Analysis of the Cashew Value Chain in Nigeria. African Cashew initiative

Transcription

1 Analysis of the Cashew Value Chain in Nigeria African Cashew initiative 1

2 African Cashew Initiative is funded by: and private sector partners Implemented by: In cooperation with: Published by: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH International Foundations Postfach 5180, Eschborn, Germany T F E Ulrich.Sabel-Koschella@giz.de I Place and date of publication: Germany,April 2011 Authors: Alois Große-Rüschkamp, Clive Topper, Ernst Grenzebach Responsible editor: Rita Weidinger - Executive Director African Cashew initiative (ACi) 32, Nortei Ababio Street Airport Residential Area Accra, GHANA T F Contact: cashew@giz.de Acknowledgement: This study has been implemented as part of the African Cashew initiative (ACi), a project jointly financed by various private companies, the Federal German Ministry for Economic Cooperation and Development and the Bill & Melinda Gates Foundation. ACi is implemented by the African Cashew Alliance (ACA), the German Development Cooperation GIZ, as a lead agency as well as FairMatchSupport and Technoserve. This report is based on research funded by the Bill & Melinda Gates Foundation. The findings and conclusions contained within are those of the authors and do not necessarily reflect positions or policies of the Bill & Melinda Gates Foundation. Design: creative republic // Thomas Maxeiner Visual Communication,Frankfurt am Main/Germany T I Photos: GIZ/Rüdiger Behrens, Dr. Clive Topper, Thorben Kruse & creative republic, istock, Shutterstock

3 Analysis of the Cashew Value Chain in Nigeria April 2011

4 Table of Contents Executive Summary Introduction Aspects of the Cashew sector Global aspects Nigerian Cashew acreage and production Regional distribution of production The Cashew value chain in the three states visited Production Importance of Cashew Cashew production systems Cashew acreage per farm Ownership and availability of land for Cashew production Yields/ha of raw Cashew nut Marketing and Processing The marketing chains Processing operations Cashew exports Use of Cashew by-products The Institutional environment of Cashew production and sector policy Agricultural policy relating to Cashew Export promotion of non-oil products Cashew research Agricultural extension SWOT Analysis of the Cashew Sector Strengths Weaknesses Opportunities Threats Specific issues relevant for reinforcing Cashew production, marketing and processing Environmental conditions of Cashew production Geographical location of Cashew production in Nigeria Economics of Cashew production Cashew nut quality Use of unproven planting material The domestic market General Conclusions Acronyms Literature Annex 1 - List of Contacts Annex 2 - Economic Data List of Figures Figure 2.1: Global production of RCN Figure 2.2: Map of Nigeria showing Cashew activity areas..15 Figure 3.1: Percentage of Kwara state farmers growing specific crops...16 Figure 3.2: Frequency distribution of the Cashew acreage of the respondents...17 Figure 3.3: Marketing Channels of Nigerian Cashew Nuts...18 Figure 3.4: Cashew Processing (Raw Nut Warehouse Operations)...21 Figure 5.1: Relief map of Nigeria with the visited states: Kogi, K(a)wara, Oyo...32 Figure 5.2: Rainfall zones of Nigeria...32 Figure 5.3: Ecological zones of Nigeria...33 Figure 5.4: Average monthly minimum & maximum temperatures and precipitation, Ibadan...33 Figure 5.5: Contribution of selected crops to a smallholder family income, present situation (Naira per hectare)...35 Figure 5.6: Calendar of recommended activities in Cashew production in the Central Belt...36 Figure 5.7: Contribution of selected crops to smallholder s family income using recommended practices (Naira per hectare)...37 List of Tables Table 2.1: Cashew production, marketing, processing and export volumes estimates (MT)...11 Table 2.2: History/Development of the Cashew Sector in Nigeria...12 Table 2.3: Estimated Cashew areas, production volumes, shares of the national total and yields...14 Table 3.1: Actors in the Marketing and Processing Chain of Nigerian Cashew...19 Table 3.2: Installed and used processing capacity for Cashew...22 Table 3.3: Total share of Cashew funding support...26 Table 5.1: Comparison of Gross Margins and contributions to the family income of selected crops (present situation)...35 Table 5.2: Comparison of Gross Margins and contributions to the family income of selected crops (using recommended practices)

5 Executive Summary Focus of the study and approach The study is based on field work by a mission consisting of 3 international experts during October/November 2010 that analysed Cashew production in Kogi, Kwara and Oyo states in Nigeria. The report contains the conclusions of the analysis and observations how the productivity of smallholder Cashew production can be raised and the market potential be used better. After a brief look at the development of the global Cashew Sector and the role Nigeria plays, the Cashew value chain and Cashew production in the visited three states are analysed and described. This description contains the results of the mission s data collection in the field, specifying the causes of the observed present-day low productivity, and the results of visits to processors of different size, compiling the difficulties they encounter. Possibilities for the improvement of the productivity of smallholder Cashew production are then presented, based on technologies readily available in the country. These improvements include changes in the treatment and care of the trees, their renewal and the planting of new Cashew trees. A check of the economic feasibility of the proposed improvements at the producer s level (micro-economic feasibility) and its impact on the income of smallholders completes the analysis. The present Cashew sector policy is also discussed and some recommendations are given regarding the support of smallholder Cashew production and Cashew processing in the country. The present situation Value Chain Analysis The analysis of the Cashew sector in Nigeria is hampered by a lack of reliable data that prevents establishing clearly the present production levels and clear trends. The development of the sector in the past is briefly described in the main text of this report (see Box 1). There is general agreement, though, that Nigeria is a major producer with an estimated 80,000 to 100,000 metric tons (MT) of raw Cashew nuts (RCN) produced annually, and that about 10% of production is consumed in the country and the rest exported. Secondary and primary data collected by the team lead to the following abstract of the situation regarding production: 5 Since no up-to-date statistical data regarding the number of Cashew producers and Cashew production could be obtained, not even the number of large-scale growers can be determined with confidence. Since small-scale farmers predominate in the country, most of which established Cashew trees without advice by or knowledge of the Ministry of Agriculture and Natural Resources (MANR) or other corresponding state bodies, the total number of Cashew growers may be near 200,000 or even be considerably higher, as the results of a sample survey by Kwara State Agricultural Development Project (ADP) the state extension service, which is named according to the project that supported or still supports it for the season 2008/09 imply: if ADP is correct in stating that 61.5% of the sample farmers own Cashew trees, then projected to the state level there are over 172,000 Cashew growers in Kwara state alone. Equally, the exact size of the Cashew acreage is not clear. An acreage of about 100,000 hectares was most frequently indicated. However, the concept of acreage appears suitable only when relating to plantation-type Cashew establishments. Attempts to represent smallholders Cashew trees that range from single trees to plantation-type plantings and encompass as well situations of a few trees dispersed throughout a field with another crop, hedgerows of Cashew trees and irregular lumps of trees without other crops grown underneath in terms of the acreage they occupy may be responsible for the variation of the acreage figures. Productivity varies from near zero to near 2,000 kg/ha. Statistical figures provided by the Ministry of Commerce that unfortunately appear to contain some gross errors result in an average yield of near 1 MT/ha. However, the field data collected suggest it is most frequently around 250 kg/ha. It appears likely that this figure can be improved through the transfer of production technology knowledge to the producers. According to primary and secondary data, the visited three provinces belong to the central belt of the country in which the bulk of the national Cashew tree population is found. The somewhat dubious figures provided by the Ministry of Commerce (average yield in Kwara state of about 2 MT/ha!) even indicate that almost 40% of the national production originated from Kwara state in 2008/09. This is in stark contrast to the ranking of states indicated in earlier studies, such as that of Ezeagu published in The marketing chain of Cashew is long, involving several actors that buy and partly process RCN, before these reach the exporter (see Figure 5 in the main text). This is due to the structure of production, in which many producers furnish small amounts during a 3-months period in areas, many of which are remote and difficult to reach, leading to high marketing costs. About 90% of Nigerian Cashew nuts are exported, and the bulk of this volume as raw nuts. Only about 15% of the volume destined for export is processed into graded nut kernels in the country and then exported. Still, the final processing and packaging of the kernels for the consumer is almost exclusively done in the consuming countries in Europe and/or the USA. Because of this, only a fraction of the total value added accrues inside Nigeria, and the producers have

6 a low share of the price the final consumers in the importing countries pay. The present installed processing capacity in the country is about 18,000 MT, most of it that of one company, which is at the present time in the process of doubling its capacity. The use of the planned increased total processing capacity of then approximately 33,000 MT would raise the value added in the country significantly. However, competing processors have stopped or have temporarily interrupted their activity during recent years for lack of access to capital needed for investments and to buy and store RCN. The internal market in Nigeria is not saturated and demand appears to be growing. It is now exploited by a few small processors that use low-level technology. The less rigid quality requirements of this market offer an opportunity for small and medium sized processors to expand their operations and would open a way for marketing locally produced RCN, most of which are internationally traded at a price discount of up to 20% (e.g. compared to RCN from Benin) because of lower quality and peeling problems. The peeling problem (difficulty to remove the testa around the nut kernel) is due to as yet unidentified causes and regionally more or less prevalent, while the nut quality measured by the KOR and the nutcount (see the main text for an explanation of these terms) depends on the production technique and the type/variety of Cashew grown, hence vary widely and can therefore likely be improved significantly through technology transfer to the producers. The Institutional framework The Nigerian Federal and State Governments have played roles of varying importance over time in regard to the promotion of the Cashew sector, specifically through measures intended to increase production and exports. Cashew as a crop has been included in various programs. An earlier one is the National Accelerated Industrial Crops Production Program (NAICPP) started in 1994, a later one the Cashew Development Program (under the Tree Crops Development Program), intended initially for the period 2001 to 2004, and the establishment of 3 Commodity Development and Marketing Companies, with one of these for tree crops (see also Box 1 in the main text). MANR s Tree Crops Development Units (TCDUs) of various states have in the past supported Cashew production activities linked to the Cashew Development Program. In Oyo state some new plantations were created, have since been rented out to private persons. Little support is provided to producers by the units visited in the three states most often it is limited to establishing contact to potential suppliers of seed nuts of the lately favoured Brazilian Jumbo type, seedlings of which mature more quickly than the traditional types and which also produces larger kernels that processors say they pay a premium for. A major role is played by the Cocoa Research Institute of Nigeria (CRIN), which was charged with measures to promote the selection and breeding of local types and introduction of improved varieties/types of Cashew, development of production technology for large-scale production, and promotion of improved production techniques. A visit to CRIN revealed that Cashew is only one of several crops of interest and apparently not the one receiving a high attention. The activities regarding Cashew suffer from lack of funding, vision & purpose and a missing definition of research priorities, plus the loss of experienced staff. In consequence, CRIN s present Cashew activities appear limited to furnishing seed nuts to interested producers from its various plots of trees that also include the Brazilian Jumbo type. Other public entities in the research sector are the Raw Materials Research and Development Council, which recently funded a 1-ton-a-day processing facility installed at Kogi State University that uses mostly locally made equipment and the Federal Institute of Industrial Research (FIRO), which developed some tools and equipment for Cashew processing that did, however, not yet pass from the test phase to that of commercial distribution. Two entities are important for the promotion of Cashew exports: The Nigerian Export-Import Bank (NEXIM Bank) provided the equivalent of approximately 18 million Euros as investment loans to 25 borrowers in the Cashew sector through commercial banks since the year However, the loan volume has dwindled since a peak in 2004 and no loans were given at all during 2006, 2009 and 2010 supposedly due to either lack of collateral of the applicants and the interest rate of up to 25% the final borrower must pay. The Nigerian Export Promotion Council (NEPC) subsidizes the export of certain products, including Cashew. There is an export subsidy of 30% on processed kernel exports and one of 5% on RCN exports, but the bureaucratic procedures involved are tedious and the costs involved to obtain the subsidy make it uninteresting for exporters of smaller volumes. While subsidies are (potentially) given on one hand, on the other hand a grading fee is collected per ton of RCN at state level and the key agents in the marketing chain (Licensed Buying Agents - LBAs) need to pay a registration fee and an annual licensing fee. Economics of Cashew production If smallholders are to benefit from Cashew production there must be benefits, either tangible (i.e. measurable in financial terms) or non-tangible (i.e. other benefits that are not valued in monetary terms). The analysis of the present situation in the three visited states revealed the following: With the present productivity of money or financial terms or improvements in the management of the existing Cashew 6

7 tree population have been assumed that will result in a doubling of the productivity from 2.5 kg/tree and 250 kg/ha in the mostly too dense stands to 500 kg/ha in thinned out and properly pruned tree populations that are also controlled better against damage by fire and insects. A cash flow analysis for replanting or newly planting Cashew trees was also undertaken. Both exercises consider two types of grower: (1) assuming all labour must be paid (medium-sized grower with several hectares of Cashew) and (2) assuming all labour input is done by family labour (situation of the smallholder owning about 2 ha of Cashew or less). Identical production methods and yields were assumed for the two types of grower. Not surprisingly, the labour costs prove to be the largest cost factor for the medium sized grower, constituting over 90% of all costs. These costs are not accruing for the smallholder. Under present circumstances the Gross Margin (Market Value of production minus variable costs) of Cashew is 3,600 Naira/ha for the grower using hired labour and 12,000 N/ha for the smallholder using family labour. After improvements in the management and with a doubled productivity of existing Cashew, these values change to 4,500 N/ha and 21,500 N/ha. If Cashew is newly established and bush is cleared for this purpose, the productivity is supposed to climb to 750 kg/ha (10 kg/tree when the spacing is 12m x 12m). The average annual net cash flow (comparable to the Gross Margin of an annual crop) over a 25-year calculation period is 11,588 N/ha for the medium-sized grower and 37,818 N/ha for the smallholder using family labour. These figures consider growing annual crops among the cashew trees during the first 4 years of the plantation. In the present situation and after improvements, Cashew proves to be a crop that has low economic competitiveness compared with annual crops in the study area. This situation is compounded by the possibility to grow two short-season crops per year in most parts of the visited three states due to annual rainfall exceeding 1000 mm. Other perennial crops like oil palm, cocoa and citrus that thrive in the region also yield much higher returns than Cashew. Even though the investment in itself is feasible, new Cashew plantations can in purely economical terms neither compete with most annual crops (especially vegetables) nor with the mentioned alternative tree crops in the three states visited. Here, the benefits would rather be (i) risk mitigation due to diversification of the cropping system, (ii) the additional utilization of existing labour capacity during periods of low labour demand by other crops, and (iii) the generation of some income during a period when other crops do not provide one. Conclusions The present, generally low productivity of most Cashew production seen in the three visited states can be raised through improvements in the pre- and post-harvest production techniques. In many cases the changes required include the thinning out of too dense stands of trees and/or the reshaping and/or rejuvenation of trees. However, in general the productivity can already be improved noticeably through proper pruning and better protection of the trees against damage by insects and fire. In the visited states, Cashew is at present not competitive in purely financial terms with perennial or annual cash crops, and not even with the staples yellow maize or beans which can be double-cropped due to the high rainfall levels in Kwara, Kogi and Oyo as is shown in section 5.3 of the main report which contains the economic analysis. Even assuming a triplication of the yield from 250 kg/ha to 750 kg/ha (i.e. to about 10 kg/tree) does not change the competitiveness of Cashew compared with other crops so much that installing new Cashew plantations (though an economically feasible investment) would be the preferable alternative for someone keen on maximising his income. In the visited regions Cashew is only of interest for producers that use predominantly unpaid family labour and appreciate that Cashew requires labour input and provides an income mainly during the respective off-seasons. Therefore, any expansion of the Cashew acreage appears better justified in regions where double cropping is not possible, alternative crops are less productive while Cashew remains productive due to its draught tolerance, i.e. in regions with 700 mm or less annual rainfall. In order to exploit existing market potentials better, it seems worthwhile to consider attending to the growing demand in the national market. This would create opportunities for local processors that cannot easily meet the quality requirements of the international market and would stimulate local economies. Regarding the institutional field, it seems worthwhile reviewing the system of fees asked and subsidies granted by Government entities, as these now create distortions in the market. The priorities of the public entities concerned with Cashew research ought to be redefined. 7

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9 1 Introduction The African Cashew Initiative (ACi) project is an activity supported by the Bill and Melinda Gates Foundation and the Private Sector with the purpose to strengthen the global competitiveness of Cashew production and processing in Africa. Its aim is to create additional income for over 600,000 small farmers in 5 African countries during a period of ten years by intensifying the production of Cashew in smallholder farms and by increasing value added through supporting the whole value chain of Cashew especially processing and increase the Cashew kernel exports to over 10,000 MT by The project pursues five objectives in order to achieve the overall project goal: Increase quality and quantity of Raw Cashew Nut (RCN) production, thus ensuring the competitiveness of African Cashew production on global markets, Strengthen local medium and large-scale Cashew processing industries, Improve market linkages along the value chain and promote African Cashew on the world market Support an enabling business environment for Cashew production and processing, Identify and analyse learning areas and implement innovative projects on a pilot basis. The ACi Cashew project is implemented by GIZ in cooperation with three sub grantees: Technoserve, an US nongovernmental organization; FairMatch Support, a not for profit foundation based in the Netherlands; and the African Cashew Alliance, a supranational platform of private and public partners involved in the Cashew value chain. At present ACi supports the Cashew value chain in five pilot countries: Mozambique, Ghana, Benin, Cote d Ivoire and Burkina Faso. According to the Terms of Reference the present study is to: describe and analyse comprehensively the Cashew value chain in Nigeria, determine strengths and weaknesses of the major stakeholders in the value chain, focus on Cashew growing areas particularly in the Western, but as well in the Eastern and Southern part of Nigeria. However, due to security concerns, the study team had to limit its analysis to the three Western Central Belt states of Kogi, Kwara and Oyo, apart from meeting with stakeholders operating at or near Lagos. The analysis was additionally hampered by the general lack of reliable data on the Cashew sector, especially primary production (see chapter 1) and partly by a then ongoing strike of research station employees. The three mentioned states are among the major producing areas of raw Cashew kernels in the country. The results of the economic analysis obtained here are supposed to be transferable to other Cashew-producing areas of the country in the same climatic zone, while the results and conclusions regarding the quality of production and those regarding the value chain s part of marketing and processing are considered representative for all regions of the country. In the analysis, the strengths and weaknesses in the value chain are identified and the potentials for enhancement are explored. Threats that might hamper or impede the development are discussed. Together this covers the four elements of a SWOT analysis. 9

10 Million tonnes 2 Aspects of the Cashew sector 2.1 Global aspects Global production of RCN has since the 1980s increased from around 0.5 million metric tons (MT) to over 3 million MT today. West African countries including Nigeria are considered major producers, contributing 29% to the total volume in 2007 according to FAO statistical data (see Figure 2.1). According to these data, 1 in 2008 Vietnam was the leading producer with 1.2 million MT, followed by India with 665,000 MT. Figure 2.1: Global production of RCN ,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Global production of RCN Source: based on FAO STAT figures % of total 2009 production: West Africa 30% Viet Nam 29% India 21% Brazil 7% Mozambique 2% Others Mozambique West Africa Brazil India Viet Nam Even though some doubts are justified as to the production figures of some countries that are estimates, the general trend is undeniable: Global production has multiplied several fold since the early eighties of the past century, and growth has continued to be strong even after the turn of the century, obviously following a strong growth of global demand for Cashew kernels. 2.2 Nigerian Cashew acreage and production Official Nigerian statistics regarding the Cashew production volume are not existing, as the marketing is largely unregulated and includes local sales to agents at two different levels and acting either on their own behalf or on that of processors and/or exporter (see the section below on the marketing chain). Also, home consumption and direct sales to local customers must be considered in addition. In 2005, Nugawela and Oroch 2 maintained that no systematic data was being collected for the Cashew sub-sector, particularly at the state level and that any data available, for example, the acreage of Cashew, were based on very general estimates and varied widely, e.g.: 375,000 ha according to the Government of Nigeria, 200,000 ha under effective production according to the Cocoa Research Institute of Nigeria (CRIN), Under 200,000 ha according to several other, not specified studies. According to data furnished to the mission team by the Ministry of Commerce the Cashew acreage in 2008/09 was only about 112,000 ha (see chapter 2.2). The FAO STAT database contains an estimate of 660,000 MT for 2008, which is a figure that seems grossly out of range and the credibility of which is undermined further by an unexplained triplication of the volume from 1998 to Table 2.1 below contains figures on produced and processed volumes that have been published in studies during recent years or have been indicated by the resource persons met by the members of the assessment team during October They are considered to be more realistic, also when taking into account the volumes processed in the country and those declared exported. 1 Nov.11 Website search data on web page NUGAWELA, Patrick and OROCH, R.: Cashew sub-sector Strategic Framework Using Cashew sector Markets for Pro-poor Growth in Nigeria. Draft. Abuja, March-April 2005

11 Table 2.1: Cashew production, marketing, processing and export volumes estimates (MT) Reference year Marketed production Processed in Nigeria 2000/ Source (see Annex 3 - Literature Consulted) FAO acc. to Chemonics 2002, Chemonics 2002, New Nigerian Foundation (NNF) Chemonics 2002, Mr. Tunde (Abod Success Investment Co.) at the 2007 annual Meeting of the African Cashew Alliance (ACA) in Maputo * Planned: 2007: : West Africa Trade Hub Cashew Market Study, Part 2 Nigerian Ministry of Commerce 2010 *) Estimated Production Resource persons met during the mission The ambiguity of these figures stems from several factors: Although the planting of Cashew trees was promoted at certain times, a large part of the existing trees were planted by individual farmers in an ad-hoc, generally unplanned and piecemeal way (see Table 2.2); There is no governmental body responsible for the sector that would integrate all actors and establish a priority for determining exact figures. The National Cashew Association of Nigeria (NCAN) which is representing processors and traders lacks the resources to do the needed monitoring; The processing sector is dominated by one major player, OLAM, which a number of national companies compete with and the company did not furnish data on the volume of its exports of raw nuts and the prices; Nigeria is a country with an estimated 135 million inhabitants which constitute an increasing target market for Cashew nuts as a snack, especially for nuts of lesser quality. Some producers and backyard processors cater directly to this local market and their sales volumes cannot be estimated reliably. 11

12 Table 2.2: History/Development of the Cashew Sector in Nigeria According to Ezeagu (2002)* and Nugawela & Oroch (2005), cultivation of Cashew started in the early 1950s, through the efforts of the then, Eastern And Western Nigeria Agricultural Development Associations. The initial objective of these planting programmes was to use Cashew trees for soil erosion control. Very little commercial attention was paid to Cashew due to the prominence of cocoa in the south west and oil palm in the south east. Cashew is mainly a smallholder crop and supplements the incomes of many thousands of farmers across 18 States. A large number of people, mostly in low-income groups, generate an income from Cashew as growers, labourers, harvesters, local merchants/buyers, etc. Women play a vital role in the whole process, from Cashew harvesting to the labour intensive processing of nuts. In-addition, some large private plantations have been established, which are not particularly profitable. In the 1970 s the old Eastern and Western regional governments established Cashew processing units to process the harvest from these government-owned plantations but the factories were unsustainable. Similarly, in the early 1980s the Oyo State government in partnership with private interests including Oltremare, the Italian Cashew machinery company, established a processing factory (Cashew Processing Industries Ltd.) in Ibadan to process the harvest from government-owned farms. The project could not be sustained because of infrastructural and management problems, and inefficiencies caused by government bureaucracy (NNF, 2004). During the 1990s, there have been a number of processing initiatives by private entrepreneurs. OLAM Nigeria Limited, (a subsidiary of OLAM International Limited) was established in It is a major exporter and processor of raw nuts and is extensively involved with other agricultural commodities in Nigeria including cocoa, sesame, rice, cotton, sorghum and ginger. From Nigeria the company started to expand its business with Cashew processing and trade and in the meantime is the biggest processor and trader of Cashew with a share of about 25% of the world market. According to Ezeagu (2002), Cashew exports were not significant until the Nigerian economy was deregulated in 1986, when fixed exchange rates and price fixing of commodities abolished, and commodity boards were wound up. After 1986 a large number of companies and individuals entered the Cashew market, resulting in an increase of production and exports. By 1995, an estimated 16,000 MT were exported and the area under Cashew cultivation was estimated to be in the region of 40,000 hectares. In 2002, according to the Federal Ministry of Agriculture and Rural Development, annual production was 30,000 MT from a total area of 50,000 hectares. However, for the year 2008/09 the Ministry of Commerce furnished estimates on the acreage and production of the individual states of the Federation that add up to 112,000 ha total acreage and a production volume of 105,000 MT (see Table 2), while some key informants of the mission estimated the acreage to be higher, yet estimated similar production volumes of about 100,000 MT of raw Cashew nuts, with 15,000 to 20,000 MT processed in Nigeria and about 60,000 to 80,000 MT exported as RCN (see the following chapters). *) For the indicated literature see Annex 3 Literature Consulted 12

13 One link in the marketing chain that could theoretically be used to register marketed volumes are the Produce Inspection Units for cash crops of the relevant units of the MANR of the State Governments, which do the grading of the products at the point of bulking. However, data on the graded volumes were not available due to a strike in part of the public sector at the time of the mission. Also, since there is a grading charge (1000 N/MT in Kwara state), any resulting data would most likely be understated. 2.3 Regional distribution of production According to the National Cashew Association of Nigeria (NCAN), the Cashew area is generally grouped into 3 blocks: The South West, including of Edo, Ondo, Osun, Ekiti and part of Oyo, The South East, including of Imo, Anambra, Enugu, Cross River and Ebonyi, The North or Middle Belt, including Kwara, Kogi, Benue, part of Oyo and other northern states. Resource persons linked to NCAN estimated that roughly 30% of production comes from the South West, 30% from the South East and 40% from the Middle Belt and indicated Benue, Kogi, Kwara, Oyo, Enugu, Abia, Anambra, Ekiti and Imo as major Cashew producing states. The Cashew acreage for Oyo state alone was indicated as being near 172,000 ha. This information deviates in part from information received after the mission s end, which originates from the Ministry of Commerce (MoC - see Table 2.3 on the following page). MoC furnished estimates of the acreage and production data of the individual states during the seasons 2007/08 and 2008/09 (Table 2.3, columns B to F). They combine to a national Cashew acreage of 100,000 and 112,000 ha for the agricultural years 2007/08 and 2008/09 respectively, and corresponding national production volumes of 125,000 and 105,000 MT. In the ranking of the states according to the production volume estimates of MoC for 2008/09 (column J), Kwara appears as the primary producer with 38% of the total production, followed by Imo, Enugu, Kaduna and Edo. Oyo contributed 1% only (but 7% in the previous year) and Kogi a similarly insignificant volume of 0.8%. If ranked according to the Cashew acreage, in 2008/09 (column E) Kwara is followed by Imo, Edo, Enugu and Ondo. Based on the acreage, Oyo and Kogi gain in significance, then belonging to the 10 most important Cashew growing states with 5.2% and 3.2% of the national total. However, lacking information on the way in which these data have been collected and information that would explain the obvious inconsistencies (marked in red in the table), the data must be considered with caution: There are missing figures (e.g. for Taraba), out-of-range production figures for some states (e.g. for Sokoto and Rivers) and unexplained large changes in the acreage or the production volume between the two years for some states (e.g. Edo, Oyo, Anambra, Osun and Kogi). Some of these inconsistencies seem to be caused by unchecked printing errors. However, the MoC data correspond to the general information on the regional distribution of Cashew production: Even though Cashew is a plant that thrives in semi-arid climates and can therefore be considered more competitive compared to alternative crops when grown in low rainfall areas, its production in Nigeria is for historic reasons (see Box 1) concentrated in the South and the Middle Belt, which receive over 1000 mm of precipitation per year. This means that Cashew is competing there with cocoa or oil palm. The concentration of production and the location of processing facilities are visualised in the following map taken from an earlier study (Figure 2.2; source Chemonics 2). 13

14 Table 2.3: Estimated Cashew areas, production volumes, shares of the national total and yields Rank State 2007/ /09 Change C/E & D/F Share 2008/09 Yield 2008/09 Area Prod. Area Prod. Area (%) Prod. (%) ha (%) MT(%) (kg/ha) A B C D E F G H I J K 1 Kwara ,5 0,1 19,6 38, Imo ,1 0,1 11,5 8, Enugu ,5-1,1 6,7 7, Kaduna ,5-4,7 3,9 7, Sokoto ,7 5, Edo ,3-3,0 6,8 5, Kano ,0-39,1 2,0 4, Ebonyi ,3 0,7 2,9 2, Ekiti ,3 1,7 2,9 2, Delta ,8-0,9 1,5 2, Niger ,2 2,0 3,1 2, Kebbi ,0-0,6 0,8 1, Ogun ,0-0,9 0,8 1, Ondo ,1 0,9 6,6 1, Cross River ,5 0,0 1,4 1, Oyo ,4-85,1 5,2 1, Nasarawa ,1-12,6 2,1 1, Anambra ,2-83,2 4,6 1, Osun ,3-85,8 4,5 1, FCT Abuja ,0 2,2 0, Lagos ,5 0,0 1,3 0, Plateau ,4 2,3 0,9 0, Katsina ,0-12,2 0,5 0, Kogi ,4-24,5 3,2 0, Benue ,8-67,6 2,2 0, Abia ,6-90,9 1,6 0, Akwa-Ibom ,5 0, Rivers ,0 0, Adamawa Bauchi Bayelsa Borno Gombe Jigawa Taraba Yobe Zamfara Total ,1-16,3 938 Source: Ministry of Commerce data, Dec NB: Figures in red mark unexplained inconsistencies in the data Points are separators for figures with more than three digits; Commas mark fractions 14

15 15 BENIN REPUBLIC Figure 2.2: Map of Nigeria showing Cashew activity areas Cashew Production Cashew Marketing Cashew Shipping/Exportation Source: CHEMONICS 2002 Cashew Processing Source: Chemonics International Inc., loc cit. Page 18 NB: Some of the Cashew processing factories indicated in this map have meanwhile closed down mainly because of weak management and/or lack of finance

16 3 The Cashew value chain in the three states visited 3.1 Production Importance of Cashew As described above, obtaining reliable data on the Cashew sector of individual states proved difficult. Especially the number and percentage of farmers who grow Cashew is not or only approximately known in the three states visited. Figure 3.1 with the results of a random sample survey by the ADP in Kwara state covering 20 farmers in each of the state s 16 Local Government Areas (LGA) indicates how many of the interviewed farmers grow certain perennial crops. Figure 3.1: Percentage of Kwara state farmers growing specific crops 70% 60% 50% 40% 30% 20% 10% 0% 62% 57% 30% Source: Kwara State ADP 2009 Sample Survey 5% 3% 1% More farmers in the Kwara sample grow Cashew than any other perennial type of plant, with Mango in a close second place and Banana coming third. Extrapolated to the state level, the percentage of farmers growing Cashew in the sample corresponds to 173,000 Cashew growers state-wide. One can therefore conclude that Cashew is of importance for almost two thirds of the producers in Kwara state. However, since no corresponding data could be obtained for the other two visited states, the percentage of Cashew producers in these remains unknown. Apart from some of the large growers that are specialized on Cashew production, usually a smallholder farm s acreage dedicated to other crops exceeds the Cashew acreage and is used to grow annual food crops (e.g. cassava, yams, maize, guinea corn/sorghum, beans, etc.) and some or other of the remaining tree crops mentioned, e.g. cocoa, oil palm, citrus, as well as banana and plantain Cashew production systems In smallholder farms, various forms of growing Cashew can be identified: Around homesteads, providing shade and apples/nuts, As hedgerows or boundaries, As trees of variable number (5 to 30 per ha) in fields of annual crops, As isolated trees or clumps of trees without another crop, As regularly spaced tree monoculture with 70 or more trees per hectare, depending on the spacing. In the visited farms Cashew was grown either in the form of clumps of trees or as more or less densely and regularly spaced monoculture. Most often and due to the lack of advice before planting Cashew the spacing observed in plantation-style Cashew monocultures was too dense (less than 10x10m) with tree canopies interlocking, which reduces the yield per tree because the fruits mainly develop on the outside of each tree s canopy. Operations are minimised in most smallholder farms and include slashing of weeds once in the rainy season if trees are more widely spaced and the removal of low branches that impede weeding and harvesting. A second weeding under the trees at the start of the harvesting period in February is optional and obviously not carried out rigorously. It also is hardly necessary when the trees form a dense canopy. In a few widely spaced Cashew plantations the slashing between the rows is done by tractor, and as well the slashing and incorporation of vegetation around the Cashew acreage to form a fire control strip. Most smallholders do not carry out this operation at all or only haphazardly due to the high manual labour input required and damage by fire is an experience made by many interviewed growers unless rigid community laws prevent fires, which are often started by cattle herders in an effort to stimulate new growth of grasses for their animals. Also, the control of insects was found to be carried out as needed only in exceptional cases. Several Cashew plantations were encountered that showed insect damage, yet no control measures were undertaken. Most growers reported that they collect nuts fallen to the ground and separating the apples and nuts at this moment by twisting them apart. Few admitted to also pick or knock fruits from the trees. 16

17 No. of cases Most, but not all smallholders, report to dry the nuts on the ground and some on cement pads for one or two days when needed before selling them Cashew acreage per farm Most of the producers interviewed individually grow Cashew on only part of the acreage they exploit, ranging from a few scattered trees to several tens of hectares. The farmers interviewed indicated Cashew acreages ranging from 0.5 ha to 270 ha (see Figure 3.2 below). Figure 3.2: Frequency distribution of the Cashew acreage of the respondents Source: Mission s field data Looking at this Cashew acreage distribution, the following factors must be kept in mind: Due to their better access to information and transport facilities it is more common for the owners of larger farms to attend meetings like the team s kick-off meeting for the visits in Kogi state, which was organized by MANR in Lokoja. Some visits to farms were pre-arranged by members of the MANR or their direct regional contacts. This and the wish to meet farmers who might keep records of yields and inputs led to having more large farmers among those visited. Some smallholder farmers did not know their Cashew acreage and most could only estimate approximately the number of Cashew trees owned. Based on additional information obtained during the mission, the percentage of farmers with Cashew acreages of 5 ha or less seems to exceed the 56% of the total, which the combined total of the lowest three size groups in Figure 3.2 represents, and probably even is in excess of 75%. Also, if the percentage of Cashew growers reported for the sample survey in Kwara is projected to the state level (61.5% of 280,000 farm families in total) and related to the acreage reported for Kwara by the Ministry of Commerce, the average acreage per grower is even lower and only between 0.1 and 0.2 ha. For the purposes of the study, the Cashew acreage of a typical smallholder that produces RCN for sale and has an established proper Cashew plot, is estimated at 2 ha Ownership and availability of land for Cashew production The majority of the surveyed Cashew farmers own their land, while about one third lease it. Those leasing were either immigrant farmers, or farmers leasing Cashew plots established previously by MANR. All informants said that availability of additional land to expand the Cashew acreage was not a problem. This is no surprise as most smallholders have difficulties to obtain fertiliser at the official subsidised price and therefore practice shifting cultivation, in which part of the land is at any time recovering during the fallow period as bush-land Yields/ha of raw Cashew nut There is an obvious discrepancy between the average yields that can be calculated with the data provided by the Ministry of Commerce and the data reported to the mission by key informants and smallholders. The MoC data lead to productivity figures ranging from 153 kg/ha to about 2000 kg/ha (with still higher figures considered to be due to typing errors), and a national average of around 900 kg/ha results from these (see Table 2, last column). In contrast, the interviewed farmers that were able to respond to the question reported yields ranging from virtually zero to 750 kg/ha. Over half indicated yields of 250 kg/ha and less, about a quarter yields between 250 and 500 kg/ha and another quarter yields between 500 and 750 kg/ha. All these numbers must be seen as approximations, highlighted by the finding that almost half of the contacts in Kogi State and a quarter in Oyo State could not indicate their Cashew production volume at all - even for the present year 2010, which is seen as an indication that the yields they obtained were most likely in the lower range. The inability to provide yield data is understandable for two reasons: (1) the total amounts harvested weekly over a period of almost 3 months from February to April are in some cases quite small as most smallholders immediately sell the collected nuts after harvesting. Also the growers do not possess any written sales records and therefore cannot provide a reliable estimate of the cumulative total sold. Often volumes are measured in containers - mudu the size of which varies from farm to farm. (2) Since the Cashew trees on smallholder farms are often not established as a plantation-type monoculture it is difficult to estimate the 17

18 area and usually these farmers do neither know the area, nor the number of trees, nor the production volume. Based on the MoC data for the season 2008/09, low yields of around 200 kg/ha result for Kogi and Oyo, while for Kwara the computed value is 1850 kg/ha. The reported high productivity for Kwara clashes with figures obtained during the interviews conducted by the team and interviews conducted in 2008 in Kwara and Nasarawa by Topper, which also indicated low productivities of around 250 kg/ha. The conclusion drawn by the mission and confirmed by the visual verification of Cashew plots, is that the overwhelming majority of Cashew plots are low yielding, producing around 250 kg/ha or even less. Therefore, in the following we assume an average yield of 250 kg/ha on a smallholder farm with the present production practices. 3.2 Marketing and Processing The marketing chains Figure 3.3 below is indicative of the flow of the raw Cashew nuts (RCN) and processed Cashew nuts (kernels) in Nigeria to the final processors and distributors in the country and overseas. The functions of the various actors in the Cashew value chain are described in more detail in Table 3.1 and in the chapter on processing. The value chain of Cashew in Nigeria is composed of mostly small-scale producers that sell their nuts to sub-buyers (often young men working for the main buyer). These buy very small amounts of Cashew from the smallholders (a few kilograms) and from bigger Cashew producers (one or several 80 kg-bags). Smallholder farmers normally collect mature Cashew nuts weekly and sell them at once to local buyers in order to obtain cash. The small-scale traders in turn sell the Cashew nuts to buying agents registered with MANR (called Licensed Buying Agents - LBAs). The LBAs bulk the RCN and provide them either to processing companies or to exporters of RCN. Cooperatives or marketing associations play a minor role in Cashew marketing in Nigeria, and act mostly like sub-buyers with an established long-term link to their members, the Cashew producers In the Western States buyers from Benin also buy RCN in order to blend them with Benin RCN for export via Cotonou. This is profitable since a large part of Nigerian RCN obtain a price of only 80% of the price obtained for Benin raw Cashew nuts, which are considered to be of better quality. The price difference may reach 25% to 30%. This makes it worthwhile to export Nigerian Cashew through Benin. However, there is no reliable information on the quantity that is exported to Benin. Figure 3.3: Marketing Channels of Nigerian Cashew Nuts Benin (blending) India and Vietnam (processing) Europe and USA (final processing, packing, distribution) Local market (distribution) Backyard processors Exporting companies (RCN) Processing companies (processing of RCN into kernels) Buying agents from Benin Licensed buying agents - LBAs Sub-buyers Cooperatives Cashew producers 18

19 Table 3.1: Actors in the Marketing and Processing Chain of Nigerian Cashew Type of actor Buying from... Selling to... Characteristics / Activities Smallholder producers (<5 ha) Sub-buyers; LBAs; Some (few) cooperatives Over 90% of producers may belong to this group; Usually sell small amounts directly after each picking or after drying Medium producers; Large-scale producers LBAs or agents acting on behalf of established processors or traders Have a notion of nut quality and prices; Dry and may also store nuts before selling to obtain better price Sub-buyers (local buying agents) Producers LBAs or local processors from which they get cash advance; Buyers from Benin Compile small volumes into larger charges; Often young men from villages with some sort of transport vehicle (bicycle, motorcycle); Main buyers of the producers; Varying degree of knowledge about nut quality Licensed Buying Agents (LBAs) Sub-buyers or commercial producers Processors; traders that may or may not give them advance cash Registered with MANF and member of LBA (informal) association; Have good knowledge of nut quality; may test nuts before paying; Also buy directly from larger producers with which they have established long-term relationships; Provide advance to producers and sub-buyers Bulk, transport, dry, store and may to some degree also process (e.g. case of LBAs cracking nuts for OLAM = toll processing ) 3 Processing / exporting companies LBAs or independent buying agents Buyers from importing countries Process RCN: crack, peel, sort, grade, package and export kernels for final processing outside Nigeria (ex. USA/EU) National processors Large processors; LBA Local supermarkets, shops Do final processing of kernels for the national market in different types (spicy, salted) and sizes of packaging (bottles, foil bags) Supermarkets National processors Local consumers Mostly sold in labelled bottles or foil bags Artisan processors (mainly in the South-East) Producers, buying agents Backyard processors (mainly in the West) Crack and peel nuts and sell kernels to backyard processors Backyard processors Street vendors and local shops Artisan processors; Processors Backyard processors Street vendors; local shops Local consumers Portioned packaging in plastic bags (e.g. containing approx. 50 or 100 nuts) 3 OLAM has also outsourced the cracking and peeling to some facilities run by former employees 19

20 The described marketing chains reflect the most common cases but also include less frequent market linkages, e.g. LBAs buying RCN directly from commercial producers and medium sized growers. Not shown are specific and less frequent cases, e.g. backyard processors buying cracked nuts from small artisanal cracking enterprises. The processing companies process RCN into Cashew kernels which they export to the world market - mainly to Europe and the USA. Exporters of RCN sell the product mainly to India and Vietnam, where the nuts are processed and the kernels are then exported to Asian countries such as China and Australia, but to Europe and the USA as well. As mentioned above, most smallholders are cash-strapped and sell the nuts directly after each round of collection. Few are financially able to store the nuts and sell after the end of the harvesting season or still later in the year when the price of RCN increases. This requires proper harvesting and postharvesting techniques, and adequate facilities for drying and storing the raw nuts. In the actual system the nuts are sold by the smallholder producers to any sub-buyer that procures nuts in the villages and is offering an acceptable price. Thus, a producer s buyer may vary from batch to batch that has been collected. The possibility of the producers receiving advance payments to pay hired labour for weeding and/or harvesting are minimal in this system. The case is often different when the nuts are sold to LBAs or Sub-buyers of the major processors or traders (OLAM or national companies like ABOD Success Co.). These do often provide producers with which they have longer-lasting relationships with advance money. Such advance payments are deducted at the time of delivery of the produce. For the producer they signify an obligation to sell at least corresponding volumes of production to the provider of the shortterm credit and this limits their choice of action. For the buyer they is some form / method of ensuring to obtain a foreseeable / the agreed volume of nuts. Even though farmers and LBAs claim that the farmers do not have to pay interest in this system it can be assumed that interest is indeed paid in the form of a lower price that farmers obtain. Since there are no written contracts or invoices or receipts, the system is not transparent Processing operations Raw Cashew Nuts can be processed in order to produce kernels that can be exported to the main consuming markets in North America or Europe, where the final processing (salting/ seasoning and packaging) is done before their distribution to wholesalers and retailers. The processing of RCN to kernels creates value added but this is a labour intensive process that involves several distinct steps (see Figure 3.4 Cashew Processing). About 6 to 7 labour days are needed to produce 20 kg of exportable kernels. Labour costs are therefore a major cost item of the processors and the processing cost depends in large part on the wage level and the worker s efficiency, two factors that favour processing in Asia. According to OLAM, the multi-national processing/trading company of Indian/Singapore origin, the lower efficiency of the workers and the existence of a minimum wage rate in Nigeria results in higher unit costs for cracking, peeling or grading than in India or Vietnam. Since work in Cashew processing is considered demanding, staff turnover has initially been high in Nigeria. OLAM has recently managed to reduce the turnover rate by hiring mainly female labour for processing and by outsourcing the cracking and peeling of RCN. This has helped to improve the efficiency and to lower the cost differential between processing in Nigeria and Asia. 20

21 Figure 3.4: Cashew Processing (Raw Nut Warehouse Operations) CLEANING, SIZING RAW NUT QUALITY CONTROL AND ASSESSMENT STEAMING COOLING SHELLING AND KERNEL SEPARATION KERNEL DRYING AND HUMIDIFICATION PEELING (REMOVAL OF THE TESTA) AND OF EXTRANEOUS MATERIALS GRADING AND SIZING INTO 13 EXPORTABLE GRADES ACCORD- ING TO AFI STANDARDS PRE-PACKING QUALITY CONTROL PACKING AND SHIPPING PRE-SHIPMENT CON- TROL Source: ACET NB: OLAM grade to 27 grades Installed and used processing capacity An investment guide Agro Processing - Processing Cashew Nuts in Nigeria published in the year 2005 lists 8 companies that process Cashew nuts for export. According to different sources only 3 of these companies are still processing: ACET Nigeria Ltd. of Ondo state, Nefraday Farms Ltd. of Ilorin, Kwara state, and OLAM Nigeria Ltd. with one factory in Oyo and one in Ilorin. However, ACET did not process nuts during the last two years and Nefraday Farms did not process any during the last year, leaving only OLAM as sole processor of Nigerian Cashew nuts for the export market during the season 2009/10. Recently a new, small processing factory was opened at Kogi State University (KSU) in Ayingba. The used locally-produced equipment was donated by the Raw Materials Research and Development Council of the Federal Government. The factory at KSU is intended for commercial use and at the present time has a capacity to process 1 MT of RCN per day, equivalent to about 300 MT/year. It is a pilot unit within an intended programme to support the processing of regionally important crops at the local level through provision of processing equipment. The total capacity for processing Cashew in Nigeria for export (i.e. meeting the 13 quality standards mentioned in Figure 3.4) is about 18,300 MT, of which about 80% is used at present. During the last two years nearly 100% of the total processed volume originated from OLAM. 21

22 Table 3.2: Installed and used processing capacity for Cashew Name of Company Location of factory Capacity (MT/year) Processing volume 2010 (MT) ACET Nigeria Ltd. LION COM- MODITIES, Nefraday farms Ltd. Kamalo, Ogun state Ilorin, Kwara state 1,000 0 (2007: 1,000; 2008: 1,000) 2,000 0 (2009: 1,000 MT) OLAM Nigeria Ilorin, Kwara state 5,000 5,000 Oyo, Oyo state 10,000 10,000 Kogi State University Ayingba, Kogi state (Operating since October 2010) Total 18,300 15, Examples of present and planned activities of major actors in the Cashew value chain The activities and approaches used by OLAM Company and of ACET Ltd. and LION Commodities Ltd., two national companies acting in the Cashew sector, are briefly described in the following. OLAM Nigeria, a subsidiary of a Singapore-based company, dominates the processing of Cashew in Nigeria. Of its two factories, the one in Oyo is owned by OLAM, whereas the factory in Ilorin is leased from the Government of Kwara state. Adjacent to the leased factory, OLAM is now constructing a completely new factory in Ilorin with a capacity of 15,000 MT/year. The cracking will be fully mechanised with reduced input of manual labour to reduce the labour costs which OLAM considers high in comparison with other countries in which it operates. During the last year OLAM processed about 8,000 MT of RCN in Oyo and about MT in IIorin. All kernels were exported to Europe and the USA. With the new factory in operation which is planned for the end of this year the processing capacity of the firm will be about twice its actual capacity. In order not to unbalance the market OLAM intends to reduce its exports of raw Cashew nuts correspondingly. The company is at present employing about 600 workers in Ilorin, of which 90% are women. The workers are paid 60 N/kg of whole kernels handled. When processing 10 kg per day, the salary obtained is about 600 N/day (4 US$/day). It may vary both ways depending on the worker s efficiency. The resulting daily wages are equivalent to the wage rates for hired labour in agriculture (800 N/day for heavier, or men s work and N/day for lighter or women s work). To reduce its organizational and logistical problems OLAM follows two strategies: (1) Decentralizing the cracking and peeling by implementing satellite cracking/peeling stations. At the moment it is running 6 satellite stations, which are situated near the processing factories in the surrounding rural areas. OLAM transports the RCN to these stations and brings back the peeled kernels to the 2 processing stations. There the grading, quality control and packing are done for exporting. (2) Outsourcing the cracking and peeling of RCN to former workers, who have gained enough experience. This outsourcing is called toll processing. The contracting partners receive the equipment from OLAM, but have to rent the premises and employ workers at their own risk. The RCN - already steamed - are delivered by OLAM or transported by the local entrepreneurs and the peeled kernels are delivered to the main factory where the grading, quality control and packing are done. The mission visited one local processing factory in Offo - a town near Ilorin - with nearly 100 workers. The owner has to pay back the value of the equipment obtained from OLAM 22

23 on credit within three years. This is done without a formal credit contract, so the local entrepreneur does not know the total investment of his business. The repayment is done by deducting the principal and unknown interest from the amount payable for the processing. The entrepreneur in Offo town is only doing the cracking and is paid 100 N/kg of RCN by OLAM. After deducting 75 N/kg for salaries, 25 N/kg remain to cover the rent for the premises, the supervisor, the costs for the transport of RCN and the kernels and overhead costs such as energy and his entrepreneur s income. Even though the agreement appears not very transparent, the factory owner pronounced himself satisfied with it and reported that this way he earns much more than as a worker of OLAM. The difficulties with the employees, of which also 90% are female, are reportedly less than those OLAM faced because of a more intimate relationship between manager and workers and a resulting higher commitment of the employees to the factory. ACET Ltd. started to process Cashew in the late 1990s. Its factory was built in 2005 for a capacity of 4 MT RCN per day. With 250 working days per year the total annual capacity is about 1000 MT. During the seasons 2007 and 2008 the company processed about 1000 MT per year and exported the kernels. However, during the last two years ACET did not process any Cashew since it could not finance the purchase of raw materials. This was due to two reasons: ACET could not obtain credit from a commercial bank and also has not yet received the export subsidy for its 2007 exports from the Nigerian Export Promotion Council (NEPC) on which it counted. Based on an announcement that during the next few weeks the outstanding payments would be paid the company owner intends to resume processing in the 2011 season. The company owner is convinced quality problems can be overcome by a more direct relationship between producers and processors in which the Buying Agents are bypassed. ACET plans to buy raw nuts from the farmers directly in the future by setting up four collection centres. The owner also plans to contract the Sustainable Tree Crops Program (Africa - STCP) at the Cocoa Research Institute of Nigeria (CRIN) in Ibadan to provide extension support to the cooperating farmers, specifically to improve nut quality. While this is a laudable approach, some doubts remain as to its feasibility, which depends on the capacity of CRIN to provide extension services to several hundred farmers and regarding the capacity of ACET to finance such extra services to the farmers: Assuming the actual average yield of 250 kg/ha and a planned volume of 1,000MT RCN/year, ACET would have to purchase the entire production of about 4,000 ha. Even if the company cooperated mainly with the bigger farmers with an average Cashew acreage of 10 ha, it would need 400 cooperating partners. In order to provide the extension services efficiently, these 400 persons would have to be grouped. With 20 members per group about 20 groups would have to be trained and/or accompanied. This training can be done by one full time technician under condition that transport is available and that extension material has been prepared and is ready for use. Another challenge is the grouping of the farmers because the members of a group have to live near to each other in one or two villages. Experience shows that farmers do not easily trust each other and that effective cooperation among group members is often difficult to achieve. Also, the extension system s costs are significant for a comparatively small processing factory. Lastly, ACET might be unable to benefit sufficiently from this strategy because in addition to the costs of the extension system it would also have to pay its producers a higher price for the raw nuts of better quality, which might eat up / erode the price differential now reaped by the Buying Agents. In Ilorin there is also a Cashew processing facility of the group LION Commodities Ltd. with a capacity of about 2,000 MT of RCN/year. This processing facility also was not producing during 2009 because of financing problems. In previous years processed kernels were exported to the UK, the Netherlands and the RSA. The General Manager told the mission that he intends to resume processing in the coming season but would probably concentrate on the final processing (salting and spicing of already processed kernels) for the domestic market. As yet this seems to be a first idea and there was no clear strategy yet on how to realise this option Processing for the domestic market Besides industrial processing for export markets, some lowvolume processing is already done for the domestic market by so-called backyard processors. These may undertake all operations themselves or get supplies of kernels. Most companies have different sources of kernels: some buy the kernels from OLAM (normally the lower qualities, i.e. broken, small or not white or spotted kernels) and some from artisanal processors, mainly in the South-East. After cracking and peeling the nuts, the produced kernels are sold by street vendors or in local shops usually without any salting and spicing. 23

24 The artisanal processors - in the South-East of the country that could not be visited by the mission - are said to roast the nuts on open fires and crack them using hammers and/or knives. However, one such processor visited in Ilorin was equipped with a simple boiler for conditioning of the nuts and four locally manufactured crackers (copies of imported Indian crackers) and processed about 30 tons of RCN per year. This female entrepreneur is selling the kernels to shops in Ilorin and Lagos. Production was said to be restricted to a period of three to four months per year because financial constraints limit the volume of raw nuts that can be bought and stored. The procurement of the kernels appears to be a big problem for the small-scale processors and it is one of the factors limiting expansion of their operations. There are some other processors that do only the final processing, i.e. the salting and/or the spicing of kernels. The kernels are bought from OLAM and/or from small-scale processors. After the salting or spicing the kernels are manually filled into bottles which are also capped and labelled manually. The quality of the samples bought by the mission in the market was low due to a high percentage of spotted, undersize, broken or not properly cleaned kernels. The small scale processors do the final processing such as salting and/or spicing and packing and sell the final to the local market, supermarkets, hotels or restaurants. All interviewed small-scale processors told us, that they could sell three to five times more processed kernels on the domestic market if they could get kernels and financing for expansion. The total quantity of RCN, which is sold as finally processed kernels on the domestic market was estimated by some small scale processors to be about 5,000 MT to 10,000 MT RCN, i.e. 1,250 MT to 2,500 MT of the final products. Due to high demand and the limited supply the price seems to be very attractive and according to one such processor, the profit obtained is higher than if he was exporting kernels even when considering the added costs of the final processing and foregoing the export subsidy of 30% for kernels. This is because even broken kernels are paid well in the local market whereas they would lead to significant price reductions when exporting Cashew exports The majority of the Cashew produced in Nigeria appears to be exported in the form of raw Cashew nuts (RCN), and only a small proportion as processed kernels, based on the following calculation: Total nut production is estimated at 100,000 MT % (15,000 MT RCN- see Table 3 above) are being processed into kernels during the last two years. The resulting 3,750 MT kernels are exported mainly to the USA and the EU. Another 5 to 10% (5,000 MT to 10,000 MT RCN) are processed by local processors for the domestic market. About 80% of the national nut production is exported in the form of RCN. This volume of about 80,000 MT includes an annually varying volume to the order of about 10,000 MT on average - is going to Benin, blended with Benin RCN and exported as Benin RCN to India and/or Vietnam. The remaining 75% of RCN of the national production are exported mainly to India and Vietnam, where they enter into the processing chain of the national production of these countries. The mission understands that the exporters of RCN dry and bulk the volumes in their warehouses, the Produce Inspection Unit (PIU) give them the required documents after inspecting volumes prepared for shipment and then transport them to Lagos, where they may be stored for some time before being loaded into containers and shipped. Exporting via Lagos port was indicated to the mission as an activity that is hampered by time-consuming bureaucratic procedures and requiring the use of agents Use of Cashew by-products A study by the African Cashew Initiative (ACi), in the form of a draft report 4 assesses the feasibility for 5 alternatives of Cashew by-product use. This is based on an assessment of the situation in Brazil and four ACi countries (Burkina Faso, Ivory Coast, Benin and Ghana) by the Technoserve Mozambique team and a contracted Indian Cashew expert. The study concludes that in the 4 African countries almost all apples are wasted and, if at all, are used as animal feed or in some cases to locally produce small volumes of Cashew juice. The study sees a general lack of awareness of the potential uses in the African countries. The study s findings are also definitively valid for the part of Nigeria visited by the mission. At the present time no use is made of Cashew by-products, especially as the apples are separated from the nuts during harvesting and left to rot even though they are known to possess nutritive value and to be rich in vitamins. However, a merchant and member of NCAN in Kogi state hopes that the extraction of Cashew Nut Shell Liquid (CNSL) is profitable and has arrangements made 4 ACi: By-Products of Cashew processing CNSL and Cashew Apples. Draft version. Sept. 2010

25 to obtain the nut shells from the new processing plant installed at Kogi State University. The feasibility of extracting and refining CNSL as well as that of the other options described by Technoserve, which include the production of Cashew apple juice and Cashew apple plum, the production of alcoholic drinks from Cashew apples, electricity production using apples and nut shells, as well as the marketing of fresh apples for consumption needs to be assessed realistically before any such option should be pursued. In Nigeria any of these variants are subject to various hampering factors in terms of production and marketing infrastructures, poor road infrastructure, intermittent electricity supply, organisational problems, and limited availability of capital for needed investments - apart from the scarcity or non-existence of the needed technical expertise. 3.3 The Institutional environment of Cashew production and sector policy Agricultural policy relating to Cashew The mission did not find any indications that at present Cashew production is promoted by the federal agricultural policy. In fact, agricultural policy seems to be determined by State Governments. The task of promoting and monitoring Cashew production would have to be part of the tasks of the Tree Crops Development Units (TCDUs) of the states MANR. The TCDUs were created in the past, and especially promoted tree crops during the second Obasanjo Government, to recuperate Nigeria s lost position as a leading palm oil and cocoa producer. The TCDU of the federal Ministry of Agriculture and Natural Resources in Abuja was also visited. The TCDU had no information at all on Cashew production, be it the acreage, the volume of processing or exporting. According to the information obtained, no agricultural policy or strategy has been developed regarding Cashew production, and no strategy exists how to promote it, even though the TCDU expressed its interest in the topic This shows that there is no consistent medium or long term policy/strategy regarding the sector be it at the federal level or at state level, and any attempts of support seem to lack an orientation to and analysis of the economic benefits of measures undertaken Export promotion of non-oil products During the recent decade the Nigerian Government made various attempts to promote the production and export of Non-Oil-products. NEXIM-Bank The Nigerian Export-Import-Bank (NEXIM-Bank) was founded to facilitate the production and export of Non-Oil products through credit lines at subsidized interest rates that can be used for investments and for the procurement of raw materials. According to the NEXIM-Bank the total loans provided between Sept and Nov was about 5.9 billion N. Of the total amount about 36% went to agro-industries, 43% to manufacturing, and 21% to other sectors. NEXIM-Bank loans were also used for investments in the Cashew sub-sector and for the procurement of RCN as shown in the table below. In Kwara State the mission visited three producers that have leased Cashew plantations established by the state s MANR between 2000 and According to the members of the TCDU Ilorin, MANR s establishment of 500 ha each of oil palm, cocoa and Cashew plantations in this state was part of an attempt to promote these tree crops. However, subsequently the promotion of Cashew production was reduced to CRIN s provision of Cashew seed nuts to interested farmers. 25

26 Table 3.3: Total share of Cashew funding support Year 000 Naira 1Euro = x Naira 000 Euros Beneficiaries Average loan size 000 Euros 1Euro = x US$ Average loan size 000 US$ , , , , , , , ,036, , , , , , , , , , , Total 2,935, , The total share of Cashew funding support from Sept to Sept was about 2.9 billion N (18.1 million Euros or approximately 22.6 million US$). 26 beneficiaries obtained loans during the ten years, with the volume handed out varying strongly from year to year. However, during 2006 and during 2009 and 2010, no loans were given to the subsector. The average individual loan size in the different years ranged from about 208,900 US$ to 1.8 million US$. However, interviewed private processors claim that obtaining NEXIM-Bank loans is very difficult due to the general lack of collateral and the bureaucratic procedures involved: NEXIM-Bank provides its loans via commercial Banks that must bear the risk of default. Thus the commercial bank has to add a premium to cover the risk of default on top of the interest rate at which it obtains the money from NEXIM- Bank and the charge for administrating the loan. The interest rate payable to NEXIM Bank during 2010 ranged from 9% to 15%. The final interest rate to be paid by the client therefore is from 15% to 25% per year according to an informant from NEXIM-Bank. Nigerian Export Promotion Council Another public entity charged to promote the export of Non Oil-products is the Nigerian Export Promotion Council (NEPC). NEPC subsidizes the export of certain products, including Cashew. Exports of Cashew kernels are subsidized with 30% of the export value FOB Lagos, while the export of RCN is subsidized with 5% of the value FOB Lagos. This results in a net export subsidy for Cashew kernels of 25% of the value FOB Lagos port. 26 Unfortunately, NEPC was not able to provide the mission with the volume of its subsidy payments to promote the export of Cashew kernels and RCN. According to representatives of the private sector, the process to obtain the subsidy is very bureaucratic and causing high administrative costs that may exceed the value of the subsidy, making it not worthwhile to apply for the subsidy. In addition, the payment of the subsidy is obtained only with great delay; ACET company reported in November 2010 that it had not yet receive the export subsidy for its kernel exports during Cashew research There are some Governmental research institutions, which claim to carry out research in the Cashew subsector among its various tasks. The Cocoa Research Institute of Nigeria (CRIN) is the most important of these. CRIN has the research mandate for 5 tree crops, namely cocoa, coffee, tea, cashew and kola. Even though the Institute was on strike the Director of Research and 5 scientists met with the mission team to explain their programme, the major points of which are briefly described below. Breeding - two types of planting material were being sold: 1. Jumbo nuts at 500 N/kg. This planting material originated from Brazilian Common trees (via Konsoni-Ola Farms) and was eventually planted at CRIN Ochacha sub-station from which the seed material is now harvested. Raw nut weight of this material was 15g or more, but no information was available on either the KOR or potential yield.

27 2. Medium seed was sold for 300 N/kg. This material is harvested from a block of trees of mixed origin. Again, no information was available on either KOR or potential yield. A visit to the two breeding germplasm blocks at Ibadan showed that one block was virtually abandoned while the other was currently being maintained. Unfortunately the breeder left some time ago, which would explain major gaps in the breeding programme. Food science had researched and produced various products made from the apple e.g. juices, jams, wine, vinegar, animal feed. Normally, the apple is detached from the nut and thrown away. Entomology studies were being undertaken on various pests including Helopeltis, a potentially serious pest of Cashew. Soil science - high concentrations of Manganese had been found to cause dieback and research was being undertaken on drip irrigation. Agricultural economics - no economic data was available on the Cashew value chain. Scientists have their own discipline (e.g. entomology, soil science, economics, etc.) and work on a few crops, with one crop being dominant. There does not appear to be one person with responsibility for the over-all coordination of Cashew research. Bearing in mind that the mission s visit to CRIN was not made on the best of days, it does appear that currently Cashew research is somewhat piecemeal and not focused on the major issues facing the farmer, in spite of the fact that there are many able scientists at CRIN. Adequate funding is a major constraint, but more needs to be done to interact with cashew farmers and industry specialists to ensure research is focused. In order to address the most pressing problems facing Cashew farmers, CRIN s research topics would have to include the following: 1. Provision of good proven clonal planting material which when managed properly will yield over 800 kg/ha, with a high KOR. 2. Selection of clonal varieties suitable for the drier northern regions to give farmers there a tree crop which can provide a good consistent income and environmentally benefit the semi-arid agro-ecosystem. 3. Developing appropriate grafting techniques to satisfy the above. 4. Researching the reasons for Nigeria s low quality nuts, which is responsible for discounting the price of nuts. 5. Establishing the causes of flower drying, where entire panicles with many flowers dry to a brown colour with no nuts set. This can happen over an entire tree resulting in no yield. 6. Developing a package of best practices and establishing demonstration plots around the Cashew areas and in the north where Cashew is not grown. 27 Another research Institution is the Federal Institute of Industrial Research (FIRO). This Institute was developing some equipment or tools for the processing of Cashew. But none of these tools or equipment has so far been developed to a commercial production level. The Raw Materials Research and Development Council is a public entity that is to promote the raw materials sector, including the creation of value-added through processing in the country. Supposedly within a wider program to establish processing facilities in each Local Government Area (LGA) for the regionally predominant (agricultural) raw materials, this entity financed the processing plant at the Kogi State University in Ayingba. KSU provided the buildings infrastructure for this commercial enterprise. The visited 3 research institutes all gave the impression of being severely hampered in the execution of their activities by a lack of funding even to continue basic research. All were unable to explain their medium to long term strategies, their research priorities or the objectives and purposes of the rudimentary research still carried out Agricultural extension Nigeria s agricultural extension service still reflects the influence of its structuring during the Agricultural Development Project (ADP) that was initiated with support by the World Bank and gave the present extension service its name ADP. Since the donor s funding came to an end, the created expensive organizational infrastructure is underfunded and activities have shrunk to effectively those that receive support from other donors. Without such support the extensionists in the rural areas suffer from most serious shortcomings in transport and extension materials, a lack of continued qualification, and because of low salaries receive little or no motivation to advise farmers. Regarding the Cashew sector, this lack of advice shows in the absence of any orientation on how to properly establish Cashew plantations and a copycat attitude when planting Cashew. Most farmers that established Cashew during the last decade planted Cashew without any idea on the feasibility of the crop and opted for much too close spacing of the trees. As a result Cashew was established with too dense spacing of the trees (which causes low nut yield) and in climatic regions where other tree crops, such as oil palm, cocoa and citrus are more productive and would have been a better choice, as is the case in the visited three regions that receive annual rainfall in excess of 1000 mm, while little attempt was made to expand the Cashew acreage in low rainfall regions in the North, where other tree crops are unsuitable and Cashew is the better choice economically and under the aspect of risk alleviation.

28 4 SWOT Analysis of the Cashew Sector The SWOT analysis looks at the Strengths, Weaknesses, Opportunities and Threats of the individual links in the Nigerian Cashew chain. Strengths and weaknesses are considering internal factors that can be controlled by the actors while opportunities and threats are outside conditions or factors, such as the influences of agricultural policy or developments in the world market. 4.1 Strengths Cashew has many and varied benefits that are considered its strengths: Regarding production these include: Cashew provides an income during the late half of the dry season, at a time when many farmers have little money and yet finances are required for farming activities for annual food crops. Once the Cashew trees are established, there is usually no conflict of labour requirements with other annual food crops. Cashew creates work for farmers during the dry season and employment for labourers to carry out weeding, pruning and harvesting. When Cashew is planted correctly the space between trees can be used for intercropping with annual food crops at least during the first three to five years. The Cashew tree is well adapted to risk prone, semiarid environments with a protracted dry season. The deep tap-root can access moisture and nutrients other plants cannot reach. As a tree crop Cashew provides more consistent yields and hence income from year to year in spite of changing weather patterns, including dry spells. Kernels (and apples) are highly nutritious with low cholesterol levels. Regarding processing the strengths are: Cashew processing in the country provides employment and income, especially for women and in rural areas. Processing know-how and infrastructures already exist in Nigeria. Regarding the environment there are strengths of Cashew as well: Environmental benefits include o Stabilisation of agro-ecosystems (prevention of soil erosion by water and wind; reducing flooding; maintaining the climatological balance), o Bio-diversification, o Potential to establish systems that are less reliant upon agro-chemicals, o Carbon sequestration and reduction of CO 2 levels in the atmosphere. 4.2 Weaknesses At the present time Cashew production and processing show some weaknesses, especially if compared with other leading producers, especially Vietnam. Regarding production, the observed weaknesses include: Predominance of too densely spaced and poorly maintained Cashew plantations with low yields per tree and per hectare. Poor quality of the produced nuts (KOR), especially when compared to other producing countries. Improper production techniques and especially crop maintenance activities, for which the growers cite a lack of cash as central cause. Drying of flowers without nuts set and insect damage with growers either not knowing the causes and countermeasures or even lacking the awareness of the damage. Susceptibility of Cashew to fire damage. A lack of advice to growers on adequate production techniques, e.g. on how to reduce damage by fire and insect attack, loss of flowers as well as on improving tree spacing and maintenance so that yields are increased. Low competitiveness of Cashew in the Central Belt and South of the country in terms of income creation against annual and other permanent crops (oil palm, cocoa, citrus) under the present price relationships. Need of large amounts of capital to clear land mechanically and difficult access to such capital at acceptable interest rates. Low farm gate prices because of the high transport costs of RCN and kernels, low quality and high costs of information gathering because of the poor communication infrastructure. Regarding marketing and exporting, the weaknesses include: Small batch sizes when local buying agents collect nuts from individual smallholders impede the proper determination of and payment according to nut quality, 28

29 hence smallholders receive no incentive to produce nuts of better quality. Ineffectiveness of marketing cooperatives the visited cooperative does not record individual members sales volumes, did little to promote better quality, and does not reward individual growers better quality as it receives its village producers groups production as a bulked volume. Licensed Buying Agents and local buying agents lack of capital to finance the buying of nuts. Difficulty of buying agents to obtain credit for buying nuts at acceptable interest rates. Lack of medium and long term loans to producers in order to finance the establishment of Cashew plantations. Loss of nut quality when nuts are stored under inappropriate conditions in sub-standard warehouses. Regarding trading and processing, the weaknesses include: Peeling problems with nuts produced in a large part of the country and predominance of nuts of small or at best medium size. Faltering of the majority of previously existing processors and dominance of the sector by one major company. Only tentative first efforts of Government support to establish small processing facilities in the rural areas. Difficulties of processors in Nigeria to reach levels of efficiency and work quality that compare favourably with Asian countries, and hence, high unit costs of processing. Lack of capital for smaller processors for investment and for buying stocks of RCN to process year-round. High costs of RCN because of the necessity of drying the RCN before exporting or storage (nearly at each level of the marketing chain RCN are dried, i.e. by producers, sub-buyers, LBAs, and processors or exporters). Weak, unreliable and insufficient supply of electricity, especially in rural areas, where it is often lacking during over 50% of the time. Therefore each factory needs to have its own generator in order to avoid frequent and long lasting breaks in production, and the costs of its acquisition and use reduces the industry s competitiveness in the world market. Difficulty of local exporters to obtain loans from NEXIM-Bank since this requires opening a letter of credit with foreign companies, which are often reluctant to enter in agreements with Nigerian companies. High transaction costs because of: 29 o Weak road and communication infrastructure, resulting in high transport costs and slow information transfer. o Existence of a fee to be paid to the Produce Inspection Units (PIUs) (1,000 N/MT of RCN in Kwara) for the obligatory check of the quantity, quality, packaging and use of chemicals during storage of all crops of economic importance. As reported by LBA s and some inspectors of the PIU the quality control is not carried out rigorously and the fee has transformed into collection of income for the states. The need to obtain the inspection papers creates opportunities for corruption which increase the costs for the private sector. o High costs to get the RCN and/or the kernels through customs services for export. Since exporting a container with RCN requires about 25 signatures of several governmental institutions and organisations, all exporters engage special agents to get their shipment on board of a vessel. Weaknesses also exist in the institutional framework of the sector: The Ministry of Agriculture and Natural Resources (MANR) does not appear to rate promotion of the Cashew sector highly and the Agricultural Development Project (ADP) which is in charge of rural extension appears to also be hampered by a lack of purpose, personnel and finance, resulting in practically no possibility of farmers to obtain information on appropriate Cashew production techniques from local ADP staff. The Cocoa Research Institute of Nigeria (CRIN) at Ibadan has the research mandate for 5 tree crops, namely cocoa, coffee, tea, cashew and kola. It has been involved in Cashew propagation in its central and two substations, but appears severely restricted in its activities, apparently due to a combination of high staff fluctuation, lack of financial and personnel resources and possibly other shortcomings like a lack of focus of the research done. The National Cashew Association of Nigeria (NCAN) tries to integrate processors, traders and some major producers, but has only limited impact on sector development due to lack of capital, organisational and management capacity. Also, OLAM company, which at the present does almost 100% of the processing in the country and is the most important link in the sector, is not a member since it is foreign owned. Lack of a consistent, medium or long term strategy of the agricultural policy at the level of federal but as well at state government level. The grading fee that Cashew traders must pay has developed into a mere form of revenue creation for the state governments. It and the licensing fee for LBAs

30 (1500 N for initial registration and 1000 N annually for renewal) with no clear benefits in return create an incentive for corruption and are detrimental to efforts of deregulation. 4.3 Opportunities In spite of the above, there are a number of factors that create opportunities for improving the benefits the country may obtain from Cashew. Regarding production these include: Growing external and internal demand for Cashew of good quality. Easy expansion of Cashew acreages as free land is available in the visited states, the growing of the trees from nuts is unproblematic, and associated crops can be grown during the first 4 years, providing income to the growers when the trees are not yet bearing fruit. Easy increase of Cashew yields through training provided to the growers. Possibility to improve nut quality by training growers on production, harvesting and post-harvest operations. Possibility for use of the "apple", which is till now hardly ever exploited in Nigeria, which is nutritious and very high in vitamin C. Existence of CRIN, which is a potential source of advice and of seed and/or seedlings of improved genetic potential. Improved competitiveness of Cashew against other crops should climate change reduce the rainfall levels in West Africa. Possibility to expand production in semi-arid parts of the country where Cashew is potentially a competitive alternative to annual crops and alleviate the risk for smallholders because of the good drought-resistance of Cashew. Regarding marketing and exporting, the opportunities include: Increasing size of batches sold through formation of groups that bunch individual farmers collected nuts and pay regard to quality aspects. Improvement of nut quality through creation of drying pads where these do not exist. Possibility to improve farmer s exchange of information by organizing farmer groups. Possibility to improve buying agents knowledge of quality issues through training. Regarding processing, the opportunities include: Increasing world market and local market demand for Cashew. Interest or actions of various companies to expand their processing capacity. Existing organization that groups local processors (NCAN), intent on strengthening the sector and on increasing the share of processed Cashew in the export volume. Possibility of decreasing the costs of processing through o training of managers of processing factories, o creation of credit lines for buying raw material for processing, o improving the electricity supply, o reduction of transaction costs for export. 4.4 Threats Major threats to the development of the sector include: Declining world market prices in case the increase of production in countries like India and Vietnam outpaces that of demand. Continued lack of reliable data on all aspects of the sector, specifically production which might be an obstacle to define and to implement a consistent medium and long term strategy. A perceived adamant attitude of the Nigerian Government towards NCAN and Cashew production in general as other crops contribute more strongly to the non-oil export income on a per-hectare basis, specifically oil palms and cocoa. The difficulty to improve the quality consciousness of producers given the present marketing system and therefore continued poor quality and poor reputation of Cashew nuts originating in Nigeria. The potential inability of MANR/ADP or of willing processors to provide the needed extension support to the smallholders that produce Cashew, due to o lack of funds for personnel and running costs, o past attitudes to carry out campaigns and not provide continuous support, o being rooted in the costly Training and Visit system of agricultural extension. Difficulties to establish viable producer associations or cooperatives given the existence of a marketing system in which the smallholders are kept selling small amounts of nuts against immediate cash or in return for having obtained short-term credit from the buyers 30

31 5 Specific issues relevant for reinforcing Cashew production, marketing and processing 5.1 Environmental conditions of Cashew production Generally, Cashew is suited to a wide range of natural conditions, including soils except heavy clay, saline soils and soils with a hardpan, which impede root penetration. Due to its extensive root system being able to tap nutrients at lower levels, Cashew is a plant suitable for growing on marginal land that cannot be used for annual crops or other more demanding tree crops. Cashew can be grown under conditions of rainfall ranging from 500 mm to 4,000 mm, but best in areas with annual total rainfall of between 900 mm and 1,500 mm and a distinct dry season of 4 to 6 months as rain during the flowering/harvesting period interferes with pollination and nut setting and causes post-harvest problems like the drying of nuts. The temperature range for Cashew is C. This limits the altitude to about 1,000 m as cooler temperatures delay flowering. Although cashew will grow over a wide range of environmental conditions as describe above, in order for the farmer and country to derive maximum economic benefit, the most appropriate clonal types should be selected for the different agro-ecological zones. However, as mentioned in Section 3.3, no clonal material currently exists in Nigeria, hence a priority for research should be to develop a range of clonal types suitable for the different agro-ecological zones. Even clonal material imported from other countries will need to be evaluated for their suitability and yield potential in different zones prior to release to farmers; unfortunately, this is a very time consuming process. An interim strategy has been suggested by Topper (Topper, 2008), where nuts from the 10 top yielding trees within an area are harvested, mixed and then used as seed nuts the following raining season. This strategy would help to ensure that the planting material is adapted to the local environment and could be used while in parallel better clonal material is developed specifically for each agro-ecological zone. 5.2 Geographical location of Cashew production in Nigeria In most West African Cashew producing countries, Cashew is grown in the drier northern areas and cocoa and oil palm in the wetter southern areas. In Nigeria, Cashew predominates in a West to East geographical band with rainfall decreasing from 1400 mm in the South to 1000 mm in the North (see Figures 5.1 to 5.3 with relief and climate-related maps on the following pages). In a large part of this band all three tree crops are grown together, which suggests that Cashew is being grown in conditions where the other tree crops are very competitive. As it was not possible to obtain detailed meteorological data during the mission, the climate data for Ibadan on one of the next pages, abstracted from the internet are used to visualise the general temperature and precipitation pattern in this region. Further north, temperatures increase, total rainfall decreases and the dry season is extended. According to the visited farmers north of Ibadan rainfall starts to decline in October, November is a transitional month of low rainfall and then December is almost totally dry, as are January and February until low rainfall resumes in March and increases in April, with a rainy season from May to September. 31

32 Figure 5.1: Relief map of Nigeria with the visited states: Kogi, K(a)wara, Oyo Source: Federal Republic of Nigeria: Nigeria s First National Communication under the United Nations Framework Convention on Climate Change. November 2003 Figure 5.2: Rainfall zones of Nigeria Source: Federal Republic of Nigeria:ibid. 32

33 Figure 5.3: Ecological zones of Nigeria Source: Federal Republic of Nigeria:ibid. Figure 5.4: Average monthly minimum & maximum temperatures and precipitation, Ibadan Source: 33

34 It can be seen that in the area where Cashew production is concentrated, the dry season lasts only 4 months, from mid- November to mid-march, which is only just sufficient. If farmers continue harvesting into April and even May the nuts go soft and this would contribute to the existing quality problems. Most interviewed farmers claimed to stop harvesting once the rains start. A conclusion from these observations is that in principle Cashew production should be promoted in the Nigerian states further to the north where Cashew becomes more competitive against other tree crops which require higher precipitation (cocoa, citrus, oil palm) and annual crops which are more susceptible to drought, potentially in the isohyets band ranging from 1000 mm down to 700mm, which includes Niger state, most of Kano State and most of Gombe and Adamawa states (see the 800 mm and 600 mm isohyets in Figure 5.2). The potential of Cashew production in these areas should be more thoroughly investigated than is possible in this report. 5.3 Economics of Cashew production Gross Margin using the present production practices An evaluation of the economics of Cashew must consider that there is a period after the establishment of the trees, in which no production is obtained. However, this is of relevance specifically if the acreage of Cashew is to be extended. For a comparison of the actual profitability and of the changes in the profitability through improved management of existing plantations these aspects can temporarily be neglected. The information obtained in the appraisal of the situation generally hinted at a low economic competitiveness of Cashew if compared to other permanent crops and to some annual crops as well, and especially when a part or all of the labour input is provided by seasonal or hired labour. Significantly higher profitability was indicated for cash crops like cocoa, oranges, tomato and even cassava. The competitiveness of Cashew in the region in purely economic terms is visualised by the results of Gross Margin calculations. The Gross Margin (GM) is obtained by subtracting Variable Costs (i.e. the costs of paid labour, materials used and services paid) from the Gross Revenue (market value) of the crop. Table 5.1 on the following page contains the results for Cashew, based on the data obtained by means of the mission s rapid appraisal in the field and for some crops for which data were obtained from Kwara state ADP. The calculations for Cashew consider existing dense stands of adult trees (over 8 yrs old) and are oriented in the respondents indications on their costs, especially the labour input (the major cost item for the producer that employs seasonal labour), albeit this did vary widely without a clear linkage to the reported yields. The following labour input figures were used: Pruning (cutting low branches) Weeding Fire control 1 md/ha 3 md/ha 2 md/ha Harvesting incl. post-harvest operations 9 md/ha 5 Assuming this labour input of 15 man-days/ha in total and the indicated wage rates of 500 N/day for lighter work (in which children are often used) and 800 N/day for pruning and fire control activities as well as for manual land preparation for annual crops, and using data on average yields and prices obtained from Kwara State ADP for the other crops shown, the competitiveness of Cashew at present is as shown in Table Based on 10 rounds of collection per season (about once per week) and about 3 minutes spent per tree each time nuts are collected. 34

35 Table 5.1: Comparison of Gross Margins and contributions to the family income of selected crops (present situation) Denomination Unit Cashew Oil Palm Maize, yellow Cow pea Cassava Productivity kg/ha Selling Price N/kg Gross Revenue N/ha Variable Costs Labour Materials N/ha Services Other v. costs Gross Margin N/ha GM w.o. labour N/ha labour input md/ha 15 17, ,8 90 Return to Labour N/md Source: Tables A5-1 to A5-6 in annex 2 As can be seen, with the average yield of 250 kg/ha and an average selling price of 50 N/kg, the Gross Revenue of Cashew is 12,500 N/ha. It compares unfavourably to that of the other crops in the table. Also, the Gross Margin of Cashew is low when all labour must be paid with only 3,600 N/ha (approximately 24 US$). However, an equally low Gross Margin (GM) results for maize and a negative GM for cow peas, while Oilpalm and Cassava render positive Gross Margin that each surpass the GM of Cashew by more than 20-fold. It is apparent from the table that a higher labour input in Cashew production, such as for a more comprehensive fire control (which would increase the labour input by about 4 man-days/ha at an additional cost of about 3200 N/ha), would reduce the Gross Margin of Cashew to near Zero. This signifies that a medium or large-scale Cashew producer that depends on the use of paid labour is likely to use an extensive production system with minimum factor input to avoid financial losses. However, if only family labour is used in the operations and the labour input therefore is not costed, Cashew provides a higher return of 12,000 N/ha (indicated in the coloured line GM w*ith+.o*ut+. labour ). In smallholder farms this is the net cash contribution of Cashew to the family income and a figure which smallholders implicitly use to rate the usefulness of growing a specific crop. Yet, it is apparent from the figures in the line GM w.o. labour of Table 3.3 that under these conditions all other crops shown, yield significantly higher returns than Cashew. This is highlighted by Figure 5.5 below. 35 Figure 5.5: Contribution of selected crops to a smallholder family income, present situation (Naira per hectare) Source: Tables A5-1 to A5-6 in annex 2 Table 3.3 reveals as well in its last line that the Return to Labour 6 of Cashew is similar to that of maize but much lower than that of oil palm and cassava among the lowest, even though the labour input is much lower than that required for the other crops. The profitability measure is only near the daily wage rate for labour provided by men (800 N/day). The Return to Labour for Cashew would be lower if the added labour input for better fire control was considered and then b reduced to 631 N/ha. In this case men could earn more income if they worked as hired labour elsewhere instead of spending time on Cashew cultivation. Consideration of double cropping of annual crops Two additional considerations further reduce the competitiveness of the present Cashew production system: 6 Obtained by dividing the GM w.o. labour by the man-days of labour needed GM excluding labour costs

36 In the calculations on which the results presented in table 3.2 are based, a labour input of already 40 man-days for land preparation alone has been assumed for the annual crops. However, cow pea, maize and cassava (and other leguminous crops, yams and sorghum) are usually grown in rotation for various years and two short season crops can be grown per year. This has two effects: The annual income of two such crops on the same plot must be added when comparing their gross margin to that of a perennial crop, and Extensive soil preparation is not necessary with each crop and the volume of land preparation work is considerably reduced. When double cropping is considered, the labour input for land preparation (assumed in the calculation to be 40 md/ha for each annual crop) sinks to only 16 md/ha. Then the Gross Margin of cow pea also turns positive. In the visited 3 states double cropping is made possible by the climatic conditions and is therefore also widely prac tised, and results in an combined GM for maize and cow pea of 27,000 N/ha/year (all labour assumed to be paid). Cashew with a GM of only 3,600 N/ha is then much less competitive than the alternative uses of the crop land. Also, when looking at alternative perennial crops, with the prices obtained for palm oil during the recent years (three-year averages were used in this comparison) Cashew is outclassed in attractiveness by palm oil production. The same is due for cocoa and citrus, which were not computed but clearly indicated as more profitable crops by many interviewed persons growing them. That Cashew is grown by a majority of the smallholders in the visited three states is therefore mainly due to the fact that Cashew has been or can be established at low cost by planting nuts from existing trees, that unused land is available, that the labour input for maintenance of the trees can be minimised and that labour is required mainly during periods of low labour requirements of other crops (see Figure 5.6 below). Figure 5.6: Calendar of recommended activities in Cashew production in the Central Belt Plant s stage // Human activity May June Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Season Rainy season Dry season Flowering Nut ripening Weeding, Fire control Spraying (if needed) Harvest Pruning (Planting seedlings/nuts) Gross Margins with improved production practices Recommendations for improved Cashew production are based on Cashew spaced 12 by 12 metres or thinned out to obtain 70 trees/ha and maintained in good order. This includes more intensive pruning to prevent interlocking of the trees and the subsequent reduction of the effective surface, more intensive fire control, and spraying against insects when needed. This will increase the labour input moderately, while the increased canopy surface will result in a very significant increase of the productivity of the tree population. The following annual labour input per hectare is required for improved Cashew production following the practices recommended by the mission s Cashew expert Pruning 5 md/ha Weeding 3 md/ha Fire control 6 md/ha Harvesting 13 md/ha. Post-harvesting operations 2 md/ha With the recommended practices the yield of Cashew can safely be assumed to double to 500 kg/ha (7.1 kg/tree), while the yields of the other crops are assumed to increase by a more conservative 50%, using improved seeds and respecting the fertilizer and plant protection recommendations published by Kwara state ADP. Also, sesame and ground nut have been considered, for which data could be obtained only for improved production practices, but not the present ones. 36

37 Using the improved practices, the Gross Revenue of Cashew increases to 25,000 N/ha and a positive Gross Margin of 4,500 N/ha (30 US$/ha) is generated (see Table 5.2) when labour is fully costed, i.e. in the case of farms using hired labour. Table 5.2: Comparison of Gross Margins and contributions to the family income of selected crops (using recommended practices) Denomination Unit Cashew Oil Palm Maize, yellow Cow pea Cassava Sesame Groundnut Productivity kg/ha Selling Price N/kg Gross Revenue N/ha Variable Costs Labour Materials N/ha Services Other v. costs Gross Margin N/ha GM w.o. labour N/ha labour input md/ha 28 24, , Return to Labour N/md Source: Tables A5-1 to A5-6 in annex 2 1 Using the practices recommended by the mission s Cashew specialist for Cashew and by the Kwara State Agricultural Development Project (ADP) for other crops 2 All values for cassava refer to a 18-months production period and that planting stems are bought 3 Other v.costs for cassava include transport and 20% marketing commission In smallholder farms that use only family labour, Cashew would generate a contribution of about 21,500 N/ha (about 100 Euro/ha) to the family income (GM w.o. labour), as shown in the third line from the bottom in Table 5.2 and in Figure 5.7. Figure 5.7: Contribution of selected crops to smallholder s family income using recommended practices (Naira per hectare) GM excluding labour costs 0 The Gross Margin without Labour of Cashew (equivalent to the net contribution to a smallholder s family income) would increase further to near 34,000 N/ha if the yield of Cashew could be tripled to 750 kg/ha (10 kg/tree) yet it would still not even surpass that of cow pea. 5.4 Cashew nut quality Apart from the low yields per tree and per hectare, the quality of Nigerian Cashew nuts, which is low by international standards, is another serious problem not yet overcome. The three major quality issues are: Moisture content in excess of the maximum 12% of many batches of raw nuts arriving at Lagos for export 7, Low KOR (Kernel Outturn Ratio) and generally high nutcount 8 Difficulty to remove the testa on nuts from certain regions ( peelability problem). Source: Tables A5-1 to A5-6 in annex 2 Still, Cashew would remain a crop with a relatively low economic competitiveness in the visited regions which have agro-ecological conditions that permit growing the indicated alternative crops and especially also permit double cropping of short-season crops like maize and certain legumes Nugawela & Oroch (2005) state that the moisture content of most batches of raw nuts arriving at the Lagos port exceeded 20%, particularly after the rains have started 8 The KOR indicates the amount of useable kernel in pounds weight (lbs) obtained from an 80 kg bag of raw nuts, hence it indicates the quality of nuts. Nutcount refers to the number of nuts per kg and varies widely depending on the type/size of nut. For Nigerian nuts it typically is high (180 to 200).

38 In addition, the nuts are generally of medium or small size, hence the high nutcount, even though the Brazilian Jumbo type has been introduced in the country during the last decade and has subsequently been multiplied and distributed by CRIN and some private growers. High moisture content may be caused by some growers not drying the nuts as needed before selling in order to obtain a higher weight, since nuts are bought on the basis of weight. A secondary problem arises when a mix of batches with different moisture content is dried artificially and already dry nuts in the mix get burnt. This results in the need of drying in the following levels of the market chain namely LBA s, Processors and exporters, which causes extra costs for these agents. The KOR considers various characteristics of nuts determined after they have been removed from the shell, including the share of kernels that are blemished, spotted, discoloured, spoilt, immature, and so on. Countries with high quality nuts have a KOR that is in excess of 50 (varying from 50 to 55/56 in India, Vietnam, Brazil), but African countries have KORs of less than 50, and in the larger part of Nigeria the KOR typically varies from 40 to 46, which is below the lower limit of Standard Grade, which is 48. According to OLAM in the visited states the following KORs are typically attained: Oyo 49 to 50, Kwara 46 to 48, Kogi 45 to 46. As a result of low nut quality, the majority of Nigerian raw nuts are discounted by about 20% with a loss in revenue for the country amounting to about 8 million US$ according to an earlier study by Topper. Factors that can contribute to low quality and KOR include: Premature harvesting (shaking the tree, hitting, picking), Harvesting during the rains (soft nuts), Leaving nuts on the ground for too long (one side of the nut turns red in colour), Drying the nuts with apples or bits of apple attached, Inadequate drying, Over drying and/or drying in high temperatures, Poor storage conditions, use of plastic sacks, inadequate ventilation in stores, etc., Excessive shading which prevents nut maturation, Insect attack. The assessment by the mission revealed that poor production, harvest and post-harvest practices are widespread: in Kogi State half of the respondents (wrongly) picked nuts 38 from the trees, while in Kwara nearly a fifth shook the tree to make nuts drop. Every fifth farmer in Kogi, every third in Kwara and every second in Oyo does not dry the nuts. Insect damage was seen and yet the farmers were unaware of its importance. All this is not surprising, since most Cashew farmers receive virtually no information or support. Difficult peelability is a problem affecting nuts from certain regions of Nigeria. During the processing of Cashew, a thin fibrous skin (testa) which covers the kernel has to be removed to make the kernel pleasantly edible. It normally comes off relatively easily after steaming and drying and cooling when scraped with a knife. If more pressure is being applied to the kernel to remove the testa, this results in more broken kernels, which is costly as broken kernels command a lower price than whole kernels. In addition, more time is spent removing the testa, which also increases the processing cost. The causes of a difficulty to remove the testa are not yet known but it was reported by various informants that this problem seems to be more serious in the mid and eastern states of the Cashew belt, whereas in the western states like Kwara, this problem appears to be less relevant. This is a hint that climatic conditions can be one of the reasons for this problem. 5.5 Use of unproven planting material In the past and at present, most farmers that expand their Cashew acreage have planted and continue to plant their own nuts or nuts obtained from other growers without selection. This is due to the fact that proven (cloned) planting material is not available. As a result the genetic variability of the trees in a plantation is very high. The negative effect is compounded by the growers inability to register the yield differences between trees and eventually substitute low yielding trees. As an interim measure until such proven planting material becomes available, farmers that want to plant Cashew need to be taught how to proceed when choosing nuts for planting (e.g. to select a number of good mother trees (the best in the community as a whole) and how to use the nuts from these trees for planting. The procedure ought to be used as well when low-yielding trees have been identified and are to be replaced. 5.6 The domestic market As mentioned above, there exist some Nigerian small scale processers, which are delivering their final product to the local market. These Small and Medium Scale Processors (SMSP) are faced with various constraints and difficulties such as: Difficulties to get good quality kernels for an acceptable price,

39 Lack of capital and/or long- and medium term credits for the financing of investments like processing equipment and transport, Lack of short term credits for financing the procurement of raw materials, Lack of technical skills with regard to the technical optimization of the different production lines, the diversification of products, improvement of packing material, Lack of management skills such as cost calculation (unit costs), finance management, calculation of the profit of investments, marketing (optimum packaging material etc.). To exploit the potential of the domestic market more intensively would have three advantages: (1) the value added will increase in comparison to exporting Cashew kernels and first and foremost RCN; (2) since the final processing in SMSP is very labour intensive, expanding the final processing creates a lot of employment - mainly of women; (3) the Cashew value chain becomes more independent of fluctuations in the world market. According to the information gathered, the absorption capacity of the domestic market for final Cashew products is not at all met at present. The present quantity of final-processed Cashew kernels ready for consumption in the local market can be estimated at about 10,000 MT of RCN equivalents (about 10% of the national production). This quantity can be tripled or increased up to four or five-fold since there is a big demand for Cashew in the supermarkets and in the restaurants. Also, one small-scale processor is already producing salted Cashews snacks for a Nigerian airline, but up to now only the biggest cities like Lagos and Ibadan are supplied with Cashew ready for consumption. It can be assumed that there is a demand at least in the medium sized towns as well. Based on this assessment, the absorption capacity of the domestic market can be estimated at 20,000 MT to 40,000 MT of RCN equivalents, i.e. 20% to 40% of the present production. As described above, the export of RCN and of Cashew kernels is subsidized. It has to be noticed first, that this is a disincentive to produce final-processed Cashew kernels for the domestic market since the final processors have to compete on the market for RCN and/or kernels with the exporters. Finally the Nigerian consumer pays a higher price because of this export subsidy. On the other hand the farmgate price may rise as a consequence of the subsidy on exports, which could even be a wanted impact. These considerations show that the impacts of such a subsidy have to be analysed carefully and has to be balanced with the social policy interest of the country. The best probably would be to abolish the subsidy of 5% on exports of RCN and to reduce the subsidy of Cashew kernels by 5 to 10 percentage points. This would not reduce significantly the competitiveness of Nigerian Cashew on the world market with its at present very high demand for Cashew a situation which is forecast to persist during the next years because of increasing demand for Cashew by China and India. On the other hand the price of Cashew could be reduced on the domestic market accordingly, which as one consequence would increase the internal demand. This would make Nigerian Cashew producers more independent of the fluctuations of the world market prices. 39

40 6 General Conclusions The present, low productivity of most Cashew production seen in the three visited states can potentially be raised through improvements in the pre- and post-harvest production techniques. In many cases the basic changes required include the thinning out of too dense stands of trees and/or the reshaping and/or rejuvenation of trees. Productivity can be improved noticeably through proper pruning so that the surface of the tree canopy is maximised and better protection of the trees against damage by insects and fire. In the visited states Kwara, Kogi and Oyo, Cashew is at present not competitive in purely financial terms with perennial or annual cash crops, and not even with the staples yellow maize or beans which can be double-cropped due to the high rainfall levels in the region. Even assuming a triplication of the yield from 250 kg/ha to 750 kg/ha (i.e. to about 10 kg/tree) does not change the competitiveness of Cashew compared with other crops so much that installing new Cashew plantations (though an economically feasible investment) would be the preferable alternative for someone keen on maximising his income. Improving Cashew s competitiveness in this region would require the yields to be higher than the 10 kg/tree assumed, which may be possible if suitable clonal varieties could be made available. In the visited regions Cashew is at present only of interest for producers that use predominantly unpaid family labour and appreciate that Cashew requires labour input and provides an income mainly during the respective off-seasons. Therefore, unless measures to increase the yield and competitiveness of Cashew in the Central Belt significantly (i.e. beyond 10 kg/tree), any expansion of the Cashew acreage appears better justified in regions where double cropping is not possible and where alternative crops are less productive while Cashew remains productive due to its draught tolerance, i.e. in semi-arid regions with annual rainfall of less than 1000 mm. Some issues linked to improvement of production do require research in order to establish the still unknown causes of negative factors, such those of the peeling problem or the massive dropping of flowers mentioned by some producers. It is also necessary in order to identify clonal varieties that are suitable for the country s regions with their different specific edafo-climatical conditions or and to establish clearly that the perceived benefits of the type known as Brazilian Jumbo do exist. In research, more focus is needed on issues that help raise Cashew s profitability. This would have to include linking research activities more closely to the issues relevant for farmers, including the testing of imported seed nut varieties like Brazilian Jumbo for their yield potential and nut quality under Nigerian environmental conditions and, hence, their profitability as well as selecting and breeding clonal varieties adapted to the various growing regions in the country. Also, the weakness of the extension sector needs to be overcome, and this will require establishing a closer link between research, extension and the private sector, i.e. producers and processors. It seems worthwhile reviewing the system of subsidies given and of fees levied by Government entities, as these now create distortions in the market. Policy regarding Cashew exports is less than ideal with the subsidies on the export of both, RCN and Cashew kernels. If exports of kernels are subsidized in order to promote processing in the country so that the national economy benefits from the value-added, it would be sufficient to subsidize kernel exports alone, for example with 25% of the value, the present net effect. However, by also subsidizing RCN exports, the unintended impact is that the price for Cashew kernels on the domestic market increases accordingly and the total subsidy volume is increased unnecessarily. Exports are at present hampered by the bureaucratic procedures involved. Especially the local processors are affected negatively by the long duration of these processes. Local processors would also benefit if solutions could be found that would help them gain access to capital for investment. Considering the difficulties to process and export Cashew, it seems worthwhile to direct more attention to the expanding national market, which offers opportunities especially for local processors that cannot easily meet the quality requirements of the international market. 40

41 Acronyms ACA ACi ADP CRIN FFS FIRO GM GIZ ha IRR KOR KSU LBA LGA MANR md MoC MT N NAICPP NCAN NEPC PIU RCN SMSP STCP SWOT TCDU w.o. African Cashew Alliance African Cashew Initiative Agricultural Development Project Cocoa Research Institute of Nigeria Farmers Field School Federal Institute of Industrial Research Gross Margin Deutsche Gesellschaft für Internationale Zusammenarbeit Hectare (10,000 m²) Internal Rate of Return A composite index used to describe the quality of raw Cashew nuts Kogi State University Licensed Buying Agent Local Government Area (comparable to Districts elsewhere) Ministry of Agriculture and Natural Resources Man-day Ministry of Commerce Metric Ton/s Nigerian Naira (exchange rate in Nov.2010: 150 N/US$) National Accelerated Industrial Crops Production Program National Cashew Association of Nigeria Nigerian export Promotion Council Produce Inspection Unit Raw Cashew Nut/s Small and Medium Scale Processor/s Sustainable Tree Crops Program Strengths, Weaknesses, Opportunities, Threats (TCU) Tree Crops Development Unit (Tree Crops Unit) without 41

42 Literature Chemonics International Inc.: Subsector Assessment of the Nigerian Cashew Industry. Washington D.C., Sept (Chemonics 2002, 1) Chemonics International Inc.: Industry Action Plan Nigerian Cashews. Washington D.C., Sept (Chemonics 2002, 2) EZEAGU, William: Nigeria Assessment of the Situation and Development Prospects for the Cashew Nut Sector. Report on behalf of the International Trade Center UNCTAD/WTO (ITC). July 2002 FAO Production Statistics: NUGAWELA, Patrick and OROCH, R.: Cashew sub-sector Strategic Framework Using Cashew sector Markets for Pro-poor Growth in Nigeria. Draft. Abuja, March-April 2005 The New Nigerian Foundation (NNF): Cashew Production to Market Linkage Project (Feasibility study). July 2004 TOPPER, Clive (Biohybrids Agrisystems Ltd): Assessment of potential for cashew upgrading in selected locations of Nasarawa and Kwara States, Nigeria. March 2008 TUNDE, Mr. (Timde Otunge) - Abod Success Investment Co.: Country Overview: Nigeria. Contribution to the African Cashew Alliance Annual Meeting, March 2007, Maputo Mozambique West Africa Trade Hub: Cashew Marketing and Consumption in West Africa. Part 2. Country Summaries: Nigeria. West Africa Trade Hub Technical Report No. 22h, Accra

43 Annex 1 - List of Contacts Organization Name Function Location Remarks Donors BRÜNING, Karl GIZ Country Representative, Head of EOPSED GIZ Deputy Head of Programme, 4, Julius Nyerere Crescent, Employment-oriented Private Sector Asokoro District, Abuja JACOBI, Petra Development Programme (EOPSD) OGUNDELE, Richard B. Programme Officer Agribusiness, EOPSD Government Organizations Cocoa Research Dr. OLUBAMIWA, Oyallwola Director Research Institute of UWAGBOE, Eghosa, E. Agricultural Extensionist PMB 5244, Idi-Ayunre, Ibadan Nigeria (CRIN) SHITTU, T.R. Agricultural Economist OMAKU, Gabriel S. Deputy Director Tree Crops Unit No. 18 IK Araworo ath. Mission, Okene, Kogi State MANR Kogi State, SHAIBU, Abdul Aziz Official Lokoja LGA Lokoja HQ Lokoja WAIDI, Amao Official Saky LGA Saky ADEJE, Abdul Officer, Omalla LGA (or producer?) Omalla ORYA, Robert U. Managing Director / CEO NEXIM (Nigerian Mrs. Abraham. R.E.? Nexim House, Plot 975 Cadastral Export - Import Bank GE, Joachim T. Personal Assistant to the MD Zone AO, Central business District YONGO, Hope Technical Advisor to the MD/CEO Garki, Abuja Raw Materials Research and Development Council? 17, Aguiyi Ironsi Street, Maitama District, Garki Abuja ONJEWU, S.S. Federal Ministry of of Agriculture and EFIENMIKWU, Dr., Ben Azuka Director of tree crop production Dept. Fed. Dept.of Agriculture, Area 11, Only fund but don't carry out research Rural Development OKOLO, Dickson A.? Garki Abuja Fed. Ministry of Commerce & Industry BUNMI, Omololu Commodities and Products Inspectorrate Old Federal Secretariat, Area 1 Garki, Abuja Nigerian Export EZEAGU, William Asst. General Manager 40 Blantyre Street, Wuse II Promotion Council ELEKWA, C.I. Chief trade promotion officer Garki, Abuja Federal Institute of Industrial Research Mrs. KUPOLUYI, C. F. Director, Plan, Techn. Transfer & Info Oshodi Mrs. ELEMO, G. N. Director, Food & analytical services MANR Kwara Mrs. AFOLAYAN Director of tree crop production Dept. State, HQ Ilorin MOHAMED, Hassan K. Deputy Director Tree Crops Unit Ilorin MANR Oyo State KEHINDE, G. O. Director Tree Crops Development Unit HQ Ibadan ATINYINKA, A. T. Deputy Project Manager Ibadan Non-governmental organizations OWOEYE, Tunji National President 15A, Sule Abuka Crescent, Opebi Managing Director, Elephant Group (Import Inputs) National Cashew Ikeja, Lagos Association of OGUNBIYI, Akin Vice President Executive Director, Elephant Group Nigeria AGAPA, Ichapi M. Vice President AFAN BAWONDA, Matthias President AFAN Lokoja Unit Processing factories, traders, nurserymen, other stakeholders Lagos Off: 214C, Eti-Osa Way, Dolphin A.C.E.T. (Nig.) Ltd. Estate, Ikoyi, Lagos Nigeria representative in Aci, F'try: Km15, Ikorodu-Sagamu Rd., also leading member in NCAN ANJORIN, Jide Managing Director Kamalo, Via Ogijo, Ogun State Elephant OWOEYE, Tunji Managing Director 15A, Sule Abuka Crescent, Group OGUNBIYI, Akin Executive Director Opebi, Ikeja, Lagos Colossus, FASERU, Tola Chief Executive 14, Salvation road, Opebi-Ikeja, (Licensed LBA) Mr. AKINOLA Executive Director Lion commodities ADEWUSI, Adeniyi Managing Director Abod Success Investment Ltd. OTUNGE, Timde Managing Director 12A Akin Adesola, Victoria Island, Lagos 4 Oko-Oba Road, Ogijo, Ogun State 43

44 Organization Name Function Location Remarks Kogi State YUNISA, Audu Trader and Official, Anyigba LGA Kabba MUSA, Prince R. Nursery owner, Lokoja Lokoja Mr. Leye Local representative of OLAM Idah SHAIBU, Alhaji Processor and Chairman of Assoc. Of LBA's Idah Sule, Salifu LBA Idah OMEDE, Omale LBA Idah OMAYE, Akowey LBA Idah SULE, Umoru LBA Idah Kwara State Olam Nigeria Ltd. K.M. 3 Afon Road, Ogbondoroko, BUU, S.L. Director of Production Ilorin Gabab Investment Office: 115 Sobi road, Opp. (Licensed LBA) BUSARI, Ibrahimi Alh. Executive Director Adaramola Furniture, Ilorin Oyo State Olam Block CC"F", Adewinbi Layout, NEELANJERI, Rajeesh Plant Manager Araromi, Owode, Oyo Grading, sizing, packing, shipping Producers / producer groups Kogi State MONDAY, Moses Smallholder Ofu, Omododa N.N. Repres. J.O. Awonyi Farm Kabba, Bunu ESEYI, John Smallholder Ofere LEWU, Maji & brother Evergreen Farms Owner, resp. Manager Kabba area OCHA, Ben Smallholder Okengwe, Okene ABAH, Sunday Smallholder Olamabara SHAIBU, Abdul Aziz Smallholder Lokoja YANAYA, Ibrahim Smallholder Idah SULE, Bala Islaka Smallholder Idah ADAJINE, Jusuf Smallholder Irepeni, Adaji JIMOH, Usman Smallholder Irapana, Jimoh MOMOH, Itoppah Smallholder Irepeni, Adaji Kwara State OLEWOYO, Gabriel Kosoni Farms Techn. Officer Okerimi-Oro ADEKUNLE, Abedoyin Smallholder Odo-Owa, Igbedi ADEMOLA, Adeyemi Smallholder Igbo-Owa AKANWO, Omotayo Smallholder Shao AKANYUN, Adebisi Smallholder Shao ALAO, Memudu Smallholder Budu-Alao Oyo State WAIDI, Amao Smallholder Saki OGUNSOLA, NIYI Mid-sized Farmer Fasola KILANKO, Wole Smallholder Offa Meta, Atiba ONI, Tunji Smallholder Awe, Afijio AKINTOYESE, Moses Smallholder Oko-Ile ADEBISI, Julius Smallholder Oko-Ile OLANREWAJU, Abiola Smallholder Alausa OLANREWAJU, Matthiew Smallholder Alausa BELLO, Tiamiyu Smallholder Ile-Adara OGUNMOLA, Adebayo Smallholder Ile-Adara 44

45 45 Annex 2 - Economic Data Table A4-1: Gross Margin Calculation for Cashew CROP: Cashew present situation Wage rate 1 (N/md): 500 Type of grower : Smallscale Wage rate 2 (N/md): 800 Month of harvesting: Feb-Apr Dist.to market (km): 0 Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: Second by-product Third by-product: GROSS REVENUE LABOUR (per operation) Pruning md st Weeding md nd Weeding md 500 Fire control strip md Harvesting md Post-harvest operations (included in harvesting) md 500 CROP: Cashew recommended technique Wage rate 1 (N/md): 500 Type of grower : Smallscale Wage rate 2 (N/md): 800 Month of harvesting: Feb-Apr Dist.to market (km): 0 Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: Second by-product Third by-product: GROSS REVENUE LABOUR (per operation) Pruning md st Weeding (at end of rains) md nd Weeding md 500 Fire control strip md Harvesting md Post-harvest operations md MATERIALS Planting material Sub-total MATERIALS Planting material Sub-total Fertilisers NPK Urea Chemicals 50kg bag 50kg bag Fertilisers NPK 50kg bag Urea 50kg bag Chemicals Insecticide litre Other Bags and other materials 500 Sub-total 500 SERVICES Fire Ctrl strip (mechanised) - Transport (included in harvesting) - Spraying insectidicide - Other Bags and other materials 500 Sub-total Fire Ctrl strip (mechanised) - Transport (included in harvesting) - Spraying insectidicide IRRIGATION Sub-total IRRIGATION Sub-total OTHER COSTS Sub-total OTHER COSTS Sub-total Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 800 Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 768

46 46 Table A4-2: Gross Margin Calculation for Oil palm CROP: Oil palm, present situation Wage rate 1 (N/md): 500 Type of grower : Smallscale Wage rate 2 (N/md): 800 Crop acreage (ha): 2 Month of harvesting: 6 bunces a 10kg per tree; 120 trees; 20% oil Dist.to market (km): 0 Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: Second by-product Third by-product: GROSS REVENUE LABOUR (per operation) Pruning md st Weeding md 5, nd Weeding md 5, Fire control strip md 0, Harvesting md 4 Post-harvest operations (included in harvesting) md Fertilising md CROP: Oil palm, recommended technique Wage rate 1 (N/md): 500 Type of grower : Smallscale Wage rate 2 (N/md): 800 Crop acreage (ha): 2 Month of harvesting: 9 bunches per tree a 10kg; 120 trees; 20%oil Dist.to market (km): 0 Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: Second by-product Third by-product: GROSS REVENUE LABOUR (per operation) Pruning md st Weeding (at end of rains) md 5, nd Weeding md 5, Fire control strip md Harvesting md 5 Post-harvest operations md Fertilising md MATERIALS Planting material Sub-total 17, MATERIALS Planting material Sub-total Fertilisers Magnesium kg Chemicals Other Sub-total SERVICES Fire Ctrl strip (mechanised) - Transport (included in harvesting) - Spraying insectidicide - Fertilisers Magnesium kg Chemicals Insecticide litre Other Bags and other materials Sub-total Fire Ctrl strip (mechanised) - Transport (included in harvesting) - Spraying insectidicide IRRIGATION Sub-total IRRIGATION Sub-total Sub-total OTHER COSTS Harvesting (1/3 of bunches) Extraction (1/5 of oil+all cake+ all kernels) Sub-total OTHER COSTS Harvesting (1/3 of bunches) Extraction (1/5 of oil+all cake+ all kernels) Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 6.194

47 47 Table A4-3: Gross Margin Calculation for Maize 1 1 CROP: Maize, yellow, 1st cr; present technique CROP: Maize, yellow, 1st cr; recomm.technique Wage rate 1 (N/md): 500 Wage rate 1 (N/md): 500 Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilising man-day st Weeding/thinnning man-day nd Weeding (only if no herbicide is used) man-day Harvesting and drying man-day Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilising man-day st Weeding/thinnning man-day nd Weeding (only if no herbicide is used) man-day 500 Harvesting and drying man-day Sub-total MATERIALS Planting material Seeds kg Fertilisers NPK 50kg bag Urea 50kg bag 3000 Chemicals Herbicide (Primaxtra) 1 litre kg Other bags (75kg/bag, used twice) No Sub-total SERVICES Clearing land Ploughing/harrowing Ridging Spraying herbicide Treshing 100kg Sub-total IRRIGATION Sub-total MATERIALS Planting material Seeds kg Fertilisers NPK 50kg bag Urea 50kg bag Chemicals Herbicide (Primaxtra) 1 litre kg Other bags (75kg/bag, used twice) No Sub-total SERVICES Clearing land Ploughing/harrowing Ridging Spraying herbicide Threshing 100kg Sub-total IRRIGATION OTHER COSTS Sub-total OTHER COSTS Sub-total Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 2.250

48 48 Table A4-4: Gross Margin Calculation for Cow pea CROP: Cow pea, 2nd cr; present technique CROP: Cow pea, 2nd cr; recomm.technique Wage rate 1 (N/md): 500 Wage rate 1 (N/md): 500 Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilising man-day st Weeding/thinnning man-day nd Weeding (only if no herbicide is used) man-day Harvesting man-day Shelling man-day 2, Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilising man-day st Weeding/thinnning man-day nd Weeding (only if no herbicide is used) man-day 500 Harvesting man-day Shelling man-day 4, Sub-total 70, MATERIALS Planting material Seeds kg Fertilisers Superphosphate 50kg bag Chemicals Herbicide (Dual or Codal)) 1 litre kg Other bags (50kg/bag, used twice) No Sub-total 67, MATERIALS Planting material Seeds kg Fertilisers Superphosphate 50kg bag Chemicals Herbicide (Dual or Codal)) 1 litre kg Other bags (50kg/bag, used twice) No SERVICES Clearing land Ploughing Harrowing Ridging Spraying herbicide IRRIGATION Sub-total lump-sum Sub-total Sub-total SERVICES Clearing land Ploughing Harrowing Ridging Spraying herbicide lump-sum Sub-total IRRIGATION OTHER COSTS Sub-total OTHER COSTS Sub-total Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 998 Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 1.254

49 49 Table A4-5: Gross Margin Calculation for Sesame CROP: Sesame, recommended technique Wage rate 1 (N/md): 500 Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilising man-day st Weeding/thinnning man-day nd Weeding man-day Harvesting and drying man-day Threshing and bagging man-day Table A4-6: Gross Margin Calculation for Groundnut CROP: Groundnut, recommended technique Wage rate 1 (N/md): 500 Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilising man-day st Weeding/thinnning man-day nd Weeding man-day Harvesting and drying man-day Bagging man-day Sub-total MATERIALS Planting material Seed kg Fertilisers NPK 50kg bag Urea 50kg bag Chemicals Sub-total MATERIALS Planting material Seed kg Fertilisers NPK 50kg bag Urea 50kg bag Chemicals Other bags (used only once) No Other bags (used only once) No SERVICES Clearing land Ploughing Harrowing Ridging Sub-total SERVICES Clearing land Ploughing Harrowing Ridging Sub-total IRRIGATION Sub-total IRRIGATION Sub-total OTHER COSTS Sub-total OTHER COSTS Sub-total Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 2.291

50 50 Table A4-7: Gross Margin Calculation for Cassava CROP: Cassava, pure st., 18 mo; present technique Wage rate 1 (N/md): 500 Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop sold in rural market kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilizing man-day st Weeding man-day nd Weeding man-day Fire tracing man-day Harvesting man-day CROP: Cassava, pure st., 18 mo; recomm.technique Wage rate 1 (N/md): 500 Type of grower: Smallholder Wage rate 2 (N/md): 800 Crop acreage (ha): 1 Month of harvesting: Dist.to market (km): Figures related to 1 hectare Unit Quantity Unit price (N) Value (N) GROSS OUTPUT Gross value of main crop sold in rural market kg First by-product: kg Second by-product kg Third by-product: kg GROSS REVENUE LABOUR (per operation) Land preparation (manually) man-day Planting man-day Fertilizing man-day st Weeding man-day nd Weeding man-day 500 Fire tracing man-day Harvesting man-day 28, Sub-total MATERIALS Planting material Seeds No Fertilisers NPK 50kg bag Urea 50kg bag 3000 Chemicals Herbicide (Primaxtra) 1 litre kg Other Sub-total 88, MATERIALS Planting material Seeds No Fertilisers NPK 50kg bag Urea 50kg bag 3000 Chemicals Herbicide (Primaxtra) 1 litre kg Other SERVICES Clearing land Ploughing Harrowing Ridging Spraying herbicide IRRIGATION Sub-total lump-sum Sub-total Sub-total SERVICES Clearing land Ploughing Harrowing Ridging Spraying herbicide lump-sum Sub-total IRRIGATION Sub-total OTHER COSTS Transport by pickup to market (20km) Pickup, 2 to Commission for marketing % Sub-total OTHER COSTS Transport by pickup to market (20km) Pickup, 2 to Commission for marketing % Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) Sub-total TOTAL VARIABLE COSTS GROSS MARGIN Gross Margin w.o. labour Return to labour (N / man-day) 4.323

51 51 Table A4-8: Cash Flow Calculation for Cashew Cashflow calculation of cashew per tree Assumptions Exchange rate (N:US$) 150 Price of Cashewnuts (N/kg) 50 1 < price Average yield of Cashewnuts (kg/tree) (for getting 750 kg/ha) 10,7 1 < yield Trees/ha (12m x 12m) 70 Working hours per day 6 Wage rate for heavy work (N/day) (incl. food) (for light work this rate x 5/8) 800 Costs of seedlings (<50 seedlings) 150 Costs of seedlings (>50 seedlings) 150 Costs of spraying (N/ha) 2000 Price of Insecticide (N/litre) 1000 Cost of harvesting (N/manday) 500 Light landclearing (only when cashew is grown without intercrop) 0 Cash flow analysis of a Cashew tree plantation (25 years) Inflows Percentage of full production 10% 30% 60% 80% 90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Production of Cashew nuts/tree Kg/tree 1,1 3,2 6,4 8,6 9,6 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 10,7 Revenue from nuts/tree N/tree 53,6 160,7 321,4 428,6 482,1 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 535,7 Gross revenue Cashew N/ha Gross revenue intercrops [=(maize+cow pea+sesame+ground nut)/4] N/ha Total Gross revenue N/ha Outflows Unit Nr. of Units N/unit Labour Clearing of the land Manday/ha Lining, digging the holes Manday/ha Planting Manday/ha Irrigation of the seedlings (2 days/ha, watering 2 times) Manday/ha Replanting missing plants (20%) Manday/ha Correction factor for workload during first years 0,2 0,3 0,6 0,8 0,9 Weeding Manday/ha Fire control strip Manday/ha Pruning (20 min/tree) Manday/ha Spraying insecticide lump-sum Harvesting incl. removing nuts from appels Manday/ha Post-harvest operations (drying, packaging) Manday/ha Labour cost intercrops N/ha Total labour costs Inputs Seedlings (required Qty + 20%) (Costs incl. Transport) seedling Insecticide (10-15 ml/tree) ltr Other costs, intercrops (materials, services) N/ha Total inputs cost Total Outflows including labour N/ha Year Balance Cash flow (Gross Margin 1, incl. labour) N/ha Total Outflows excluding labour N/ha Balance Cash Flow (Gross Margin 2, excl. labour) N/ha

52 52 Published by: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Dag-Hammarsköld-Weg Eschborn / Germany T F E info@giz.de I