Questions answered in this article: - What is the value of logistics systems to agricultural input and produce; and how much improvement does current infrastructure need? - What must markets under Tinubu's Renewed Hope plan do differently to put produce coming out of the 28 million hectares of land to good use? - How much could go into operating and financing the Renewed Hope agenda?
We had previously introduced Bola Ahmed Tinubu’s Renewed Hope agenda for Nigeria as he ascends into his new position as the President of the Federal Republic of Nigeria. Despite its audacious promises, we established that the plan has some merit, especially when considering it in tandem with the production potential that Nigeria’s spare arable land offers.
Previously, we considered one part of the three components of an effective agricultural system that must be in place for the plan to work. The article looked at land clearing and what efforts must go into achieving the scale Tinubu envisioned when crafting his manifesto.
This article seeks to pick up from where the previous one ended and delve into logistics (or road) and what needs to be done to build a system that can support these big promises. It also looks at the business end of turning the work into value for farmers and other value chain actors.
Logistics (road) for Tinubu Renewed Hope plan
In big words, road in agriculture includes everything that supports the movement, storage, and preservation of inbound and outbound supply chain components of agricultural production and utilisation. Simply, it means transporting, storing and preserving agricultural input and produce.
Transportation
It is tempting to believe that road requirements for agriculture can easily plug into the available road for all other economic considerations. However, it demands closer and differentiated consideration because of the peculiarities of agricultural production, which is primarily rural-based, and the perishable nature of its primary product.
Furthermore, as the agenda states, doubling cultivated agricultural land and other system components that support it may require at least doubling the existing road structure. It could need as much as tripling it to achieve efficiency gains through proposed mechanisation, irrigation, a new profile of highly productive farmers and digitally enabled extension, monitoring, and evaluation capacity.
Just 31% (60,000 km) of Nigeria’s 195,000 kilometres (km) road network is paved. This leaves 135,000 km of unpaved roads primarily supporting rural economies where agricultural production takes place. As such, it creates a significant gap between agricultural road needs and availability.
Even where roads are available for rural usage, the quality is usually questionable, translating to hectic and extended travel times for its users. Sometimes, its nonexistence cuts off users that need it, especially for their trade. Farmers and other agricultural industry users bear the brunt of this.
It is not unusual to spend up to 10 hours for a 1-hour journey on some major Nigerian roads, so experiences on tucked-away rural roads are better left to the imagination. An effort that seeks to double Nigeria’s cultivated land by clearing 28 million hectares of farmland must create roads to reach them. Suppose the current 135,000 km of unpaved road mainly serve the rural communities and their economic system that is predominantly agrarian. In that case, it is safe to assume that at least another 135,000 km of road must be made to reach the newly cleared farms as the number will have more than doubled. However, discounting for inhabited communities that will still host farmers, at least 70,000 kilometres of new rural roads must be considered and most likely built to sound quality to serve the newly cleared land optimally.
Vehicles and drivers must layer on roads to complete the transportation system. In some cases, specialised vehicles and skills, such as those required for cold chain operations, will be required to transport perishable goods.
Agricultural transportation may be categorised into primary (for the last mile) and secondary (for the long haul), with particular requirements in vehicles and skills.
Deliberate efforts must be made to incentivise investment in the capital and operating requirements for these categories of agricultural transportation.
The proposed removal of petroleum subsidies may add another complexity to the availability and affordability of agricultural transportation. Typically, any increase in fuel cost is passed to producers in inflated transportation prices. The government will have to consider this and find ways of blunting the effects of petroleum product price shifts to maintain its land-clearing effort’s positive impact.
Even though nascent in its development, rail should contribute to the road segment of Nigeria’s agricultural system. A functional rail system will more efficiently handle the bulk of the secondary transportation requirements because they have more capacity to haul lots of produce at once.
Storage
Storage is a significant consideration when agricultural products are on the road. Produce must be held in standardised storage facilities to maintain good quality while reducing or eliminating material loss.
Loads of produce will come from the 28 million hectares of land proposed to be cleared, requiring different storage types and sizes. Storage needs can range from primary storage in dry goods warehouses to strategic storage in silos and specialised storage in cold rooms. These storage facilities must also be mapped to farms and markets as they are moved from production to consumption.
Assuming Tinubu’s cleared land will perform optimally, the administration will have to think about how it will store about 100 million metric tons of agricultural produce. Otherwise, a significant quantity of its output could be lost to a lack of storage after clearing land and producing on it.
Of importance and direct responsibility to the Federal Government is the country’s strategic storage capacity in the form of silos and others. 1.3 million metric tons of silo capacity in 33 silo sites across Nigeria is currently available for strategic grains reserve. Although current capacity utilisation fluctuates around the low 30%, there will be a need for both optimisations of existing capacity and increasing capacity, as this is important for a working agricultural system to deliver essential outcomes in food security and price stability.
Since the president also wants to engage agriculture as a foreign exchange earner, he must make the same road efforts for exports as he makes for local consumption. Therein lies additional work as quality standards of export markets, especially the developed parts, are usually high and more stringent. Meanwhile, Nigeria’s quality sometimes falls short of these standards. There must be world-class storage facilities that retain quality standards with transparency and traceability elements that comfort consuming markets, and translate to actualised trade and the desired foreign exchange.
Though there is available capacity that supports the road component of our agricultural system, there is a need to optimise and build additional capacity to make Nigeria food secure and a net exporter. The administration must keenly consider this for effectiveness, efficiency and impact across segments and categories.
Market
At the business end of Tinubu’s outlook for massive investments that add 28 million hectares to Nigeria’s cultivated land stock is the market. It cannot be left to the whims of fate and must be intentionally developed as the rest of the systems.
Typically, the market should be the first consideration and other components, such as road and farm needs, are worked back to support the available and target markets.
If promises are to be kept in this case, we will work with what we have and create markets for the produce and products of 28 million hectares of the land promised in Tinubu’s manifesto.
The ultimate beneficial outcomes of the land clearing effort will be socio-economic elements like food security, good-paying jobs, and foreign exchange earnings, which will only be derived from the exchange of value in markets.
The market components of Tinubu’s brand-new addition to Nigeria’s agriculture system must transform primary produce into products that are usable and attractive to consumers through value addition. It must create marketing and distribution capacity at the last mile while creating consumers who can afford them across price and value segments, locally and in export markets.
Tinubu’s administration must also create physical and non-physical market infrastructures that will serve financiers, producers, service providers and consumers. This must start with a financial market facilitating financing through equity, debt, and grant arrangements.
The proposed undertaking requires massive investment from public, private and people entities. Financial markets must be supported by structures like credit guarantees, revolving debt and equity loops, developmental interventions, and incentives for foreign direct investment, amongst several workable considerations.
At the least, board-led commodity exchanges must create guaranteed markets for primary producers. With this, farmers have assured revenue both in times of scarcity and glut, while stabilising prices to incentivise them to produce at decent returns.
Other primary produce market arrangements, such as physical market infrastructures that are locations and commodity-influenced, must ensure that farmers get access to offtake of their produce, on time, in full and at fair pricing. Market arrangements must blunt speculators and middlemen’s effects in price swings which affect pricing down the chain and harm the farmers, the primary producers.
Secondary markets must be created and regulated to support the availability of commodities and financing for farmers and off-takers. Financial arrangements riding on produce situated at commodity exchanges can support price stabilisation. They can also serve as an asset class to secure credit for farmers during financial needs. Additionally, they help maintain inventory value during gluts and negative price swings.
Wholesale and retail markets for end products must be encouraged and created. First, by ensuring consumer availability and product affordability. These are cross-sectoral macroeconomic considerations that must form a broader agenda of increasing the income of the majority of the population and reducing poverty. Otherwise, who will consume the output of 28 million hectares of land if most people are poor? The positive here is that, as efficient economies operate, the same system that supports clearing the new land will also create a consumer base of about 10 million people. However, other efforts in other sectors must contribute to market creation.
Modular processing
Farm-to-factory-to-wholesale-to-retail-to-consumer infrastructure must be improved to move produce from farm to factory, and products from factory to store shelves, where consumers can find them and derive utility for them. Though there exist market systems that support farm to table, doubling Nigeria’s agricultural production in a short time like 4 years will require deliberate effort to increase the capacity of those systems, especially with government intervention to reduce the barriers to a private sector-led rapid expansion.
Export support
As Nigeria seeks to wean off dependence on oil as nearly the only foreign exchange earner, and pass more responsibility to agriculture, deliberate effort must be ascribed to creating acceptance for our agricultural products in target foreign markets. These efforts include promoting products and services; and easing logistics to get them there competitively.
A great deal of work needs to be done here on many fronts. To think that Nigeria has not managed its image well around its people, which is arguably its greatest export for now, speaks to the effort that will be required to manage the image its products. Deliberate perception enhancing efforts must be undertaken. Nigeria’s missions overseas must be tasked to become useful and deliver this. Multilateral trade arrangements that Nigeria is a part of such as AGOA, AfCFTA and provisions of the WTO must be deliberately tapped for benefits to Nigeria’s agricultural exports.
Structural issues abound in the agricultural value chain that may increase cost of export and reduce competitiveness. These issues range from in-country cost of production due to inefficiencies of such things as utility, security, etc.; to tariffs such as excise duty, multi-agency fees and taxes that exporters face in Nigeria, and logistics such as port inefficiencies. All of these must be removed to create the right environment that encourages production for export and ensures competitiveness for Nigeria’s agricultural exports in target markets.
Operating and Financing The Agenda
Taking the clearing, cultivation, and conversion for economic benefit the output from 28 million hectares of land from a wish list to reality will require operational mettle and financial muscle. All the system areas discussed earlier in the article must be considered for financing, operations, and integration into national socio-economic structures. The aim is to improve efficiency and effectiveness, while avoiding hinderance by legacy structural inadequacies.
A 2022 study, commissioned by the Netherlands Enterprise Agency, estimated Nigeria’s agricultural financing demand at least US$ 200 billion. While a lot of this financing requirement will be deployed at storage, transportation processing, market and human capital requirements, it is difficult to ascribe exact value to those downstream elements. The previous article ascribed US$ 78 billion as cost consideration to Tinubu’s immediate promise to prepare 28 million hectares of land using market pricing of those elements as services, and assuming that cereal crop will be grown on the cleared land.
The table above shows the following:
- Average land clearing rate of 1 hectare of land across Nigeria as of April 2023
- Average cost of bundled mechanization of crop production on 1c hectare of land comprising ploughing, harrowing, ridging, spraying, and harvesting as of April 2023
- Average cost of irrigation of 1 hectare of land
- Economics of Production: Cost of input and other operating expenses to cultivate rice on 1 hectare of land
- Upstream components consist of storage, transportation, processing, markets, and capacity building.
The first three are activities Tinubu promised in his agenda while the last two are what must be added to make it work.
An army of farmers, processors and other value chain players will be required to operate the farmland and convert their output to economic benefits. If 28 hectares will be held by one farmer (which is like 9 times the current average smallholder farmer landholding), 1 million farmers will be required to cultivate the entire 28 million hectares, with the average farmer employing about 10 people, aggregating at 11 million farm owners and farm hands.
About 4 thousand processing mills running at a 100 metric tons per day capacity will be required to process the output of 28 million hectares at 4 tons per hectare. The average mill will hire 20 people to support its operations from inbound supply chain management to marketing and distribution. This will require about 80 thousand well trained personnel for these jobs.
72 thousand units of 30-ton trucks taking an average of 2 trips per week will be required to move the produce and products across the agricultural system in secondary transportation. About the same number of smaller trucks will be required for primary transportation, taking an average of 1 trip per day. To operate a truck will require at least 1 driver and 1 assistant, translating to about 288 thousand transportation jobs.
To store the total output will require about 23 thousand storage facilities that can take an average of 5000 metric tons of farm produce, and about the same for processed goods. With each storage facility engaging an average of 5 people for its operations, about 115 thousand hands will be required to run the storage facilities required to support the proposed system.
Production activities related to Tinubu’s quantitative agricultural promise requires an estimated 11.8 million jobs. We can assume that it may need another 20% for administrative and management duties. Thus, it aggregates overall to about 14 million operational jobs.
Can Tinubu’s Renewed Hope agenda work?
One can only know the full extent of Tinubu’s proposed national undertaking in agriculture when effort go into proper planning. When we start seeing serious considerations and even commencement.
However, this article (and the previous one) has tried to highlight some of the linear considerations required to support a system that will deliver the cornerstone of his agricultural outlook. Although only the promise of land clearing has quantitative measures in his manifesto, the articles further expand to include the system that will translate it to economic benefits.
Granted, Tinubu’s outlook is audacious and ambitious, and may look like another empty campaign promise or even a joke. However, agriculture’s contribution to the solutions for Nigeria’s socio-economic challenges, while hitting its productivity and value potentials require such big thinking, as there is hardly any other way to do it. To deliver even a fraction of Tinubu’s outlook will deliver huge gains for Nigeria across several socio-economic dimensions, especially in such critical areas as youth employment, food security and foreign exchange earnings. Also, to deliver it must seriously engage multisector and multinational capacity, while using market forces as the drivers, and engaging government structures to remove barriers that hinder enhanced outcomes.
This plan requires a lot of new thinking and serious political will in areas such as a financing, farmer capacity enhancement, ventures for value chain alignment, export facilitation, pricing mechanisms and proper administration both in Nigeria and beyond, for efficiency, effectiveness, streamlined bureaucracy and overall competitiveness.
This must not be a joke, it must be done, and I wish Mr. President all the best.
