VCDP, OLAM and our new Agric move, By John Ogunlela
By John Ogunlela
We have a slit in the door on the federal government’s planned emergency agriculture programme today opened by the Vice President, Kashim Shettima. He outlined the programme he called d a Value Chain Development Programme (VCDP) which will be hinged on “Innovation finance for food system transformation; development of Nigeria’s agro value chain and Special Agro-Industrial Processing Zones programmes.”
That is a lot to take in a gulp and here is the meaning in bullet points:
a. Food is central. That is, food crops will be emphasized.
d. ‘Special processing zone’ is a compound and fuzzy term that means practically the same thing as the old ‘Anchor Borrower’ programme. What it is saying is, the produce will be aggregated for ‘processing’. There is a big room for variation in that open-ended expression and going further, the true process flow gets clear. The processing here could just be sorting and bagging. But it could also be a lot more. It is subjective.
c. There is an emphasis on ‘financing’. That points to loans from IfaD, AfDB and all the rest
d. Government will open up farms by enhancing security. That’s fine and we’ll, only expected.
We are later told the programe “brings together local governments, IFAD, AfDB, IsDB, GCF, OLAM and other private actors alongside the government of Nigeria for transformative financing of food systems that leaves no-one behind.”
Putting it together, here is how I will interprete it to the everyday reader who is unfamiliar with these agric economics operational language.
The VP is saying that the federal government will borrow half a billion US dollars to fund a food production emergency nationwide. The Indian company, Olam is at the centre of this program who will sit as an operator of a “Special Agro-Industrial Processing Zone”. All levels of government (Remember Ngozi Okonjo-Iweala’s ‘SEEDS and ‘NEEDS’) will be involved along with all and sundry because it’s a formulation that “that leaves no-one behind.”
People will be recruited with a wide net – apparently the widest practical possible – to produce food for Olam & Co to offtake. A commodity board will sit atop everything to regulate the pricing, according to the release from the VP office. His means they will not sell to Olam according to free market rules but according to prices imposed by government.
That is the summary unless it is later touched up here and there.
Agriculture has three sides:
1. A Science part that works with a high level of certainty as long as natute cooperates.
2. An Economics part that is responsible for sustainability.
3. A Policy part that is responsible for scope, strategy and sustainability.
We have the first part working largely okay and it needs just some touches and needs the engineering part to get expanded and concretized as a general national mentality. The second part is testy indeed because a lot of risk is embedded here. We have hardly ever gotten this right but we could if the policy part is well sculpted. Buhari’s Anchor Borrower is owed not less than N17 billion as we speak and it looks like a hopeless debt. There are different ways to address the Economics and the Policy parts and the choice outlined by the VP today is one of them.
So, will it work or will it fail?
Both the Yes and No answers are convenient and the debate can be easily reduced to mere exchange of words unless the reader understands and is honest about some premises of these thoughts. Exchange of words will end up in the morass of politics if not ethnicity or worse. Let’s explore some basics:
1. Commodity Boards: We are liberalizing energy, especially petrol but commanding the prices of food. These costs are going to be controlled for the benefit of a buyer led by a foreign business, Olam. How that dovetails into the overall national development strategy of a country with 70% youth and a developing country for that matter is hard to defend. This is my third long read on this issue and in the last one, I had emphasized the need to design this programme not merely as a value chain issue, but as a national strategy measure. Yes if well managed, it is big enough to be used as a strategic programme that catalyzes development across board. I don’t think the government is thinking that way. But of course, it doesn’t mean they are wrong; it only means , in my view, that they are not adopting the expanded approach.
2. All Aboard. This is one thing I have always opposed. Agriculture must not be treated as amass recruitment strategy or it will fail. Modern agriculture does not do well as a mass employer. It will become ponderous and the yield will reduce along with product quality. It will also fail in development and transmission of skills. It won’t add value to the recruits. We may therefore be poised to transfer humongous value to the aggregator exploiting the time and sweat of farmers without a corresponding transfer of skills and, yes, Capital to the farmers. Usually this should work for a season or two, given the fact that that sweat and time are generally lying fallow at this time. You will see a surge in grains mostly for a season or two. But it is not sustainable because the lower people will quickly see the yawning gap as their income chases goods in vain in the market. It is just everyday economics that this programme may simply be empowering the middle man, something modern agriculture policy people always strive to eliminate.
3. Central buyer. Olam is one of these big businesses whose playbook is on creating monopoly and dependency. When you mate such corporations with commodity Boards, what you have is asphyxiation of the rest. They will decide which crops are cultivated and how, they will buy off the commodity board people and fix the prices for practical purposes. They will tweak the rest of the imput-output dynamic to create a national agricultural ecosystem that is dependent on their wishes.
What do I think is the way out?
My idea will be, don’t be exclusive on it. Don’t adopt only a single system but spread your risks. Develop other ideas and run them parallel to this. Nigeria is a large and diverse space and it is too risky to over-centralize it’s agricultural programme. This idea is too top heavy and vulnerable to bug business. Let’s have at least two more parallel full style programmes.
In addition, seek and get local inputs. The national agriculture is wide and diverse. Listen to the local people and gain insight into their areas of agricultural strength. The practice of almighty policy pronounced down from the center are unwieldy and they don’t succeed. Listen to the people from township to regional levels and you’ll be pleasantly surprised.
There is a political imperative in this because the government will want to show jobs. I don’t honestly expect the government to not play some politics with this. But the exposure here is way too great and the likelihood that the failure experience of the Anchor Borrower programme of the past administration will be repeated. Political imperatives can be embedded in a safer way, a way much safety than the one espoused today.
Government also seems to feel safer dealing with entities like Olam. It is standard risk management approach but I don’t see how it will work out in this case. I leave the reasons for the reader to figure out.
Ogunlela, a Crop & Soil Scientist, consults on agriculture, enjoys writing & blogs extensively on science, technology & trending issues
