Nigeria Matters

N80b Rice Import: Solution Or Illusion To Food Shortage

The liberalization of credit, taxation and investment possibilities for large scale commercial farming has been extended by the current military government. Commercial and merchant banks have been directed to commit more of their loan portfolios to agriculture. Interest rates have been increased to encourage lending, but grace periods for borrowers have been lengthened, with tree crop farmers and ranchers benefiting most. A long with such measures the scope of the Agricultural Credit Guarantee Scheme is being expanded. Fiscal incentives include a three year income tax holiday for new agribusiness and the exemption of agriculture machinery and equipment from import duty.

Inducements for foreign companies are even greater. The Ministry of Agriculture is to set up an Agricultural Investment Bureau to give investors advice and guidance, and the government has repeatedly hinted at increasing the amount foreign companies can hold in agricultural ventures, but it seems to be moving away from such a move. But many economic analysts are skeptical that these incentives will encourage the kind of investment capital Nigeria needs to revitalize its economy. “Frankly the past three governments have tried in one form or another to stress foreign agricultural investment,” said Jay Fetner of the African Development Group, but they only “add inconsequential things.” What’s keeping investors out of Nigeria is the country’s exchange controls which limit the percentage of profits a foreign company can repatriate. Nigeria is a huge virgin market-the profit margins are tremendous, you don’t have to export, you can make all your money locally-the problem is repatriation of profits,” says Fetner. “It’s easy to make a buck in Nigeria; it’s just hard as hell to get it out of the country.” The Nigerian government says that short term cash problems make limits on the repatriation of profits a must. When the economy improves, says a Nigerian official, there will be changes. But for now, he says, “we would expect that foreign companies would also take into account Nigeria‘s interests.”

The government’s recent attempts to encourage investment, however, are prompting some foreign firms and Nigerian entrepreneurs to look more closely at the profitability of agribusiness. Perhaps more important in the long term, there also appears to have been a significant shift in the pattern of foreign involvement, back to direct investment in cultivation. After independence, many foreign companies in Nigeria became wary of involvement in direct production, fearing nationalization. Most companies opted to become management consultants or to enter joint projects with state bodies. Foreign companies could then contract to develop or manage state or privately funded projects without risking their own capital. The Kano-based subsidiary of the U.K. firm Masdar is such a consulting firm conducting feasibility studies, drawing up development plans and managing both government and private ventures. The company helped launch and provided management for the World Bank backed Kano ADP in 1982; but the contract was not renewed because of controversy over high overall costs and particularly the level of salaries paid to expatriates. Masdar has also developed 6,000 hectares of land on behalf of the Upper Benue River Basin Development Authority, returning half to original holders and managing the commercial cultivation of maize on the remainder to supply the country’s poultry industry. The RBDA has since taken over responsibility for management, and Masdar is negotiating similar deals with other state bodies and private companies.

Such consulting arrangements continue to be profitable, but now, with the climate becoming more attractive for foreign capital, multinationals are looking once more into the possibilities of direct investment in farming. The United Africa Company (UAC), a subsidiary of the Anglo Dutch conglomerate Unilever, has recently announced that it is to invest around $28 million in agricultural projects. The most important is an investment of just under $17 million in oil palm cultivation, marking UAC’s return to one of its principal activities before independence. Existing oil palm estates are to be rehabilitated and new sites developed. UAC is also to produce maize in Kaduna state and is negotiating a joint deal to grow raw materials in Oyo state for its food processing factories.

And, Nigerian manufacturers with multinational links are moving into agriculture out of necessity in order to substitute local products for previously imported raw materials that are now impossible to obtain because of import restrictions. Coca-Cola the franchise holder of the Nigerian Bottling Company (NBC), part of the Leventis group, is to produce fructose from maize grown on an 11,000 hectare farm in Bendel state. Around $50 million is to be invested in the project, which will supply NBC’s fourteen Coca-Cola bottling plants and produce glucose, starch, corn oil and animal feeds as by-products. John Holt, Nigerian associate of the U.K.-based multinational Lonrho, is also looking into starch, fructose and glucose production from maize grown on two large sites in Kaduna and Ogun states. And Cadbury Nigeria, a subsidiary of the U.K. company Cadbury-Schweppes, is investing in sorghum cultivation to supply its beverage and canned food manufacturing plants.

And, Nigeria‘s thirty-odd breweries have actually been given a government deadline to substitute local for imported grains and sugar. In response, Nigeria Breweries Ltd., part-owned by UAC International and the Netherlands‘ Heineken breweries, is to grow maize and sorghum on a 15,000 hectare farm in Niger state. As well as extracting sugar from the crops, the farm will produce edible oil and animal feeds. Stout brewers Guinness Nigeria are likewise exploring maize cultivation and are to grow other grains in the Chad Basin jointly with the Nigerian Bottling Company. The full impact of this new impetus into commercial farming on rural Nigeria has yet to surface. Although the government denies that peasants will be thrown off the land, officials readily admit that the Land Use Decree of 1978 ensures that companies wanting to invest in plantations have little problem getting cleared land. But, government officials insist that there is `ho conflict between the interest of the small holder and the interest of agribusiness, because the land that is developed is `land that is primarily unused.'” Whether there’s enough good farmland for both is questionable, but who will lose out if there isn’t, is clear. You can’t on the one hand talk about giving priorities to the small holder, to peasant production and at the same time open this thing up to international and local capitalist forces and assume that it is not going to affect the livelihood of the peasants.

In the past, peasant farmers were thrown off their land under agribusiness schemes, and there are fears that this “dispossession” may accelerate and a class of landless laborers will be formed. At best, it is argued, small landholders may become mere “outgrowers” managed by commercial concerns and then required to supply their crops to the managers, much like a sharecropper. Such developments have yet to occur on a mass scale, but already peasant communities have been disrupted by the construction of dams under the RBDAs, in which multinationals are heavily involved. For example, Impresit, the construction arm of the Italian firm Fiat, designed and built the controversial Bakalori dam, centerpiece of the Sokoto-Rima River Basin Development Authority’s irrigation complex in Sokoto state. At a cost of $550 million, the complex was supposed to irrigate 30,000 hectares for the cultivation of wheat, rice and other crops.

Some 4,000 peasant families-about 15,000 people were displaced when work began on the project in 1975. Some were resettled in badly serviced towns and villages, and many were without access to land and had to sell off their livestock to survive. Others were forced to migrate to find work and some were taken on by the contractors. When construction was completed the irrigated land was reallocated to the original holders, but the large debts that they had accumulated while without land stopped many from farming their plots. Much of the developed land was then taken over by scheme staff and absentee farmers from the towns.

Farmers’ protests over this disruption came to a head in 1980 when they blockaded the dam site to press for adequate compensation. Construction work was halted until the police forcibly broke the blockade after a gun battle which left at least nineteen people dead. Besides those in the project area, peasant farmers downstream from the dam have been badly affected by the scheme. The possibility of dry season farming on 20,000 hectares of “fadama” land inundated during the rainy season has been removed since the dam was built; peasants impoverished downstream by this far outnumber those benefiting from the irrigation scheme. As they are completed and come into operation, other large-scale irrigation projects under the RBDAs are creating similar problems; yet, despite much protest, they continue to be created. Around $2.2 billion was spent on RBDAs between 1982 and 1985 and the current military government has created another eight authorities, making one in each state of the federation, except Lagos. In May of this year, Impresit signed a $110 million contract with the military government to build the Jibia dam complex on the Gida River in Kaduna state, part of a vast plan to halt the encroaching desert in northwestern Nigeria.

World Bank involvement in Nigerian agriculture is ostensibly less harmful. The ADPs have made some advances in raising food production and in improving the water supply and other parts of the country’s infrastructure in rural areas. But the projects also have major shortcomings. Although it is true that federal and state contributions have plummeted since the early 1980s, forcing many ADPs to operate well below target, many of the ADPs problems can’t be blamed on inadequate funding. In fact, cost overruns have been reported in much of the construction work. A more important aspect of World Bank involvement is the effect its free market orientation is having on peasant farmers. The Bank’s insistence on opening procurements up to international tender means that Nigerian producers are becoming more and more dependent on imported materials and technology. Rural inequality is therefore exacerbated since only the better off can afford such items and subsidies are frowned upon. Foreign suppliers and distributors are of course the beneficiaries of the growing dependence on imports. Fertilizer distribution, for example, is to be handled by the private sector because of the inefficiency of state agencies – less than half of this year’s requirements are likely to reach the farmers. The U.S. company M.W. Kellogg, in partnership with the federal government, is set to take over procurement, while companies like ICI and Bayer are poised to handle internal distribution.

As well as assuring future markets and contracts for foreign companies, World Bank involvement in agriculture is also greatly deepening Nigeria‘s indebtedness – and strengthening the hold of international financial institutions. Between 1975 and 1983 the World Bank lent $1.2 billion toward the ADPs; talks are in progress for an additional $172 million loan to finance the ADPs in eight southern states, and another $75 million for an ADP in Borno state. On top of a $250 million loan for fertilizer imports since 1983, a $50 million loan is being negotiated for an afforestation program and for timber plantations, as well as an $85 million loan for livestock projects.

Foreign involvement in Nigerian agriculture is undoubtedly accelerating. The climate for foreign investment is becoming more amenable as the Nigerian economy is restructured under the watchful eye of the IMF, World Bank and international banks despite the lack of a formal agreement. Bureaucratic obstacles to foreign investment still persist-earlier this year five U.S. agribusiness investments were reported to be held up by delays in securing import licenses-but the overall trend is clear. As well as through consulting and joint participation in state projects common in the 1970s, multinationals are beginning to invest in their own agricultural ventures; in some cases this marks a return to activities quickly abandoned after independence. Supplying and distributing for World Bank-backed ADPs and other state projects are other lucrative fields for foreign companies. Even if agribusiness is not immediately profitable, many foreign companies feel it is important to keep or gain a stake in Nigeria, so as to be in a position to take advantage of the country’s huge potential market-Nigeria holds one in four of sub-Saharan Africa’s population.

The full consequences of the new commercial agriculture for Nigeria‘s peasant population-still responsible for by far the bulk of the country’s agricultural production-remain unclear. Already some of the serious side effects of irrigation projects have been seen. Other schemes, like the World Bank-backed ADPs, are superficially less disruptive; but these are forcing peasant communities to depend on foreign imports and a cash economy. Rural differentiation also is heightened, as it is often richer peasants – so-called “progressive farmers”-who benefit most from the schemes. The development of both foreign and Nigerian agribusiness has already forced many peasant farmers from their land and converted many to “outgrowers.” But this has yet to reach major proportions and there are grounds for some optimism in the way peasants have resisted such developments. Peasant farmers are becoming less easily coerced into parting with their lands, and often hold out for compensation with some success. Both Nigerian entrepreneurs and foreign agribusiness are finding that they cannot afford to alienate local peasant communities, on whom they often depend for labor; and they are wary of provoking public opprobrium. Peasant farmers themselves provide the strongest guarantee that the dominance of agribusiness in rural Nigeria is by no means a foregone conclusion- despite the efforts of the government and international agencies to promote it.

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