Agricultural Value Chain: A note to Dr Abubakar

By Agbaji Chinedu

A ‘value chain’ in agriculture identifies the set of actors and activities that bring a basic agricultural product from production in the field to final consumption, where at each stage value is added to the product. A value chain can be a vertical linking or a network between various independent business organizations and can involve processing, packaging, storage, transport and distribution. The terms “value chain” and “supply chain” are often used interchangeably.

Traditional agricultural value chains are generally governed through spot market transactions involving a large number of small retailers and producers.

Modern value chains are characterized by vertical coordination, consolidation of the supply base, agro-industrial processing and use of standards throughout the chain. 

A value chain encompasses the flow of products, knowledge and information, finance, payments, and the social capital needed to organize producers and communities.

Information is especially important to all value chain actors and flows in two directions: markets inform producers of price, quantity and quality needs, product handling and technology options, while producers inform processors and markets on production quantities, locations, timing and production issues. In a value chain, processors and marketing agents may provide producers with finance, inputs and training in technologies of production.

Value chains may include a wide range of activities, and an agricultural value chain might include: development and dissemination of plant and animal genetic material, input supply, farmer organization, farm production, post-harvest handling, processing, provision of technologies of production and handling, grading criteria and facilities, cooling and packing technologies, post-harvest local processing, industrial processing, storage, transport, finance, and feedback from markets.

The rapid globalization of the Agricultural markets has led to the generation of new production and distribution systems, as well as new consumption patterns. One of the objectives of modern agriculture is to reduce to the barest minimum the problems associated with agricultural loss, wastages and output underutilization by ensuring an efficient optimization of all the linkages between the producer and final consumer through the “Value-Chain” concept.

There is oftentimes no differentiation of farming activities which resultantly shields the benefits that could have accrued from trade specializations. The sustained efficiency in the agricultural industry of the developed nations is hinged on the principle of specialized diversification through the value chain. Here, each of the producers, processors, marketers and researchers focuses on his enterprise as one’s output is another’s input, ensuring quality delivery of resources to the next link without encroaching into other production niches.

In Nigeria, attention is mostly focused on primary production; huge crop turnover/harvest, large flock management, enormous plantations etc. Nigerians pride themselves in being the world’s largest producer of cocoa, third largest producer of sorghum, largest producers of yam and cassava, and cultivators of the great monumental groundnut pyramid. The enigmatic question here is: despite our seemingly agricultural feats, why is the agricultural industry not regarded as developed? Production efficiency which could have been realized from the processing of our massively harvested crops is lost; for example, cocoa beans are exported unprocessed and are transformed into varied products such as beverages, chocolate bars and candies to mention but a few which are in turn imported into the country and sold to us at increased prices.  Appreciable economic gains will accrue to the nation if there are policies to guide against exporting raw crop produce; which will strengthen the value addition process and encourage investment in such areas of the economy.

Governments all over the world are interested in the potential of value chains to develop agriculture and contribute to food security, and this has been on the rising since the 2008’s global food crisis. Nigeria through the Agricultural Transformation Agenda has currently implemented policies to strengthen the players of the value chain mix and revolutionize agriculture as a business entity. Agricultural value chains hold considerable promise in reducing poverty and promoting inclusive growth when the poor and other marginal groups participate in them. Under the right conditions, value chains can move smallholder farmers from subsistence into commercial agriculture, this is where Nigerian Agricultural business is heading to irrespective of the challenges both natural and man-made it has faced over the years.


ENABLING ENVIRONMENT: Nigeria has over the years tried to revamp agriculture using different approaches to boost production. However, recent developmental programs are geared towards maximizing income not only on production but also on processing and other areas, (Agricultural value chain). For the effectiveness of the Agricultural value chain, an enabling environment through national policies, regulations, and supporting institutions are a prerequisite. Policy reforms relevant to the value chain approach focused on the following should be considered: –

•            Increasing private sector participation (Cooperate organizations and Individuals)

•            The quality and safety standards of agricultural products

•            Improving institutional and financial frameworks.

•            Promoting national policies that support the agricultural sector; by reducing barriers to inputs, increasing access to finance and providing incentives.

For instance, the ban on rice importation since the inception of this administration paid off. The action improved the quality of rice processed within Nigeria, with some of them matching the erstwhile popular foreign brands. This has also led to improve earnings for the rice farmers and placed their association, RIFAN, at a vantage point for negotiating loan deals for farmers with funding entities. There has also been an influx of new rice farmers as the profitability of rice farming has significantly improved, thereby providing opportunities for young people to engage in farming. The establishment of rice mills across the country created back-linkage with consequent increase in employment opportunities and rural development.

CREDIT AND FINANCIAL SUPPORT: Access to credit is a pivotal requirement for all value chain stakeholders, including small-scale processors and retailers, storage operators, and traders. Access to credit will boost small entrepreneurs, for instance, to buy processing or packaging equipment, develop storage facilities, and differentiate products. Getting access to credit and financing agricultural ventures in Nigerian Banks is not business friendly due to the nature of Agriculture; being a long-term investment. Federal government introduction of NIRSAL over the year has made things a bite easier for farmers. So far NIRSAL Microfinance Bank (NMFB) has disbursed a total of N439.74 billion to 711,706 beneficiaries under the Agribusiness/Small and Medium Enterprises Investment Scheme (AGSMEIS) and the Targeted Credit Facility (TCF). AFAN should be involved while disbursing agric loans in other to identify portfolio farmers. Speaking in a resent program in Abuja the president of All farmers association of Nigeria Alhaji Faruk Rabiu Mudi said that a live data of farmers in Nigeria is on the way. He said it will help both the association and government agencies in policy making and implementation.

INFRASTRUCTURE: Creating and rehabilitating rural roads focused on linking areas with a competitive advantage to markets can help form competitive value chains. This approach relates to a key aspect of promoting value chains by linking high-value crop production areas to strategic commercial markets. The aim is to reduce transition duration and ensure timely supply of both inputs and outputs to preserve the quality of Agricultural product. Other supporting infrastructure, such as storage facilities and transport logistics, would also increase selling options and contribute to benefits that accrue from rural roads. Investors are open to partner with stakeholders in providing transport and logistics services and other important infrastructural development if encouraged through recognition and policy supports.

TECHNOLOGY: There is need for constant innovation and technological inputs in the value chain elements to raise productivity, reduce costs, and stay competitive. Innovation requires experimentation, incubation, and eventually adaptation to develop and maintain competitiveness. This should be a continuous process involving stakeholders at every point in the chain to improve productivity, product quality, information transfer, processing, and marketing processes. Nigeria is yet to maximize technological input for Agricultural development, (ICT) which could offer a huge return and save appreciable amount of cost. For examples development of software to simplify farm management, soil testing, handle routine processes among others.

MARKET INFORMATION: Market information must be delivered on time for it to be useful. Approaches for getting timely price information for improving the negotiating position of producers with traders and processors. A wider range of information is needed, beyond prices, in areas such as inventories of agribusiness opportunities, and identifying markets and technology links for new and existing products. The private sector plays a more responsive role to farmer–market information needs. Owing to the vast nature of information required by different individuals in the value chain, the area of information management proves to be a good investment opportunity for investors to manage and allow easy access to end users. A lively Farmer association website and platform can play a major this must be encouraged.

ORGANIZATIONS: The development of organizations that have the critical mass to provide structure for governance is pivotal to the development of value chains. The World Banks’ Agriculture for Development report makes the case for organizations of key stakeholders in agricultural development in general and value chains in particular. The report argues that organizations form a major part of institutional reconstruction, and can use collective action and links to strengthen the position of smallholders in the markets. Organizations can contribute to value chains by strengthening their bargaining power to reduce transaction costs, and give poor and vulnerable groups a voice in the policy process. To do this, organizations must be able to act as vehicles of change and be able to network through well-developed links. This will also need some form of institutional governance to promote member confidence and solidarity, and build capacity for activities such as credit management.  Alhaji Faruk Rabiu Mudi led All farmers Association of Nigeria should restructuring and strategizing to make all farmers irrespective of affiliate a player.  

PRIVATE SECTOR PARTICIPATION: Encouraging private sector participation requires clarity about the roles of government and the private sector. Fostering interaction through public–private partnerships require identification of opportunities and the development of commercial models for effective participation of both sectors. This is what Nigeria hope to achieve if they use the Agric-value chain approach to commercialize Agriculture as a business investment. Successes recorded on the E-wallet programme under the Growth Enhancement Support scheme of the Federal Ministry of Agriculture and Rural Development to replace the old fertilizer and seedlings distribution method, which the Federal Government handled through middlemen, states and local governments as shown that public-private partnership is the engine to revolutionize Agriculture in Nigeria. Investors are therefore encouraged to look for areas in the value-chain to partner with government and come out with framework to stimulate business drives in the value chain. Guarantee off taking system is also working effectively.

INCLUSION OF THE POOR: The agricultural value chain approach can provide opportunities for the poor. Because the main aim of value chains is to generate profit, the means for achieving this can conflict with the inclusion of the poor, who generally lack the skills and expertise to produce for high-value markets. However, with good policies to support the poor through capacity building, the value chain can serve a means of empowering the poor and creating jobs. This is one of the areas developing countries like Nigeria are hoping to bank on for the creation of more jobs. The inclusion of marginal groups in value chain development has largely been based on support for production. It introduced a staged approach for inclusion, which aimed to gradually increase the skills and capacity of producers so that they could participate in commercial supply chains with the possibility that value chains would evolve.

Finally, sir, modern agricultural value chains usually offer wages and self-employment with better pay and working conditions than the traditional agriculture.  A comprehensive approach is required by the public-private partnership to identify key constraints to agriculture value chain development and adopt a workable policy, regulatory, and institutional reforms to address key constraints for agricultural value chain development.

The multiplier effects of the success of Agricultural value chain on the Nigerian economy is far enormous, with the current agricultural income of the country, put at N15 trillion as against the potential value of about N40 trillion. Nigeria could pride herself as an investment hub in Agriculture and put the nation back to limelight as an agrarian nation that can guarantee food security and generate foreign exchange through Agro produce exports.

Agbaji Chinedu writes from Kaduna: 08035004617