Tuesday, October 31, 2017

These Necessary Government Reform Will Make You Venture Into Processed Agro Export

The Nigerian government has finally decided to diversify the economy indeed and in truth with the Agriculture and Solid Minerals sectors taking the front seat. However, the focus of most operators in the sector are mainly the crop production and animal husbandry. So many other operators are not interested in what I will like to call the Agricultural sector enabler or demand driver which is value addition.

According to the publication of Agricultural and Applied Economic Association, Value added Agriculture is a portfolio of agricultural practices that enable farmers to align with consumer preferences for agricultural or food products with form, space, time, identity and quality characteristics that are not present in the conventionally-produced raw Agricultural commodities.

It appears that it is common sense that one should be know that value added Agricultural products will generate more revenue and at such should be of interest to anyone in this sector. However, many have decided to look away from this and just simply focus of the product and sales of the raw commodities. This disposition to value addition has been attributed to various reasons like capital, competence, machinery etc but in my opinion, I think chief among the reasons for this is the issue of mindset.

The Federal Government of Nigeria has for many years programmed Nigerians to think only in terms of commodities when it comes to export trade business. This has been consistently demonstrated by the export of crude oil by the government. This has continued for more than 3 decades and hence all the government programmes, infrastructure development, incentives, capacity building have been geared towards the development of the oil and gas sector. All these have created a mindset that made people to think less of Agriculture talk less of value added Agric business when they are thinking of investing in any business. To correct this anomalies, I will recommend that the government set a short term and medium term goals. The focus of this article will be on the short term goals, while the medium term will be considered in another article sometimes in the future.

The short term goal should include the establishment of Agro processing centres across the country in order to enable the Small and Medium Scale Enterprises (SMEs) to have a point to take off their business in order to build their capital and ultimately set up their own processing factories. It is interesting to note that the federal government has started this in some parts of the country. It will be great to not just extend this all the states in the federation, but also ensure that this kind of facility is present in all the senatorial districts of each state of the federation. This model validate the fact that, an Agro processor do not really need to have all the funds to set up a factory before he can own his own brand.

Another way of replicating this model is Contract Production. This involves a process whereby, an intending Agro processor (client) partners with a processing factory (factory) that currently produces or has the capacity to produce his dreamed product via a joint venture agreement. The client produces his packaging materials and deliver them with his raw materials to the factory. The factory then processes the product, put it in the package received and deliver it to the client for onward distribution to the market.  

To the extent that most of the Agro processor are processing various food items for mankind, it becomes highly imperative for those products to be of very high quality that is fit for human consumption. Therefore there is need for regulation. However, A situation where the Agro processors and other entrepreneur sees the regulator as an impediment to the progress of their business is not good for the country. I will strongly recommend that the National Agency for Food and Drug Control (NAFDAC) carry out a thorough assessment of its processes, do some internal cleansing and carry the following reforms. The Agency should make public a timeline for the registration of any product with the agency. The phone number to call when there is unnecessary delay should be made available to the public. The procedure for escalating any issue to the Director General should also be made known to the public. In addition to these, besides the checklists on its website, the exact fees payable to the agency for various degrees of products and registration should also be made known to the public.

All these information should be made available to the public via its website, conspicuous display in all the NAFDAC offices across the country. It will be good for NAFDAC to identify a very patriotic staff who will be able to inspire others and champion this initiative and reforms in all its offices across the country. Considering the fact that Nigerian Agro products is going no where in the export market if the populace cannot trust NAFDAC to do their job patriotically. I will also strongly recommend that the presidency directly supervise the activities of this agency in order to ensure strict adherence to all  its directives.

Having taking care of the production and regulation, the next thing I think the federal government should do in order to attract more investors into this sector is to give some tax relief. This is mainly due to the fact that the level of infrastructural deficit in the country is going to make the business to be highly unprofitable. A typical Agro processor in Nigeria will need to tackle the issue of power generation, water supply, cope with high cost of transportation and protracted transit time and all these contribute significantly to the high cost of production and thus, making the products pricing to be non-competitive both in the local and export market. All these are the basis for recommending that the Federal government should consider giving some tax exemptions to the Agro processors until the business finally stabilise.

The last recommendation is the issue of Promotion. This, in my opinion is more critical than the ones stated above, and without it all other recommendations will be an effort in futility. The neglect of this has been the bane of all the programmes and initiatives of the government. Typically in Nigeria, when the government starts a new programme, it is either not promoted at all after the launch or they will simply do few insertions on newspaper, radio or television for a few days and that will be all. The federal government needs to take a cue from the serious minded businesses who will promote their products or services for several months or even years because they realise the AIDA theory in human psychology. This model says that an individual will usually go through four phases (Awareness, Interest, Desire and Action) in response to any promotional efforts. This theory says that the initial promotion only created Awareness and generate Interest with continuous promotional efforts. As the promotion continues, this makes them to begin to Desire the product or service and further promotion eventually makes them to take Action. What the government usually do is to stop after creating awareness and this only allow few people to benefit from its programmes and hence the minimal impact and eventual failure of the various government initiatives.

In conclusion, if we want to create jobs, if we want to reduce post-harvest losses, if we want increase demand for Agro produce, if we want to grow the agricultural sector, if we want an inclusive growth in the Nigerian economy, then we must aggressively pursue value addition to most (if not all) of our Agricultural products.

Bamidele Ayemibo

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