The diversification story of Nigeria can only be anchored on primarily increasing the productivity and capacity of the agriculture value chain through greater integration. Most people may think of agriculture as only the first layer of the value chain, but it is so much more. Getting the full big picture is what turns the light on. Anyone who does not have their hooks in that chain soon could miss the lift by the next wave of massive wealth creation (following the last one triggered by the Local Content Act of 2010 and before that, the 1992 Local Banking License Issuance). I will explain.
After only Services, the Agriculture Sector is both the largest employer of labour, accounting for up to 40% of all jobs in the country (despite contracting by 50% over the past decade) and the largest contributor to GDP at 22.9%. Nigeria is also in the global Top 5 for Agric output (2015). In spite of all these, Agric remains an unoptimized sector. Why? Easy oil money.
It has been easy for a select few to appropriate its value by any means possible, both in the public and private sectors. Thus, the non-egalitarian nature of the oil sector has resulted in only ensuring a huge dichotomy of wealth distribution in the country, with the vast majority in poverty. Indeed, had there been no Local Content Act, the dichotomy would have been far worse. Yet, it is apparent to all that oil money has failed to adequately develop the economy. According to PWC, the last oil boom delivered GDP growth of the jobless growth kind.
But the future value of Nigeria’s oil is changing. It is now increasingly looking bleaker with marginal oil fracking technologies, growing environmental awareness and electric vehicles. It is noteworthy that the Rockefeller family has sold all of its oil assets and the Saudis actually sought to sell Aramco, their crown asset. Some even say we are currently witnessing the last peak oil of $80–100 ever. According to the WEF, when Nigeria was busy selling high-priced oil to the world before the 2014 price crash, its GDP was soaring. But its wealth was falling. So Nigeria is actually getting poorer each day its oil is sold. GDP does not track Net Assets, only production (and even then, only quantity not its quality).
So, many are now casting nervous glances around for any other options. But what? Industries? Unfortunately, the oil money grab led to the neglect of the very infrastructure required for sustainable industrial production. With their high cost of inputs, local industries can only compete locally and many even end up doing so by compromising international quality standards. While the Services sector has grown to become the largest sector by GDP share and employment, thanks largely to the success of mobile telecommunications, its story is different from that of India in terms of quality.
The quality of a product drives its competitiveness and demand. The quality of ICT services in India has been globally competitive, thus attracting the world’s largest tech companies. In contrast, the quality of Services in Nigeria has been poor and internationally noncompetitive. The reason has been the sorely lacking educational reforms needed to retool school products for higher quality services. Reforming our education system will need gestation time to impact the economy and even at that, will do little for those who have already graduated with a paucity of skills.
Agriculture is the bastion of hope for the next economic growth spurt of the country. We either go big with agriculture or go down with oil when next it does. There is no other short-term option. Raising industrial capacities to internationally competitive standards on a countrywide scale will take at least a decade of dedicated capital investment. Trading is not production and will not employ the teeming youths without production. The news about a local government area chairman in Akwa Ibom State driving youth employment with cucumber production is thus heartwarming, especially at the thought of the impact if all 774 LGAs follow suit.
Only a sharp focus on enhancing the productivity of the agricultural value chain will enable mass employment and income growth. Productivity increases can come from the distributive rail infrastructure being built between ports (inland and seafront), inputs partnerships like the one on fertilizer with Morocco, grain silos concessioning, funding schemes by CBN and BOI, as well as private capital investments in integrating the value chain (e.g. Olam’s outgrower programme, Farmcrowdy, ThriveAgric, Zenvus/Kobo360 logistics venture).
Thus, I fully concur with Benedict Peters, CEO of Aiteo Group, who says that “whilst we still have the oil sector, we must make it work harder for the emerging sectors that will eventually sit alongside it in a healthy, multifaceted economy.” With Joseph Agro Industries and its synergistic Foundation by the same name, he is walking his talk.
More is needed. Now. Especially in integrating the value chain to increase the productivity of existing assets. If done well, integrating Nigeria’s agricultural value chain fully should not take more than a few years to achieve. The reason being the famously high entrepreneurial drive of Nigerians (3rd globally), once convinced of a wealth creation potential. It is safe to fully expect the apathy of the upwardly mobile urban youths to soon be overtaken by the attraction of significant legitimate wealth creation. Then the avalanche will ensue.
However, if not well structured, most of the private sector involvement in Agric will end up in the informal or shadow economy, which in Nigeria is high — approximated by the M1:M2 ratio to be at least 45% (almost half — let that sink in) of reported gross product, versus 5% in the US. The huge informal sector is practically invisible to GDP and as citizens distrust how public funds are mismanaged, its off-book transactions can be expected to remain largely hidden even in an Agric value chain boom.
So, without formal structures, GDP growth figures may lag an Agric movement for some time before catching up, unless the government can somehow use non-cash #technology to incentivize the informal sector to disclose their true figures (whether the current figures for the formal sectors are true, based on this same distrust or greed or penalty nonenforcement, is another day’s discussion).
Mark my words, Nigeria’s new oil will have to be an integrated Agric value chain (not just the first layer), or Nigeria’s future will be bleaker without any oil. The population of 200m growing annually at 2.6% will ensure that. This is the only way to buy gestation time for the surgical education reforms required to structurally reposition the Services sector for future employment growth like in India.
Emmanuel Okoro is a growth strategist