Transforming the Cassava Sector in Nigeria

Do re o Transforming the Cassava Sector in Nigeria A. Adesina, M. Adetunji, T. Odunlami, J. Odeyemi, J. Awoniyi, A. Egba, A. Oredipe, and M. Fregene, DATCO, Shareholders Meeting, December 15, 2011 Federal Ministry of Agriculture and Rural Development 0

Do re o Outline The Agricultural Transformation Agenda Lessons on cassava from Asia Cassava in Nigeria Action Plan for the Cassava Transformation An Operational Plan for the Cassava Transformation Acknowledgements Federal Ministry of Agriculture and Rural Development 1

Agricultural Transformation Agenda Directly building on Mr. President s Transformation Agenda The Agricultural Transformation Agenda Nigeria can no longer continue to be a sleeping giant; we have to wake up and if we wake up, we must begin to do things differently - His Excellency, President Goodluck E. Jonathan GCFR, President, Commander-in-Chief of the Armed forces of the Federal Republic of Nigeria Federal Ministry of Agriculture and Rural Development 2

Nigeria has lost US$10 Billion (1.6 Trillion Naira) annual export opportunity from four agricultural commodities alone Potential annual export revenues assuming Nigeria maintained its 1961 market share* Measure: Millions of USD Current export revenue Oil Palm Cocoa Groundnut Cotton Potential export revenue Potential additional export revenues Additional export revenues assuming 1961 s market share applied to 2008 s values for global trade of individual commodities. * Doreo Analysis, FAO Federal Ministry of Agriculture and Rural Development 3

Nigeria spends 1.3 Trillion Naira importing wheat, rice, sugar and fish annually Key takeaways Nigeria s top 4 food imports * Measure: Annual food imports in billions of naira Wheat World s largest importer of US hard red and white winter Wheat Rice World s #2 Importer Sugar Fish Nigeria s food imports are growing at an unsustainable rate of 11% per annum. Relying on the import of expensive food on global markets fuels domestic inflation. Excessive imports putting high pressure on the Naira and hurting the economy Nigeria is importing what it can produce in abundance Import dependency is hurting Nigerian farmers, displacing local production and creating rising unemployment Import dependency is not acceptable, nor sustainable fiscally, economically or politically. *CBN Federal Ministry of Agriculture and Rural Development 4

Do re o Do re o The Days of Importing Cheap Food are over The World food price index is at its highest point in recorded history Demand drivers: Significant increase in demand FAO world food price index Measure: Index of price of food globally Population growth: Cumulative growth in world population 1999 2009* Measure: Millions of people 1990 1995 2000 2005 2011 Food exporters have demonstrated a willingness to ban exports to ensure their countries food security e.g. Thailand, Russia, India, Vietnam etc. Export bans jeopardize Nigeria s food security. Increase in standard of living: Per capita meat consumption in China** Measure: kg per person 4.4% Increased biofuel demand: % of US corn production used for biofuels Measure: % of US corn production 10% Any shock in global markets will put Nigeria s national security at risk e.g. North African riots. * Doreo s Analysis, World bank ** FAO *** Earth Policy Institute Federal Ministry of Agriculture and Rural Development 5

Nigeria s low agricultural productivity Yield per hectare Comparison of Nigeria s yields across all crops versus other leading agricultural countries Index of crop yields relative to Nigeria s yields in 1961* Measure: Relative growth in crop yields Annual growth rates 1961 2008 Key takeaways Yield per Hectare is the driver of agricultural competitiveness. 1961 1970 1980 1990 2000 2008 Nigeria s low fertilizer utilization** Measure: Kg per hectare Indonesia lowest in 1961 * Doreo s Analysis, FAO **IFDC Malaysia Thailand Indonesia Brazil Nigeria 2% 1.6% 1.2% 3% 2.3% Nigeria s low utilization of improved seeds** Measure: Percent of farmers Nigeria's yield per hectare is 20% to 50% of that obtained in similar developing countries. In 1961, Indonesia s yields were lower than that of Nigeria. In 20 years Indonesia increased its yield 3 times. Nigeria has one of the lowest usage rates of agric inputs. Across the board, Nigeria ranks at the bottom on agric indices Mechanization Intensity: 10 tractors per 100 Ha compared to Indonesia with 241 tractors per 100 Ha Irrigation: 0.8% of arable land irrigated compared to Thailand s 28% of arable land irrigated Federal Ministry of Agriculture and Rural Development 6

Role of targeted Growth Enhancement Support (GES) to migrate farmers from subsistence farming to commercialized systems Fiscal Savings / Greater return on investment Targeting highest poverty level Exit strategy 4 10 years Commercialized systems Trade Competitiveness Income 4 years Marketed surplus / Market orientation Highest poverty level / Subsistence farming GES Time Federal Ministry of Agriculture and Rural Development 7

Growth Enhancement Support Investment will be targeted at Twenty Million Farmers by 2020. Investment will generate 5X to 10X returns in increased production. Group 1 5 Million Tgt. Farmers Group 2 5 Million Tgt. Farmers Group 3 5 Million Tgt. Farmers 2012 2013 2014 2015 2016 2017 2018 2019 2020 4 Years of Support 4 Years of Support 4 Years of Support Key takeaways Phased approach with support to farmers reducing over 4 years. Estimated cost per farmer per year is 5,000 Naira (US$30) Expected benefit of program is up to 80,000 Naira per farmer (US$500) Total cost of program is approximately 400 Billion Naira (US$2.5 Billion) Total benefit of program is 6,800 Billion Naira (US$40 Billion) a 16 fold benefit versus cost GES will leverage Mobile technology to achieve scale e.g. MPESA Group 4 5 Million Tgt. Farmers 4 Years of Support Federal Ministry of Agriculture and Rural Development 8

Target commodity value chains by geopolitical zones North East Cotton, Onion, Tomato and Sorghum + Rice & Cassava + Livestock & Fisheries South South Oil Palm and Cocoa + Rice & Cassava + Livestock & Fisheries North West Cotton, Onion, Tomato and Sorghum + Rice & Cassava + Livestock & Fisheries South East Oil Palm and Cocoa + Rice & Cassava + Livestock & Fisheries North Central Maize and Soybean + Rice & Cassava + Livestock & Fisheries South West Oil Palm and Cocoa + Rice & Cassava + Livestock & Fisheries Federal Ministry of Agriculture and Rural Development 9

Development of Staple Crop Processing Zones (SCPZ) Key takeaways Cassava Agro Processing Plant Nigeria Starch Mill, Ihiala Focus on attracting private sector agribusinesses to set up processing plants in zones of high food production, to process commodities into food products. The government will enable this by putting in place appropriate fiscal, investment and infrastructure policies for staple crop processing zones: Tax breaks on import of agricultural processing equipment Tax holidays for food processors that locate in these zones Supportive infrastructure, especially complimentary investment by the government in roads, logistics, storage facilities and power. Infrastructure would focus on power, irrigation, flood control, roads, rail, air etc. Staple Crop Processing Zones will link farmers in clusters to food manufacturing plants. Develop Agricultural Investment Code, in partnership with Ministry of Finance and Ministry of Trade and Investment and CBN The location of Staple Crop Processing Zones will be dependent on a combination of State government support and an analysis of the comparative advantage of the region to produce the identified commodity. Federal Ministry of Agriculture and Rural Development 10

Support development of private sector driven, public sector enabled marketing corporations Leading global examples of marketing corporations Leading global examples of marketing corporations Key drivers of success The scrapping of marketing boards during structural adjustment, without any institutions to replace them or play their functions, has left millions of farmers in a precarious situation: market access is a challenge, price uncertainties and volatility which leave them at the mercy of middle men. No developed country has such institutional abandonment of farmers. We will revamp the functions performed by the marketing boards, but be careful to ensure that we do not build non-viable or over-bureaucratic institutions that tax farmers like the old marketing boards. They must be owned by agricultural value chains, run as private sector led (but government enabled) institutions and empower farmers and the value chain actors and generate value. These new institutions will be called marketing corporations and will coordinate the production and/or export of target commodities. In addition, they will encourage investment into the sector from R&D to infrastructure and processing. Finally, they will stimulate the development of tailored financial services to grow the sector. Federal Ministry of Agriculture and Rural Development 11

Agriculture s potential to grow the economy Agriculture production in Nigeria Value of Agricultural Sector, constant 2010 $ Billion +159% 52 36 256 99 69 2010 Current Increased Yield Increased Acreage Additional potential Shift to Higher Value Crops 1 Potential 2030 Share of growth, % 44% 33% 23% SOURCE: McKinsey Global Institute; Team Federal Ministry of Agriculture and Rural Development 12

High Level Key Performance Indicators (KPI s) Rice Paddy High Quality Processed Rice Jobs 2010 2015 3.4 Million MT 7.4 Million MT Negligible 2.5 Million MT 1 Million Cassava Cassava Tubers Yield Jobs 34 Million MT 51 Million MT 12.5 MT/Ha 25 MT/Ha 1.2 Million Sorghum Sorghum Grain Yield Jobs 9.3 Million MT 10.3 Million MT 0.75 MT/Ha 2.5 MT/Ha 150,000 Cocoa Cocoa Beans Yield Jobs 250,000 MT 500,000 MT 300 Kg/Ha 500 Kg/Ha 360,000 Federal Ministry of Agriculture and Rural Development 13

High Level Key Performance Indicators (KPI s) Continued 2010 2015 Cotton Cotton Lint Yield Jobs 20,000 MT 140,000 MT 150 Kg/Ha 400 Kg/Ha 125,000 Fertilizer Number of Farmers Reached 550,000 20,000,000 Assumes 500,000 metric tons of fertilizer is targeted at 5 million farmers (100kg i.e. 2 bags per farmer), only reaching 11% of targeted farmers. Federal Ministry of Agriculture and Rural Development 14

Do re o Cassava Transformation Plan Driving Economic Development through Value Addition Federal Ministry of Agriculture and Rural Development 15

Lessons from a Successful Cassava Revolution in Asia The Asian cassava revolution is driven by market opportunities, particularly the huge Chinese market, and entrepreneurs Market opportunities leads to an investment in processing capacity Expanded processing capacity creates a market outlet for cassava and income for farmers Higher income encourages adoption of improved production methods - of high yielding varieties and improved production methods - by farmers leading to increased productivity Increased productivity, reduces unit cost of raw material and makes cassava competitive High productivity and a competitive sector reduces risks to investment in modern and large cassava processing factories Any other learning experiences??? Federal Ministry of Agriculture and Rural Development 16

Cassava Map of Nigeria Source: Akoroda et al. 2010 Federal Ministry of Agriculture and Rural Development

Do re o The Potential of Cassava in Nigeria Nigeria is the world s largest producer with 38 million MT in 2010; up to 45 million MT was produced in 2006 Nearly 90% of cassava production in Nigeria is for domestic food production Production is by small holder farmers; a significant percentage are women More than 95% of production and processing is by rural communities Nigeria could easily double its cassava production with improved markets. Linking Farmers to Markets is the Key to unlocking the potential of cassava Federal Ministry of Agriculture and Rural Development 18

Do re o Garri Value-Added Chain Largest value-added chain, in terms of volume; an estimated 60-70% of all cassava produced Potential demand: 4-4.5 million tons of garri or 26 28 million tons of fresh roots/annum Inelastic demand; hence cyclic glut every three years Dominated by house-hold, village-level processors and trade intermediaries Inconsistent quality and low hygiene Different qualities in different parts of the country Federal Ministry of Agriculture and Rural Development 19

Cassava Value Chains HQCF High Quality Cassava Flour (HQCF) Principal market replacement of up to 10% wheat flour in bread; others food industry, adhesive industry, dextrins. Demand is over 400,000 tons per year. Starch Native and modified starches We have two functional starch mills in Nigeria with a combined capacity of 27,000 tons (although they currently operate below capacity). Demand is 230,000 tons per year currently met by corn starch imports. Chips HFCS Ethanol Dried Chips Principal market to meet internal and external demand of cassava for industrial use. China s demand is expected to exceed 12 mill tons by 2015/16 due to their large ethanol production. Demand is 520,000 tons per year from China and 400,000 tons Sweeteners - High Fructose Cassava Syrup (HFCS) The total sugar requirement for soft drink bottlers and juice manufacturers in Nigeria is estimated at 200,000 tons of sugar p/a. A replacement of half of this by HFCS from cassava, would create a 100,000 ton demand. Fuel Ethanol (E10) Nigeria has adopted the policy of blending gasoline with 10% ethanol, the E-10 policy. This represents a potential one billion liter per year market of fuel ethanol and 3.75billion for cooking fuel, assuming 50% of feedstock comes from cassava, a raw material requirement of over 3 million tons of dried chips is required. Federal Ministry of Agriculture and Rural Development 20

Do re o The Cassava Action Plan Source of demand Fresh root demand (in Millions of metric tons) 2011 2012 2013 2014 2015 Base-line for food (4% per annum increase 36.00 37.44 38.94 40.50 42.11 HCQF 0.35 1.15 1.17 1.20 1.22 Sweeteners 0.01 0.02 0.95 0.98 1.01 Dried chips 1.87 2.24 2.61 2.98 3.17 Fuel Ethanol 0 0 0.8 1.2 1.5 High Quality Garri 0.5 0.75 1 1.5 2 Surplus (purchase by govt) 1.7 0.8 0.3 0.2 0.2 TOTAL 40.43 42.40 45.77 48.55 51.21 Federal Ministry of Agriculture and Rural Development 21

Do re o The Cassava Action Plan Linking Demand to Supply - Outgrower farmer networks linked to existing and new processing plants - Improved supply chain management for large HQCF, Starch and Sweetener factories - Setting up new HQCF, Starch and Sweetener factories - Advocacy with end-users - Production of dried chips for export - Minimum price guarantee for farmers Raising productivity - Commercial seed systems of processor and farmer selected varieties - Network of agro-dealers and capacity building - Increasing farmer access to credit to purchase inputs - Building capacity of extension agents for effective farmer education - Fertilizer and adaptive variety trials Federal Ministry of Agriculture and Rural Development 22

Do re o The Cassava Action Plan The Cassava Market and Trade Development Corporation (CMTDC) - Study of expert from Thailand and China on the Nigerian cassava sub-sector - Establishment of CMTDC based upon recommendation of Asian experts - CMTDC conducts market development and improvement (qualitative and quantitative) Policy report - Enabling Legislative Acts for Market development - Fiscal Policies - Financial Service Policies - Agricultural Policies - Cross cutting Incentives for motivation Monitoring and evaluation - Base-line survey of cassava production and processing - Development of M&E plans to assess progress of interventions Federal Ministry of Agriculture and Rural Development 23

Do re o Operational Plan Stimulation of demand for HQCF Stimulate demand for cassava bread Strong political support for bread made from 40% cassava flour. Bakeries will have 18 months in which to make the transition, and will enjoy a corporate tax incentive of 12% rebate if they attain 40% blending. All equipment for processing of high quality cassava flour and composite flour blending will enjoy a duty free regime. With effect from March 31st 2012, importation of cassava flour will be prohibited so as to further support this programme. From July 1st 2012, wheat flour will attract a levy of 65% to bring the effective duty to 100%, while wheat grain will attract a 15% levy which will bring the effective duty to 20%. Consultations with the sector to ensure a smooth transition are on-going. An aggressive training program for bakers on how to make 40% cassava flour bread. Media promotion Nigerian President promoting 40% cassava flour bread Nigerian Minister of Agriculture at IITA where the 40% cassava flour bread was first baked Federal Ministry of Agriculture and Rural Development 24

Operational Plan Expansion of HQCF Production Expand production of HQCF in Nigeria Upgrade and expand existing HQCF mills: from total capacity of 60,000 to 100,000 tons in 3-5 months Engage private sector to build 12 new HQCF factories (40,000 tons/annum): total additional capacity of 480,000 tons/annum within 12 months Incentivize wheat millers and other actors in the wheat flour value chain in Nigeria to do backward integration and build new plants Develop effective financing mechanism for plant upgrade, including 40% government equity participation Encourage formation of out grower farmer network via facilitation of access to tractors, inputs, finance DATCO HQCF cassava factory, Ijabge, Nigeria Thai Farms HQCF cassava factory, Ososa, Nigeria Federal Ministry of Agriculture and Rural Development 25

Do re o Operational Plan Starch/Sweetener Support existing starch processing facilities to compete with imported starch Access to capital, and fiscal incentives Preferential water and power supply agreements Encourage formation of out grower farmer network via facilitation of access to tractors, inputs, finance Remove tariffs on starch processing equipment and other agricultural processing equipment. Expansion of processing capacity Feasibility studies on establishment of large scale starch and sweetener factories in Nigeria Provide incentives for establishment of new starch and sweetener factories in designated staple crop processing zones (SCPZ) Establish express lane policy to expedite agricultural production machinery imports. Create a new generation of farmers around these new factories Federal Ministry of Agriculture and Rural Development 26

Do re o Fuel Ethanol Establishment of a demonstration fuel ethanol plant Build a supply chain of farm clusters for supply of raw materials to the plant from surplus production Advocacy for fuel ethanol in automotive and cooking fuel Establishment of four demonstration fuel ethanol plant Feasibility studies on establishment of demonstration scale fuel ethanol factories in Nigeria Provide incentives for establishment of new fuel ethanol factories in designated staple crop processing zones (SCPZ) Establish express lane policy to expedite agricultural production machinery imports. Create a new generation of farmers, with high starch varieties, access to finance and inputs, and mechanization around these new factories Develop a financing program that includes smart support from government Federal Ministry of Agriculture and Rural Development 27

Improving Small Farmer Productivity Cassava is produced by a little over 6 million farm families at an average farm size of 0.5Ha and average yield of 11tons/ha Production systems vary from mono crop, where land is abundant to inter-cropping with other crops even rice Limited use of inorganic fertilizer and inappropriate cultural practices Intervention to raise yield include establishment of over a thousand demonstration trials of best bet varieties and increased access to inputs and finance The goal is an average yield of 20ton/ha in 2014. Federal Ministry of Agriculture and Rural Development 28

Cassava transformation implementation underway already across 14 states Cassava Market and Trade Corporation Audit, upgrade, and pre-qualification of SMEs to supply High Quality Cassava Flour Infrastructure improvement /equipment upgrade for clusters of processors of Gari, Fufu etc. Private sector investments: Training of bakeries in 40% HQCF bread Cassava snack foods Dried chip plants Starch mills Glucose plants Ethanol plants Supply chain management of producers linked to offtakers across cassava growing belts Novel cassava-bean flour snacks, Chin Chops Gon-Chuks HQCF factory makers of Chin Chop, Mbirri Federal Ministry of Agriculture and Rural Development 29

Cassava Market and Trade Development Corporation Team from China consisting of the secretary of the Guanxi Association of starch producers, an association of 120 starch factories and a dried cassava chip importer. Visited cassava production and processing in Nassarawa, FCT, Osun, and Ogun States, and IITA, Ibadan Submitted a report on recommendations for a Cassava Market and Trade Development Corporation Highlights include: 1) creation of a strong platform for cassava producers and processors for advocacy, information sharing, access to finance, quality standards, etc 2) Establish a model training farm to train new generation of farmers 3) Submit proposals to government on development of novel products and valueadded chains 4) Fund from membership fees and grants from government Federal Ministry of Agriculture and Rural Development 30

Cassava Job Creation Targets 1.2 Million Jobs by 2015 Primary Production Value Chain Primary Production Jobs Annual Projected Number of Jobs in Primary Production Measure: Thousands of Jobs Value Chain Jobs Annual Projected Number of Jobs in the Value Chain Measure: Thousands of Jobs Cassava has a relatively high labor content requirement of over 300 man days per Ha. This high requirement translates into almost a quarter million jobs in primary production alone. The value chain is relatively labor intensive. Estimate that for every 1 jobs created in primary production 1 job will be created within the value chain. The value chain includes, input supply, service delivery, aggregation of output and processing. Federal Ministry of Agriculture and Rural Development 31

ACKNOWLEDGEMENT DATCO Shareholders for the Invitation to the Honorable Minister of Agriculture of Nigeria, Dr Akin Adesina. Dutch Government for their support to Cassava + in Nigeria. IITA and CIAT for their past contributions to the cassava sector in Nigeria. Large number of stake-holders in cassava value-added chain in Nigeria who have shared their experiences with the transformation team. Numerous friends who have contributed to my learning experiences. Federal Ministry of Agriculture and Rural Development 32

Do re o THANK YOU FOR LISTENING! Federal Ministry of Agriculture and Rural Development 33