Tuesday, December 29, 2015

Overcoming Financial Dependence on Abuja: A Case of Plateau State

The state of Plateau is among the states in Nigeria that is currently running on deficit according to BudgIT. This is really unfortunate because this state is among the few in Nigeria that has a double in the sense that it has huge deposit of solid minerals with export potential in addition to its agricultural potential.
Plateau state has no reason to be in this financial mess. However, the people on the plateau have found themselves in this predicament because their leaders have not learnt how to harness the state potential in both agriculture and solid minerals to generate enough revenue to meet her obligations.

This article therefore was written to show the state a way out in practical sense with the numbers that are well researched and not just speculation on what could be done. This article is a departure from what our leaders are used to. They make promises of projected internally generated revenue and jobs to be created. They give us numbers which have no foundation, no basis and are therefore not realistic and we the citizens have failed to ask the question "HOW". We are usually indifferent and do not bother about the specifics. Then, they get elected and begin to tell us their challenges and why they cannot fulfil their promises.

The time has come for us to begin to tell the leaders what they need to start doing in order to redirect their various states to the path of economic progress. In this article, we will be examining how the farming and exporting of sugarcane can help plateau state to generate N170 billion in revenue if the government can commit just 10% of its arable land to the cultivation of this agricultural commodities.

Let me also point out that the facts raised in this paper are based on the data obtained from different research done by Central Bank of Nigeria, National Bureau of Statistics, Ministry of Agriculture and some universities in Nigeria.

Plateau state produced about 28,000MT of Sugarcane in 2012. Using the national average of about 38%, this state currently has arable land that is about 1,187,059.20 hectares of lands. We have made some reasonable and very conservative assumptions in this analysis and this include that:
1.   The state is using just 10% (118,785.92 hectare) of this land for sugarcane plantation

2.   The yield per hectare of sugarcane is 20MT per hectare (even though, there are varieties that can yield more than this) this yield was used to make provisions for losses that might occur during harvest

3.   The unit price of sugarcane is USD600/MT FOB Lagos (even though it can be as high as USD750)

4.   Cost of farming was put at N210,000 per hectare based on some research works

5.   Cost of exporting per metric tonne was put at N30,000 base on the export projects I have handled in the past

With a yield of 20MT per hectare, this means that the state can produce 2,374,118.40MT of sugarcane on the land size stated in the assumptions above. If this sugarcane is exported at a free on board (FOB) price of USD600/MT, the total proceeds will be USD1,424,471,040.00. Using a conversion rate of N195 to 1USD, this amount to N227,771,852,800.00. The unit cost of farming sugarcane and exporting are N210,000 per hectare and N30,000 per MT respectively. The total cost of farming plus 50% profit on the sales to the government (or to the trading company engaged by the government) comes to N37,392,364,800.00 and the total cost of exporting (transport, documentation, freight forwarding etc) comes to N71,223,552,000.00. The total project cost (farming and exportation) will be about N108,155,936,000.00. The estimated profit that can accrue to the state on this project comes to about N169,155,936.00.
According to data obtained from government sources, the IGR of the state for the year 2014 was about N8,280,000,000. from the analysis we have done on farming and exportation of sugarcane, the state could grow her revenue by about 2000% from this source alone. 

To implement the option put forward in this article, here are some of the steps that the state will have to take. The state government should:

1. Purchase of improved varieties of seedlings and other farm inputs for registered farmers and cooperatives

2. Train the farmers on the best farm practices using Agriculture professionals and extension officers

3. Provide a guarantee to the farmers to purchase the harvested crops from them at a pre agreed price

4. Partner with a trading company for marketing and export of the commodity and share proceeds

5. Buy the farm produce from the farmers on credit and pay them upon receipt of export proceeds from buyers abroad.

We strongly believe that if the government of Plateau state can adopt this commodity as a means of revenue and implement the strategies suggested, it will naturally rebound the economy of this state to the part of greatness within a years, the state also becomes self-sufficient and numerous job will also be created as collateral benefits.

Bamidele Ayemibo (Lead Consultant, 3T Impex Consulting Limited) 

1 comment:

  1. This is exactly what the state of Madhya Pradesh, India did. They encouraged the farmers to grow sugarcane in large quantities and it was bought directly by the govt of the state, which they supplied to sugar factories set up in the state. If only our state govts can think outside the box