The Problem With Nigerian Rice Is Not Stones
Understanding the issues as Nigeria 'diversifies' to Agriculture
FAAC Shares A Smaller Sack (*Don't Leave Me!)
If you want to know how beautifully or poorly the Nigerian economy is doing, there are a lot of figures that can aid you. You can look at the unemployment rate — which is projected at 33.6% (or 39.4 million people) by year-end 2020. There's average household wage which is at a measly N11,000 monthly. There's also inflation rate, which could go as high as 15% before the year ends. And those are just three figures.
But, if you want to use actual government spending to measure economic growth, then the monthly FAAC allocation is a good place to look.
FAAC, short for Federation Account Allocation Committee, is the monthly pool from which the three tiers of Nigeria's government, including Federal, State and Local governments literally sit down to share all of the country's monthly revenue, including monies gotten from oil sales, signature bonuses paid by oil firms, Customs revenue, tax revenues including CIT and VAT, and other monies.
But the FAAC allocation pool is getting smaller.
In May, the three tiers of government all shared N547.3 billion, compared to the N669.9 billion that was being shared around this period in 2019. That's a N122 billion deficit.
And it could be worse. If oil sells for $30 till 2020 ends and other cuts persist, then the average monthly pool available for FAAC allocation could go as low as N485 billion. Worse, if oil sells for $20 alongsides other declines, Federal, State and Local governments could be forced to share only N453 billion. And it only keeps going lower for as long as oil declines and other IGR revenues get thinner.
So what's the drill? Your Grandma who is a pensioner might not receive her August pension if the FAAC pool gets seriously lower. And the interstate road might also not be fixed. In fact, everything in both recurrent and capital expenditure portfolios of all government institutions stands at risk. Meaning that Nigeria needs to either make more money, and/or reduce massively it's expenses, all in the shortest term.
Agriculture: My Lord, May I?
At the 2009 U-17 World Cup, a player by name Sani Emmanuel won the Golden Ball, and he was one of Nigeria's truly remarkable young stars at the tournament. But he remains an unforgettable footballer because he was our “Super-sub” at the tourney — the coach brought him on each time we badly needed a goal, and he always scored.
Agriculture does the same job for Nigeria's economy.
Each time our economy is doing badly and you ask the average politician what we need to do, they look you in the eye and tell you we need to “diversify” to Agriculture. But how, nobody says.
In the FG's recently released Economic Sustainability Plan, there was much ado about agriculture, as always. The Economic Sustainability Committee agreed on embarking on a “mass agriculture programme” expected to bring between 20,000 and 100,000 hectares of new farmland under cultivation in every state of the Federation. The aim of the programme is stated as that of creating about 5 million job opportunities directly and indirectly over a 12-month period, while also ensuring food security and reducing pressure on our foreign reserves.
But again, let's look at the how.
Essentially, the 12-month program works on a 'farm to table’ plan involving three large segments including:
1) Services and Inputs: Here, Small-holder farmers (SHFs) will be supported with services and inputs including land-clearing, ploughing, provision of seeds, saplings, fertilisers, pesticides, etc, as well as extension and storage facilities to reduce post-harvest losses and equipments;
2) Financing: Small-holder farmers will be granted access to low-cost input loans more likely at a rate of 5%;
3) Off-taking: The produce will be purchased by large conglomerates, agro-processors, commodity exchanges and relevant agencies for government strategic reserves.
The FG also promises extensive construction of rural roads to ensure seamless access to farms.
The Misconception — Not All Agriculture Reduces Poverty
Agriculture can be a good thing, but again, there's a tendency for many people to speak in glowing terms when it comes to Agriculture. Many will remind you of the “good old days" when oil had not soiled our land and the mainstay of the Nigerian economy was Agriculture.
But Agriculture without the corresponding value chains is only subsistence farming, and it does not actually lead anyone out of poverty, talk less of really enriching its practitioners.
In fact, in the Nigerian Bureau of Statistics Poverty and Inequality Report of 2019, 58.76% of males and 37.75% of females who were primarily engaged in Agriculture were poor, by far the highest figures for a single occupation. What's more? Lagos had a poverty headcount rate of 4.50, the least headcount rate of all 36 states in the Federation, a state with the primary occupation of most residents being in trade and services.
So yes, while Agriculture can and does employ a large number of rural Nigerians, it does not offer the best path to financial freedom. Except, note, there's a clear path to profitability contained therein, like the FG's earlier vaunted plan.
No doubt we can massively reduce our balance of payments on food if we take Agriculture seriously. We can also reduce poverty (currently at 40%) if we develop the Agriculture value chain so that subsistence farming is reduced and the commercial part of Agriculture is emphasized, including the ‘Farm to Table’ process.
But will we do it? That's another question.