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Nigeria’s agric: When foreigners dominate

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Nigeria’s agric: When foreigners dominate

The recent pronouncement by the Federal Government that Nigeria’s agriculture is dominated by foreigners has sent jittery to the spines of local stakeholders. Taiwo Hassan reports

 

 

In the beginning
Several decades ago, sustenance farming contributed majorly to Nigeria’s agric sector – enhancing the nation’s food sufficiency.
But unfortunately, the sector remained dormant basically because of the inability of the past governments to prioritise agric – relying on oil, which is susceptible to the vagaries of forces of demand and supply – raising concerns for the fate of the economy.
Basically, the headwinds in the sector prompted slow development and stunted growth as many people who had been into agriculture neglected it in search of greener pasture and other white collar jobs in the country.

However, the reason for this change in paradigm was not farfetched due to the fact that farming faced low patronage and neglect, which consequently affected its contribution to the country’s Gross Domestic Product (GDP).
Ideally, one of the major reasons responsible for the neglect of this sector was the surge in the oil price at the international market as past governments raked more revenue from the sale of the product to the detriment of agriculture, which was once a cash cow for Nigeria.

Shift to agric

However, in order to re-jig the sector positively, succour came during the regime of former President, Goodluck Ebele Jonathan when he appointed Dr Akinwumi Adesina, as agric minister in order to bring back the lost glory, which had stifled the growth of the sector.
Under Adesina, who is currently the President of African Development Bank (AfDB), Nigeria’s agric sector witnessed transformation following different policies that were unleashed to galvanise desirable the sector.

As part of plans to attract investments into the sector, the Federal Government and the state governments intensified Foreign Direct Investment (FDI) campaign to revamp the sector. The belief was that if foreign investors key into the Nigeria’s agriculture, it would spur rapid development and put Nigeria on the global economy as a food producing nation.

Foreign dominance

However, still basking in the euphoria of exiting recession, Nigeria’s agric sector was hit with the news of foreigner dominance.
The Federal Government said that it had discovered that more foreigners were doing businesses in the agricultural sector. It said this could be traceable likely to the high interest rates banks demand from local agriculture entrepreneurs.
Minister of State for Agriculture and Rural Development, Heineken Lokpobiri, was quoted as saying that low access to finance was a major challenge impeding the development of the agricultural sector in the country.

“The major challenge bedeviling this industry is access to finance. Agricultural financing in Nigeria is too costly; for even at nine per cent you can’t find it. They will ask you for all forms of collateral, the CBN will say bring your father’s house, bring this, bring that,” he said.
“And that is why if you look at it now, foreigners are taking over the agro sector here; either from India, they get it (loan) at three or four per cent, or from Europe at two or three per cent. But here, it is 30 per cent and they (banks) are not even willing to give. The only way you can compete with others is for you to have cheap funds that will reduce your production costs.”
Lokpobiri said that Nigeria had over the years had allowed the banking sector hold the country hostage with high interest rates.
Particularly, he was quoted to have stated that it was for this reason the government often borrowed less from the domestic market.

Compromise theory

Corroborating Lokpobiri’s stance, the Minister of Agriculture and Rural Development, Chief Audu Ogbeh, said that the present administration was against FDI, since this is the way other countries in the world attract investment into their mainstream economy but Nigeria’s agric industry is already compromised in its entirety.
According to him, with the current scenario in the country’s agriculture, it would be difficult for any local investor succeed since the FDI has been tailored to favour foreigners.
His words: “The way it is, we welcome foreign direct investment. Every developing country does that. It is a welcome development for a country that wants to grow and grow speedily. But it has other complexities, which are not always visible and noticeable to observers.
“Of course, when they want to come in, they ask for tax holidays, which countries are willing to give. But how about dangers they face in local economy in the long run? Take the problem we face now, that is nearly impossible for any Nigerian investor to have access to substantial credit to make any major investment, say in the agro-industrial sector where we operate now,” Ogbeh added.

High interest rates regime

Factually, Ogbeh’s grouse may be attributed to the high interest rate in securing agric loans at the banks, which is scaring many farmers from approaching the banks for loans.
Besides, findings also show that many of the banks are reluctant to give loans to farmers in the country. Basically, Nigerian banks are not willing to support long-term agric loans since they want to quickly recoup their facilities.

Ogbeh said: “At interest rates of between 25 and 32 per cent, what – on God’s green earth – can you do? You can’t do much. But these foreigners can borrow at two per cent, bringing a hundred or two hundred million dollars to invest. Of course, they will create some jobs but essentially low level jobs – for outgrowers and others. In a sense, they are jobs. But the way we are heading, what it means is that if these interest rates persist for much longer, the only people who will dominate agro-industry, and indeed major industrialisation, in this country are foreigners.

He continued: “Is that necessarily a good thing? It’s good in some ways. But if they take absolute control, then we are in danger. This is the complexity. And I keep complaining, for instance, about the interest rates, although many people don’t seem to agree with me. Where in the world have interest rates remained at over 25 per cent for 30 years and that country still claims the economy is growing? How does it grow? Or how does it develop its industries? Where in the world is the MSME industry flourishing when it is impossible to access credit? So, young people are reluctant. Retiring civil servants who want to create something can’t do anything. Those within the productive bracket who want to create and do things can’t do anything. We are facing a problem, and something has to be done very quickly about the entire interest rate regime.”

Govt’s political will

Speaking on agric sector’s support, the minister said: “The costs of production, processing, and export make us uncompetitive outside, in the international markets. If you’re going to set up a food processing outfit, all your machinery must be of food-grade stainless steel. And food-grade stainless steel is always very expensive.

“You don’t make them here in Nigeria; you import them. You pay the duties. You install them. Then you go for your standby generators and you pay local taxes of all kinds, such as local government tax, corporate tax, and so on. By the time you add these to your production cost; you can’t compete with the man in China or Brazil.

“If you go into the world market, you would hear them saying no! We are getting it cheaper from other people. On the other hand, you know what happened in India. If you build a brand new factory, and they commission it for you, the Indian government writes you a cheque of 35 per cent to help you stabilise your business, knowing that they will recover their money eventually from tax. That is the kind of support they give. We need to have such a scheme here.”

Dangers of FDI

On what the country is likely to face with the continued opening of its economy to FDI influx, the minister said: “Leaving everything to only foreign direct investments is also not safe because they come with certain strings, which are not always very easy. They will have to repatriate their profits. The other issue is, if agriculture doesn’t grow as fast as it should and agro-industrial exports and raw materials don’t happen as quickly as they should, when the oil and gas era is gone, what will be our source of foreign exchange? Again, that is something we need to deal with. And it’s all very complicated.”

Last line

With the Federal Government’s stance on foreign domination of the country’s agric sector, there are fears that the nation’s quest to attract foreign direct investments into the sector are being threatened and compromised.

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