“The agriculture ministry … has tended to be controlled by what we refer to as the fertiliser mafia.”
So said Femi Edun, managing director of Lagos-based Frontier Capital, during the recent Africa Economic Forum in Cape Town.
Although Edun didn’t elaborate on the exact workings of the “fertiliser mafia”, Nigerian President Goodluck Jonathan last month also mentioned previous corruption in the fertiliser industry. In an interview with a Swedish journalist, Jonathan said that his government had succeeded in tackling corruption in fertiliser procurement and distribution.
“Corruption is not just one group of people. Look at fertiliser. When government used to distribute it, there was a lot of corruption. Today the farmer buys fertiliser directly from the manufacturers and dealers. The government subsidies the fertiliser. We give farmers tokens so they can buy it and cut out the middleman. So corruption is reduced,” Jonathan said.
Edun also expects big things from Nigeria’s new agriculture minister Akinwunmi Adesina. “We have a finance minister that came from the World Bank and is quite well-known in financial circles internationally. We now have an agriculture minister of equal stature in terms of his knowledge, his experience … and what he intends to do. So there is a new initiative that is going on in agriculture that seeks to fix some of the problems in that sector, and also harness the opportunities.”
Adesina is former vice-president of the Alliance for a Green Revolution in Africa (AGRA) and is generally seen to be a competent person.
“Adesina took the government out of fertiliser distribution, as corruption made a mockery of its attempts to get fertiliser to poor farmers,” commented Charles Robertson, global chief economist of Renaissance Capital, last year.
Pan-African asset management group Imara is also upbeat about reforms in the agriculture sector. “In agriculture, for example, which is 44% of GDP, each crop’s value chain has now been analysed and proposals made,” commented Jon Chew, manager of the Imara Nigeria Fund, in a recent statement.
Historically, Nigeria had a large global market share in crops like cocoa, coffee, cotton, ground nuts and palm oil. “If this share had been maintained, these crops would now be a US$10 billion industry – 5% of GDP … These industries fell into ruin because the government took over the marketing of these commodities … Corruption set in and farmers had given up, but change is on the way,” said Chew.
He explained that Nigeria’s “new economic team is now encouraging private markets on the basis that if farmers get the correct price (and tariff protection in the early days) they will start to produce again”.
According to Chew, the previous failure to encourage private enterprise had created various structural problems. For instance, the local subsidiary of Unilever had not expanded into a basic product line like shampoo as Nigeria no longer had any local supplies of the basic raw material, palm oil. However, expansion of the brand’s range would become feasible once reforms ensured reliable local supplies.
Word on the ground is that large palm oil plantations are being planted by Indonesian entrepreneurs and preparations are being made to set up a new rubber plantation.
He added that reforms in the agriculture sector would bestow significant benefits on the economy.