Nigeria: Trade Agreements and Implication for Its Agricultural Sector

nigera trade agreement and agric

In November 2016, ministers of industry, trade, and investment from across Africa met for the second rounds of trade negotiations in Kenya to design the structural framework that will drive a proposed Continental Free Trade Area (CFTA).

This proposed framework, the CFTA, is expected to deepen Africa trade internally, as well as fast-track efforts at achieving greater regional integration.

Unfortunately, Intra-African trade relations remain low, despite the abundance of raw materials, goods and services, and several economic opportunities on the continent.

According to information from the African Development Bank (AfDB), Intra-African trade is low, compared to intra-regional trade in other parts of the world.  Also, the United Nations Conference on Trade and Development (UNCTAD) forecast indicates that the current intra-Africa trade will improve to 15.5% by the year 2020 if tariffs are removed; and with enhanced trade facilitation measures, has the capacity to increase to 21.9%.

Therefore, the Continental Free Trade Area (CFTA) provides an ample opportunity for Africa, and Nigeria in particular, to increase its intra-Africa shares of trade, movement of goods and services including an increase in capacity utilization for manufacturing further than primary products.

Just for the record, The Nigerian government trade negotiator is the Federal Ministry of Industry, Trade, and Investments (FMITI), and according to information on Wikipedia (https://en.wikipedia.org/wiki/Foreign_relations_of_Nigeria),  Nigeria is a member of the following international organizations:

  • African, Caribbean and Pacific Group of States
  • African Development Bank
  • African Union
  • Commonwealth of Nations
  • Economic Community of West African States
  • Food and Agriculture Organization
  • Group of 15
  • G-19
  • Group of 24
  • Group of 77
  • International Atomic Energy Agency
  • International Bank for Reconstruction and Development
  • International Chamber of Commerce
  • International Civil Aviation Organization
  • International Criminal Court
  • International Development Association
  • International Finance Corporation
  • International Fund for Agricultural Development
  • International Hydrographic Organization
  • International Labor Organization
  • International Monetary Fund
  • International Maritime Organization
  • International Mobile Satellite Organization
  • International Olympic Committee
  • International Organization for Standardization
  • International Red Cross and Red Crescent Movement
  • International Telecommunication Union
  • Interpol
  • Non-Aligned Movement
  • Organization for the Prohibition of Chemical Weapons
  • Organization of Petroleum Exporting Countries
  • Permanent Court of Arbitration
  • United Nations Organization
  • United Nations Conference on Trade and Development
  • United Nations Economic Commission for Africa
  • United Nations Educational, Scientific and Cultural Organization
  • United Nations High Commissioner for Refugees
  • United Nations Industrial Development Organization
  • United Nations Iraq-Kuwait Observation Mission
  • United Nations Institute for Training and Research
  • United Nations Interim Administration Mission in Kosovo
  • The United Nations Mission for the Referendum in Western Sahara
  • United Nations Mission in Bosnia and Herzegovina
  • United Nations Mission of Observers in Prevlaka
  • United Nations Mission of Observers in Tajikistan
  • United Nations University
  • Universal Postal Union
  • World Confederation of Labour
  • World Customs Organization
  • World Federation of Trade Unions
  • World Health Organization
  • World Intellectual Property Organization
  • World Meteorological Organization
  • World Tourism Organization
  • World Trade Organization[/b]

Nigeria – Agriculture

In Nigeria, there are over 30 million hectares of farmland under cultivation every season. This falls substantially below the estimated 78.5 million hectares of land that is required for farming to feed Nigeria’s growing population.

There are about ten relatively large commercial scale farms in Nigeria deploying some form of mechanized processes and can purchase tractors for agricultural and non-agricultural purposes.

However, the Nigerian agricultural sector is dominated by smallholder (subsistence) farmers who work an average of 4–5 acres each, usually, under rain-fed conditions.  Most of these farmers have insufficient capital and own little or no equipment of their own, and others lack knowledge of modern practices.

In fact, much of the farm machinery, seeds, and chemicals used by these farmers are purchased and distributed to them by the government under various agricultural assistance/subsidy programs, such as the e-Wallet system introduced in 2014.

Under this e-wallet system, subsidized electronic vouchers for inputs were delivered directly to the farmers’ mobile phones and then the vouchers were used as cash to purchase the inputs directly from agro-dealers nearest to them.

This initiative proved to be effective and efficient in providing the grass-root farmers with much-needed resources and eliminating corruption in the subsidy program.

The Nigerian economy took a hit in 2015 as a result of declining oil revenues. This forced the government to seek economic diversification and had pursued agricultural development as one of its key goals to help address the country’s dependence on food imports.

Food imports total nearly 11 billion dollars annually. The Nigerian government has also engaged in a campaign to redirect focus from oil to agriculture, manufacturing and solid minerals development. In this regard, the government has rolled out different agricultural development initiatives such as,

  • the Anchor Borrowers Program (ABP),
  • the Presidential Fertilizer Initiative (PFI),
  • the Youth Lab,
  • the Presidential Economic Diversification Initiative (PEDI) and
  • The Food Security Council, among others.

According to government reports, under the ABP initiative, a cumulative amount of over 150 million dollars has been disbursed to more than 250,000 small-scale farmers who cultivated almost 300,000 hectares of farmland for cereal crops (rice, wheat, maize), cotton, cassava, and soybeans,

Foreign players, like the U.S. agricultural equipment manufacturers and suppliers, are beginning to play active roles in the Nigerian market.

Similarly, AGCO, which is increasing its investment in the African continent, is looking to open an office in Nigeria and partner with some Nigerian Universities to offer technical training and support to Nigerian undergraduate students, in agricultural machinery control and maintenance.

Generally, multinational food processing companies are either establishing their own commercial farms or empowering small farmers.

Animal production has continued to record increased growth because of private sector investments. The poultry and fish farming segments have high market demand, and enjoy faster turnaround time, and as such appear to be growing at a faster pace than crop production.

Thus, opportunities exist for fish feed, poultry feed milling machinery, incubators, extruders, feed additives, livestock drugs, and vaccines.

Setting up agribusiness in Nigeria can be challenging. There are problems due to land ownership issues, lack of infrastructure including water irrigation and roads, and security and corruption issues, but the benefits of making an agricultural investment outweigh the risks.

Post-harvest losses still remains a major setback to food availability, and farms, processing companies, and food vendors need to seek preservation technologies.

Opportunities

Investment opportunities exist in all areas of the Nigerian agricultural value chain, and governments at all levels are opened to foreign direct investments, with a promise to provide attractive incentives and support.

There is significant demand for new and used agricultural machinery like tractors, agricultural chemicals (fertilizers, herbicides, and pesticides), irrigation systems, and food processing and storage systems.

New farms are springing up but still face the problem of lack of commercial farming expertise. Providing farm development services to these new investors might be a good way of marketing a broad range of farm machinery and inputs.

The Nigeria Government AGOA Strategy On Exporting Products

The Nigerian Federal Government has started the implementation strategy to ensure that non-oil products are duly accepted in the US under the African Growth and Opportunity Act.

AGOA is a trade programme meant to establish stronger commercial ties between the US and sub-Saharan Africa, and on May 18, 2000, the US Congress passed AGOA into law.

The act establishes a preferential trade agreement between the US and selected countries in the sub-Saharan region, and in its current form, AGOA will last until September 30, 2025.

The agro-products that are being considered for export under AGOA include:

  • sesame seed,
  • cashew,
  • tomatoes,
  • oranges,
  • cassava,
  • spices and
  • ginger
  • shea butter,
  • cowpea,
  • banana, and
  • Plantain,

Others are articles of leather, cement, clinker, leather arts and handicrafts, specialty foods and cocoa.

However, for Nigeria’s non-oil products to be accepted, the standards must meet the requirements of the US.

Thus, there is the need for AGOA eligible countries to put in place an effective and efficient mechanism for capacity building at the national and regional levels to maximize its utilization.

Governments should open discussion on non-tariff barriers such as the lengthy registration process for consignment that is affecting AGOA exports.

Governments of Sub-Saharan Africa should also put in place the relevant incentives/measures to attract and increase US private investments in Africa with a view to accelerating the industrialization and diversification of African economies and exports.

The Benefits To Nigeria Of Good Trade Agreements Like Africa Free Trade Area

For Nigeria, the gains are significant, and good trade relations would:

  • Expand market access for Nigeria’s exporters of goods and services, especially, agro-related ones.
  • Spur economic growth and boost job creation.
  • Eliminate barriers against Nigeria’s products and help to stop the hostile and discriminatory treatment directed against Nigerian natural and corporate businesses in other African countries, and the world as a whole.
  • Establish rules-based trade governance to invoke trade remedies, such as safeguards, anti-dumping, and countervailing duties against unfair trade practices.
  • Support the industrial policy of Nigeria through the negotiated and agreed deals to provide space for Nigeria’s infant industries.
  • Improve competitiveness, and provide an enabling environment for businesses.
  • Consolidate and expand Nigeria’s position economy-wise.
  • Stimulate increase in Nigeria’s total exports, with a small structural shift in Nigeria’s economy towards manufacturing and services.
  • Provide a policy and stage for Small and Medium Enterprises (SMEs) integration into the regional economy
  • Accelerate women’s empowerment, and provide an expanded platform for Nigerian manufacturers and service providers for connection to regional and continental value chains.
  • Increase real earnings for both skilled workers and unskilled workers in the agricultural and non-agricultural sectors.
  • Additional dynamic benefits, like, export diversification, durable sustained growth, an enlarged regional market with wider economic space for industrialization and catalytic effects for structural transformation.

trade_paper_pageWeb Resources

Federal Ministry of Agriculture and Rural Development
NIRSAL
Nigerian Agricultural Statistics

Wikipedia

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