Monday, August 8, 2016

How Kwara State Can Become Financially Independent Through Non-Oil Export

A number of states in Nigeria are currently running on avoidable deficit due to our over dependence on oil. Many of the state governments came into power with the mindset of getting monthly allocation from the federation account but the decline in the oil price vis a vis the destruction of oil pipeline and installations have dashed their hope.
In this write-up, I will be focusing on how Kwara state can become financially independent through aggressive drive for non-oil exportation. According to BudgIT, Kwara state is currently among the states in Nigeria that is running at a huge deficit. This is because the total income realisable from both the internally generated revenues and the federal allocation are grossly inadequate to meet the recurrent expenditure talk less of the capital expenditures. 
My position has always been that all the states in Nigeria has what it takes to internally fund her budget and survive independent of the federal government allocation. To achieve this, they need to focus on 2 major sectors namely Agriculture and Non-oil export. The strategies put forward in this Article is capable of not just helping the state to generate revenue and become self-sufficient, in addition to this, it will also help them to create numerous jobs for their teaming population.
Kwara state is very much blessed with very large land mass that is suitable for the production of different kind of exportable Agricultural commodities, but in this article, our recommendation for this state is Raw Cashew Nut Export. Even though this is a tree crop with gestation of about 2years for improved varieties, but the potential upon maturity will last for many years. According to the Collaborative Survey Conducted by National Bureau of Statistics, Central Bank of Nigeria, Federal Ministry of Agriculture & Rural Development and Federal Ministry of Trade & Investment, this state produced about 39,000MT of Raw Cashew Nut in 2012. Using the national average of about 38%, this state currently has arable land that is about 1,414,080.00 hectares of lands.
We have made some reasonable and very conservative assumptions in this analysis and these include that:
-the state is using just 40% (565,632 hectare) of this land for Cashew nut plantation
-the yield per hectare of Cashew nut is 1MT 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
-the unit price of Cashew nut is USD1,000/MT FOB Lagos (even though it can be as high as USD1,200)
-cost of farming was put at N25,000 per hectare based on some research works
-cost of exporting per metric tonne was put at N35,000 base on the export projects I have handled in the past
With a yield of 1MT per hectare, this means that the state can produce 565,632MT of Cashew nut on the land size stated in the assumptions above. If this Cashew nut is exported at a free on board (FOB) price of USD1,000/MT, the total proceeds will be USD565,632,000.00. Using a conversion rate of N310 to 1USD, this amount to N175,345,920,000.00. The unit cost of farming Cashew nut and exporting are N25,000 per hectare and N35,000 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 N21,211,200,000.00 and the total cost exporting (transport, documentation, freight forwarding etc) comes to N19,797,120,000.00. The total project cost (farming and exportation) will be about N41,008,320,000.00. The estimated profit that can accrue to the state on this project comes to about N134,337,600,000.00.
According to data obtained from government sources, the IGR of the state for the year 2014 was about N17,497,620,787.52. This will remain low and even drop further because it is mainly generated from the personal income tax on workers in the state most of which have not been paid for some months now. From the analysis we have done on farming and exportation of Cashew nut, the state government could grow her revenue several thousand times over and above the current level if the government can embrace this new way of thinking in their drive for revenue generation.
The state can start this drive with the exportation of Cashew nut to meet the current financial obligations but with a plan to begin to add value and process it into Cashew Kernel which will more than triple the revenue from the Raw Cashew nut.
The impact of the suggested model for Kwara state government goes beyond the generation of revenue via export, it will also have humongous impact on employment generation and increased economic activities in the state. This in my opinion is a more effective, efficient and enduring model for diversifying the economy of any state in Nigeria. 
For questions on this thought, you can reach me via email to

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