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Thursday, May 23, 2024

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Again, On Diversification of The Nigerian Economy

It has been a recurring debate.  It has been there, government after government. And only recently, it has come up again as a strong trending issue – volatility in the value of the Naira related. We feel we need to remind ourselves of this issue that thrived robustly in the past; perhaps this will make us know that we need to wake up and be involved in more of actions  now  than talk, and pull ourselves out of our forex ‘wahala’.

Siaka MOMOH

Under the name Non-Oil Digest, a monthly segment in BusinessDay, edited by Siaka Momoh, the issue was stoutly reported. 

 The segment campaigned for a diversified economy – a robust focus on manufacturing, agribusiness, entrepreneurship, small business, solid minerals, trade matters, logistics and supply, entertainment and tourism, tech business, etc. Some of the reports are republished (abridged) as follow:

Strengthening Nigeria’s non-oil export business

Siaka MOMOH

This succinctly captures Assets Export Business Clinic which held recently at the Federal Institute of Industrial Research Oshodi (FIIRO).

FIIRO is a robust industrial research institute in Oshodi, established to help industries spring up and enhance the growth of existing ones – big and small. It is one institute that can make Nigeria’s sleeping non-oil export fly high…

FIIRO, in collaboration with ASSETS, run by Shade Bembatoum-Young. Elemo admitted awareness is low for FIIRO “may be because we are scientists who devote our time to research”. But now she believes FIIRO needs to shout out.

Said Elemo: “We believe research should be properly done and articulated for publication. This is why our collaboration with ASSETS is particularly important to me – it is in line with my vision for commercialisation of research results. We are mapping out strategies for the commercialisation of research results.” For her, “It is important that we are earners of forex and not spenders”.

“FIIRO has always been in research and our results are tested,” she said. She cited in particular that sorghum which the brewing industry in Nigeria uses today, was introduced to the industry by FIIRO. Before its introduction, barley was imported for production of beer.

FIIRO’s paper presented by Dr Dele Oyeku, director, Extension and Linkages Department, at the workshop, advised we should look inwards because what we have “can make us millionaires”. For FIIRO, the best we can do now, as business people, is to add value to our raw materials and export them.

FIIRO, according to Oyeku, has developed over 250 technologies and the institute takes investors from idea creation, through production process to the market.

Garment industry

“We don’t have a garment industry in Nigeria,” Wumi Oluwadare, CEO/Master Trainer W-Art Design told participants at the workshop. Oluwadare knows her onions. This is expected from someone who has been in the industry for more than 30 years. She explained: “Every sector has a value chain. We don’t have to do everything. All you need do is to focus on a particular segment of the value chain. One major area we concentrate on is fashion; we know very little about textile. We have cotton but we export our cotton and import textile. We need to do more on capacity building. There is so much we are not doing because we do not have the knowledge.  I stick to designs; someone else should take it up from there.”

Oluwadare recalled a report by UNIDO says our schools offering textile design course are 40 years behind. It is as bad as that.

Must we export yam tubers now?

Raw yam export draws spirited comments from stakeholders, reports SIAKA MOMOH

The Minister of Agriculture and Rural Development, Chief Audu Ogbeh, strongly believes Nigeria must export yam now. He is very passionate about this just as he is passionate about making Nigeria great in agribusiness. So on June 29, 2017, he kick-started the project with 72 metric tonnes of yam export to Europe and America.

For him, “there is no reason to be anxious about what the new initiative of the federal government on yam export portends for the populace”. He specifically said those “who are apprehensive about possible non-availability of yams for local consumption as a result of yam export need not be”.

The argument of the agric ministry:  ‘Nigeria has consistently been reckoned globally as the largest producer of yams, at various times, accounting for between 65 and 76 per cent of the world production.

A report by Factfish, a research agency, disclosed that, in 2014, an estimated 45.0 million metric tonnes  of yam was produced on 5.4 million  hectares of farmlands at (8,309 kilogramme or) 8 metric tons per hectare. This was an increase over the 2013 figure estimated at 35.6 million metrics and 2012 production of 32.3 million metric tonnes, following annual production fluctuations ranging between 26 million metric tonnes  and 37 million metrics  from 2001 to 2011.

Ghana, by contrast, as the third largest producer in West Africa after Nigeria and Cote d’Ivoire, produces 11.2 per cent the world total, but accounts for over 94 per cent of total yam exports in West Africa, with about 90 per cent of its yams exported to the US, Canada, UK and other European countries…’ 

The summary of the ministry’s argument is that Nigeria is a big yam producer, World’s number one producer, post-harvest loss is endemic, and there is no shortage of yam for home consumption.

Stakeholders of the Export Advocacy Group react (abridged) as follows:

It is time to scale up production and it has to be deliberate, if we don’t export yam Ghana will help us to export our yams; then we will lose out either ways- that is, no foreign exchange and not enough yam for local consumption.

-Arnold Jack

According to the May 2017 report by the Nigeria Bureau of Statistics, 1kg of yam goes for N256. This means that 72 tonnes of yam would have a street value of N18 million. Do the maths. Forget that this is less than 50% of the volume of trade on a good day in Katsina Ala yam market every week. Anyway, the yam was well packed, and then freighted to the US and UK.

Let us assume that the packaging and freighting cost N3 million (and it might be a lot more, given that yam is heavy). So we have about N15 million net worth of yam (18 – 3 = 15). Assuming we sell it at twice the price, we would make a profit of N15 million. Again, let us assume that we did not incur additional cost in the transaction. So, here is the summary: we exported 72 tonnes of yam, and made N15 million. Good business, good profit.

Now this is where I am going with this: if 72 tonnes of yam is processed to pharmaceutical grade starch, (PGS) (that is the major component of tablets and capsules), we will get about 9.7 tonnes of pure PGS. I am a pharmacist, I know. Depending on your source, pharmaceutical grade starch goes for anywhere from $20 – 40/kg in the international market. And you can Google this up. Pa Audu’s 72 tonnes of yam is therefore worth a princely N102 million if it was processed to PGS (assuming it is sold for $30/kg, just to be conservative). So, N18 million worth of yam, processed to N102 million, profit of about 84 million.

The question is, has Pa Audu made N15 million or lost N84 million?

Imagine, for instance, that Benue State was interested in setting up a starch production plant in Katsina Ala. Would we need to export 72 tonnes of starch to make N15 million, instead of making N84 million? And this is a state that makes a pitiable Internally Generated Revenue of N250 million per month. The same Benue produces arguably half of the oranges in the country but there is no single fruit juice making industry in the state. This is not about Benue.

Nigeria produces 50 million metric tonnes of cassava annually, 20% of world production according to FAO, but what do we do with it? We convert it to fufu and eat. Zero percent is processed to PGS or other value-added products. If only half of it is processed to PGS, we would be making N35 billion per annum in sales. Again, open Excel and do the maths.

So we have Audu exporting yam, exporting jobs, losing revenue and feeling cool. And we have Gov. Ortom in the background, loving the spotlight of this new enterprise, waiting for applause. He cannot see the opportunities and the waste. He cannot understand why IGR is only N250m/month. Then we have the federal government exporting crude, exporting jobs, messing us all up.

Then we have us eating 50 metric tonnes of cassava, converting it to pooh when we can convert it to cash. Yet we are called a developing Nation.

  • Anonymous

My concern is what yam is saying now price wise in the market. A tuber of yam costs between N600 and N1000+ in Lagos where I live. In fact, bread is currently cheaper than yam. We are rushing into export when we  have not satisfied the home market. Why?

Exporting our commodity raw is modern day slavery. If we must export at all, we should meet our home demand first and add value to the products we export. With value addition, we will earn more and we will create jobs.

Forget about the talk of Nigerians and allied consumers need for yam outside our shores. A large percentage of off takers of our consignments will be the factories of these  cosmopolitan countries who will eventually sell their end products to us. We see this with cocoa, sesame seeds, cashew nuts, sheabutter, raw rubber, etc (recall the death of Dunlop and Michelin).

I know what I am talking about because I am old hand in the industry. I have managed a bonded commodity warehouse in Lagos( away on sabbatical from journalism) and have reported industry and agriculture most of my years in journalism.

Agreed Audu Ogbeh as a farmer is passionate about agriculture and so wants to do all that we make us excel in agribusiness, but he should please tread carefully. Ghana is exporting yam, and so what? Do we have the same challenges looking at our demographics? Lagos State alone is bigger than Ghana. How many mouths is Ghana feeding? If you ask for my opinion, I will say suspend the export now until the time is ripe for it.

-Siaka Momoh

I wish to add that satisfying aggregate domestic demand is very paramount before exporting to stabilize domestic prices which are based on demand versus supply factor. While we take cognizance of satisfying local demand, we should at same time (through export advocacy group like ours working with other public/private export agencies) prepare a feasible and realistic road map for venturing into Africa/world export market with domestic peculiarities, regulatory framework and market access critically considered and reviewed before we launch out our products for export so as to reap the benefits rather than make our economy worse off.

-Andy Ogba

Yam is worth its name in dollars. Let us get our statistics to be very precise. First of all, amongst the top 5 countries producing yam  in the world, Nigeria is the largest yam producer with 68 per cent of global production of 40.5 million  metric tonnes.  Ghana’s comes second and produces 7.0 million metric tonnes; Côte d’Ivoire, third  on the league, produces 5.7 million  metric tonnes ; Benin Republic, no four on the league, produces 3.2 million  metric tonnes;  Ethiopia at the rung of the ladder, produces 1.2 million  metric tonnes. Sources: FAOSTAT data 2015 (Annual yam production for top 5 producing countries).

Because of poor storage facilities, 40 per cent of our annual production rots away in the barns and markets. It therefore makes economic sense to export the export capacity, when a kilo of yam costs five dollars in Texas where you have over one million diaspora Africans.

-Anonymous

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