Agric Value Chain

The global problem of food scarcity is exacerbated by the constant increase in population growth, with no complimenting increase in the output of agricultural produce. Over the years it has become a major focus of most governments to provide enough food for her citizenry which will in-turn curb the series of social discord that could emerge if a hunger-crisis breaks out, and create an enabling atmosphere for strategic economic development by providing the working population with one of the most important physiological needs.

The rapid globalization of the Agricultural markets has led to the generation of new production and distribution systems, as well as new consumption patterns. One of the objectives of modern agriculture is to reduce to the barest minimum the problems associated with agricultural loss, wastages and output underutilization by ensuring an efficient optimization of all the linkages between the producer and final consumer through the “Value-Chain” concept.

A Value Chain can be defined as a strategic partnership among inter-dependent businesses that collaborate to progressively create value for the final consumer resulting in a collective competitive advantage*. The basic characteristic of a Value Chain is market-focused collaboration; different business enterprises working together to produce and market products and services effectively and efficiently by allowing businesses to respond to the marketplace through linking production, processing and marketing activities to meet market demands*.   Agric-food Value Chains are designed to increase competitive advantage through collaboration in a venture that links producers, processors, marketers, food service companies, retailers and supporting groups such as shippers, research groups and suppliers*[1]. One of the central ideas of the Agricultural Value Chain concept is the differentiation of the total agro system and the specialization of each element so as to optimize the entire system.

PROBLEMS OF THE NIGERIAN AGRICULTURAL VALUE CHAIN ELEMENTS

It is often said amongst literature groups that a chain is only as strong as its weakest link. The Nigerian Agricultural Value Chain has not been at premium in its performance because of the avalanche of inherent inefficiencies that characterize the elements.

A typical Nigerian farmer will produce the seeds he needs for his plantings, grow and harvest the crops on his field, process the harvested crops, market the processed produce and even be the final consumer himself, promoting thus the saying “Jack of all Trades, Master of None”. There are oftentimes no differentiation of farming activities which resultantly shields the benefits that could have accrued from trade specializations. The sustained efficiency in the agricultural industry of the developed nations is hinged on the principle of specialized diversification through the value chain. Here, each of the producers, processors, marketers and researchers focuses on his enterprise as one’s output is another’s input, ensuring quality delivery of resources to the next link without encroaching into other production niches.

In Nigeria, attention is mostly focused on primary production; huge crop turnover/harvest, large flock management, enormous plantations etc. Nigerians pride themselves in being the world’s largest producer of cocoa, third largest producer of sorghum, largest producers of yam and cassava, and cultivators of the great monumental groundnut pyramid. The enigmatic question here is: despite our seemingly agricultural feats, why is the agricultural industry not regarded as developed? Production efficiency which could have been realized from the processing of our massively harvested crops is lost; for example cocoa beans are exported unprocessed and are transformed into varied products such as beverages, chocolate bars and candies to mention but a few which are in turn imported into the country and sold to us at increased prices.  Appreciable economic gains will accrued to the nation if there are policies to guide against exporting raw crop produce; which will strengthen the value addition process and encourage investment in such areas of the economy.

The utility of time, place and standardization has not been fully exploited in the Nigerian agro-industry, which happens to be one of the core functions of marketing. Our major pitfall is on the issue of packaging and standardization which has ousted us from the global market to our own economic detriment. Effective packaging adds value to produce, enables traceability, enhances standardization, and provides feedback thereby gaining the confidence of customers. In developed nations, Universal Product Code(UPC) which is a set of 12 numerical digits for scanning of trade items are often assigned to local or imported produce to aid control of quality, pest and disease, traceability and hence feedback.

Governments all over the world are interested in the potential of value chains to develop agriculture and contribute to food security, and this has been on the rising since the 2008’s global food crisis[2]. Nigeria through the Agricultural Transformation Agenda has currently implemented policies to strengthen the players of the value chain mix and revolutionize agriculture as a business entity. Agricultural value chains hold considerable promise in reducing poverty and promoting inclusive growth when the poor and other marginal groups participate in them. Under the right conditions, value chains can move smallholder farmers from subsistence into commercial agriculture.

SCHEMATIC REPRESENTATION OF AGRICULTURAL VALUE CHAIN

 

 

FACTORS FOR IMPLEMENTING A SUCCESSFUL AGRICULTURAL VALUE CHAIN

1. Enabling Environment: Nigeria has over the years tried to revamp agriculture using different approaches to boost production. However, recent developmental programs are geared towards maximizing income not only on production but also on processing and other areas, (Agricultural value chain). For the effectiveness of the Agricultural value chain, an enabling environment through national policies, regulations, and supporting institutions are a prerequisite. Policy reforms relevant to the value chain approach focused on the following should be considered

• Increasing private sector participation,
• The quality and safety standards of agricultural products,
• Improving institutional and financial frameworks.
• Promoting national policies that support the agricultural sector; by reducing barriers to inputs, increasing access to finance and providing incentives.

2.      Credit and financial support: Access to credit is a pivotal requirement for all value chain stakeholders, including small-scale processors and retailers, storage operators, and traders. Access to credit will boost small entrepreneurs, for instance, to buy processing or packaging equipment, develop storage facilities, and differentiate products. Getting access to credit and financing agricultural ventures in Nigerian Banks is not business friendly due to the nature of Agriculture; being a long term investment.

3.      Infrastructure:  creating and rehabilitating rural roads focused on linking areas with a competitive advantage to markets can help form competitive value chains. This approach relates to a key aspect of promoting value chains by linking high-value crop production areas to strategic commercial markets. The aim is to reduce transition duration and ensure timely supply of both inputs and outputs to preserve the quality of Agricultural product. Other supporting infrastructure, such as storage facilities and transport logistics, would also increase selling options and contribute to benefits that accrue from rural roads. Investors are open to partner with stakeholders in providing transport and logistics services and other important infrastructural development.

4.      Technology: There is need for constant innovation and technological inputs in the value chain elements to raise productivity, reduce costs, and stay competitive. Innovation requires experimentation, incubation, and eventually adaptation to develop and maintain competitiveness. This should be a continuous process involving stakeholders at every point in the chain to improve productivity, product quality, information transfer, processing, and marketing processes. Nigeria is yet to maximize technological input for Agricultural development, (ICT) which could offer a huge return and save appreciable amount of cost. For examples development of software to simplify farm management, handle routine processes among others.

5.      Markets: Addressing market-information issues and support for key market drivers such as product differentiation will enable value chain stakeholders to develop products that respond to market needs. Product differentiation is a key value chain element in increasing competitiveness. Example, technical assistance on the Marketing Support for Organic Produce focused on maintaining product quality through packaging and appropriate storage and farm-gate to market transport logistics. This provides the basis for supporting a branding campaign. Improving market access through capacity building and training inputs such as workshops, trade fairs promotion collaborations between producers and processors will help in building basic business skills and to improve management and operation of small and medium enterprises.

6.      Market Information: Market information must be delivered on time for it to be useful. Approaches for getting timely price information for improving the negotiating position of producers with traders and processors. A wider range of information is needed, beyond prices, in areas such as inventories of agribusiness opportunities, and identifying markets and technology links for new and existing products. The private sector plays a more responsive role to farmer–market information needs. Owing to the vast nature of information required by different individuals in the value chain, the area of information management proves to be a good investment opportunity for investors to manage and allow easy access to end users.

7.      Organizations: The development of organizations that have the critical mass to provide structure for governance is pivotal to the development of value chains. The World Banks’ Agriculture for Development report makes the case for organizations of key stakeholders in agricultural development in general and value chains in particular[3]. The report argues that organizations form a major part of institutional reconstruction, and can use collective action and links to strengthen the position of smallholders in the markets. Organizations can contribute to value chains by strengthening their bargaining power to reduce transaction costs, and give poor and vulnerable groups a voice in the policy process. To do this, organizations must be able to act as vehicles of change and be able to network through well-developed links. This will also need some form of institutional governance to promote member confidence and solidarity, and build capacity for activities such as credit management[4]

8.      Private Sector Participation: Encouraging private sector participation requires clarity about the roles of government and the private sector. Fostering interaction through public–private partnerships requires identification of opportunities and the development of commercial models for effective participation of both sectors. This is what Nigeria hope to achieve using the Agric-value chain approach to commercialize Agriculture as a business investment. Successes recorded on the E-wallet programme under the Growth Enhancement Support scheme of the Federal Ministry of Agriculture and Rural Development to replace the old fertilizer and seedlings distribution method, which the Federal Government handled through middlemen, states and local governments as shown that public-private partnership is the engine to revolutionize Agriculture in Nigeria. Investors are therefore encouraged to look for areas in the value-chain to partner with government and come out with framework to stimulate business drives in the value chain.

9.      Inclusion of the Poor: The agricultural value chain approach can provide opportunities for the poor. Because the main aim of value chains is to generate profit, the means for achieving this can conflict with the inclusion of the poor, who generally lack the skills and expertise to produce for high-value markets. However, with good policies to support the poor through capacity building, the value chain can serve a means of empowering the poor and creating jobs. This is one of the areas developing countries like Nigeria are hoping to bank on for the creation of more jobs. The inclusion of marginal groups in value chain development has largely been based on support for production. It introduced a staged approach for inclusion, which aimed to gradually increase the skills and capacity of producers so that they could participate in commercial supply chains with the possibility that value chains would evolve.

Modern agricultural value chains usually offer wages and self-employment with better pay and working conditions than the traditional agriculture.  A comprehensive approach is required by the public-private partnership to identify key constraints to agriculture value chain development and adopt a workable policy, regulatory, and institutional reforms to address key constraints for agricultural value chain development.

The multiplier effects of the success of Agricultural value chain on the Nigerian economy is far enormous, with the current agricultural income of the country, put at N15 trillion as against the potential value of about N40 trillion[5]. Nigeria could pride herself as an investment hub in Agriculture and put the nation back to limelight as an agrarian nation.

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