources; Inconsistency of the governance regimes, policies, legislations and financial mechanisms with the requirements for climate friendly agricultural practices; Inefficient and unsustainable management of agriculture and natural resources e.g. soil, water, etc.;  Lack of awareness of soil management practices; Limited availability of drought resistant variety of crops; Lack of research into climate smart agriculture; Lack of cooperation and synergy among the key MDAs and other stakeholders; Absence of comprehensive soil map for Nigeria; Lack of awareness on climate change and its effects on agricultural practices;  Lack of access to alternative energy use; Poor infrastructure to support climate smart agriculture

Policy Thrust

Boosting public awareness through advertising of importance of climate smart agriculture; The management of land, water, soil and other natural resources will be improved; Institutional linkages and partnerships will be strengthened for ensuring climate smart agricultural governance, policies, legislations and financial mechanisms; Environmental impact assessment will be carried out on major agricultural projects; The use of renewable energy will be promoted with the involvement of private sector; Broad public and stakeholder awareness on Climate Smart Agriculture will be created;  Government will facilitate soil map to improve land use and management practices; Government will increase the adoption of global best practices on climate change, including the aspects of adaptation, mitigation and carbon credit

 

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