VZCZCXRO0774
PP RUEHMA RUEHPA
DE RUEHUJA #2486/01 3541250
ZNR UUUUU ZZH
P 191250Z DEC 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4762
INFO RUEHOS/AMCONSUL LAGOS 0487
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
UNCLAS SECTION 01 OF 03 ABUJA 002486
SENSITIVE
SIPDIS
DEPARTMENT FOR EE/TPP/ABT/ATP SPECK
DEPT PASS TO USTR-AGAMA
TREASURY FOR PETERS AND HALL
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ ANESA/DHARRIS
USAID/AFR/WA FOR TWAY, USAID/AFR/SD JHILL, AND USAID/EGAT MOTT
USDA/FAS FOR SIMMONS AND MCKINNELL
E.O. 12958: N/A
TAGS: EAGR ECON ETRD EAID EFIN PGOV NI
SUBJECT: NIGERIA: AGRIBUSINESS CLIMATE IN NIGERIA
1. (SBU) Summary: In November, the USAID contractor Booze Allan
Hamilton (BAH), conducted a survey on the agricultural business
climate in Nigeria focusing on agribusiness, trade, access to credit
and property. What they found is that poor infrastructure in the
country contributes to increased business costs. Further more, the
government develops unpredictable policies and poorly implements
others, which damages investors' confidence. Lack of and access to
information and regulations tends to be uneven and unreliable.
Despite these constraints, the team concluded that there are
abundant opportunities for expanding agribusiness by increasing
access to finance, improving information dissemination, improving
policy and regulatory environment as well as strengthening
institutions and enhancing political will power. The final draft of
the USAID/BAH report will be available in 2009. End Summary.
2. (SBU) BAH consultants talked to officials in the private, public
and donor community, reviewed laws and policies and completed a
survey on the agricultural business climate. The assessment was
centered on the agriculture sector, more specifically looking at
areas of agribusiness, trade, access to credit and property. The
following paragraphs are highlights of their findings. The official
report will come at the beginning of 2009.
Agribusiness
------------
3. (SBU) Infrastructure remains a serious issue for agricultural
competitiveness, specifically lack of rail and reliable rural road
transportation and reliable power sources. Transport costs play a
particularly important role in staple crop competitiveness. The
lack of reliable and affordable power is a major constraint to
agroprocessing and pumps for irrigation.
4. (SBU) Farm productivity and competitiveness is hampered by both
poor quality seeds that generate higher productivity and are pest
and disease resistant and very poor access to fertilizers resulting
from challenging policies and high prices. The seed market has a
history of limited oversight, poor quality and low farmer
adaptation.
5. (SBU) While there are many skilled farmers and businessmen,
overall management skills appear to be a constraint within the
agribusiness sector, particularly for medium-scale commercial
farming operations and food processing ventures. There is a need
for a greater number of skilled agribusiness owner and managers.
6. (SBU) Improving efficient access to consumer markets within the
country - supermarkets, wholesale and distribution - is crucial to
enhance agribusiness investment. A focus on the significant
Nigerian consumer markets will drive interest and investments in the
overall domestic and regional agricultural value chain. This,
combined with enhanced on-farm productivity through the application
of science and technology, will expand the sector's ability to feed
the region.
Trade
------
7. (SBU) Import/export processes are cumbersome, costly and
inefficient, and the rate of examination by customs officers (70%)
of goods moving through ports and border crossings are the highest
in the region. The lack of transparency, predictability and
coordination in the import/export process are coupled with excessive
documentation requirements.
8. (SBU) Modern information technology (IT) systems within Customs
are lacking leaving the customs processing in disarray and less
efficient. The Government of Nigeria (GON) has launched new efforts
to adopt modern processes and practices, but these needs to be
accelerated. Customs has delegated their role to value, classify,
and determine the level of inspection to a private customs service
provider; however the private run system is fraught with
inefficiencies and opportunities for rent seeking with limited
oversight from the Customs officials.
9. (SBU) The relationship between public border agencies, port and
private stakeholders is not productive, and consultation is
infrequent and not formalized. In the past, there has been limited
willingness to reform the customs process, although there are some
encouraging policies that have been set to speed up transit time in
the ports.
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10. (SBU) Conditions at Apapa port are poor, and the 30% reduction
in cost and improved efficiencies projected as result of the private
takeover of terminal operations have not been realized. It takes an
average of 28 days to unload from the port until goods depart to the
market. Many traders are using the neighboring Benin port where
charges are 50% less and processing time is faster.
Access to Credit
----------------
11. (SBU) The overall banking sector is fairly sound and is
expanding rapidly. This rapid expansion remains a concern as the
capacity of the Central Bank (CBN) is already stretched, and their
regulatory framework and procedures are still developing. Increased
capacity and technical skills at the CBN are needed to accommodate
the rapidly expanding banking sector.
12. (SBU) Better access and basic understanding of agricultural
lending is needed for most banks, although there are some banks that
are expanding lending to the sector. Furthermore, banks need basic
tools to limit lending risks such as: credit bureaus (the CBN just
released guidelines and is accepting license applications); modern
secured transactions law with electronic registry; condominium law;
warehouse receipts system; and modern leasing law (which will rely
on the modern registry).
13. (SBU) Microfinance banks (MFBs) are weak, but are the ideal
vehicle to service rural and agricultural areas. The MFBs should be
targeted for training on agricultural lending. At the same time,
farmers should be encouraged to form cooperatives as a means to give
greater borrowing power to small farmers. Finally, the CBN needs
even greater capacity in oversight of rapidly expanding microfinance
banks.
Property
--------
14. (SBU) Most agricultural land is held by small holders under
customary ownership. The process for transferring customary
ownership to statutory (titled) ownership is quite long and requires
dedication and time to complete. Few small holders have the
knowledge or ability to complete the process from the local up to
the state level. Accordingly, few have the opportunity to use their
land as collateral for loans.
15. (SBU) Under either titled or customary ownership, the state can
decide to use the land for public purpose, which can include
relocating a settlement to provide the land for industry investment,
but adequate compensation is required. Land that is under customary
ownership appears in reality to be less secure than land under
titled ownership, although this is not reflected under the policy.
16. (SBU) Agribusiness and other investors are quite secure in their
land ownership and, in the North, they do not have many problems in
acquiring additional land as necessary. However, land security and
acquisition is purportedly more challenging in the South where
population pressures on the land are greater and the land policies
differ. In land case disputes, most are handled adequately on the
local level through mediation with local leaders, while land
disputes that must go to court can take years to resolve.
Issues for reforms
------------------
17. (U) After a USAID/BAH roundtable discussion with the Nigerian
public and private sector, the following issues were presented by
stakeholders as the most pressing issues for reforms.
18. (U) Priorities for reforms in the area of trading across borders
are:
-- Reduced transit times and costs of goods.
-- Improved policy and regulator environment for agriculture seeds
and fertilizer.
-- Continued reform and stability in the policies and regulations
related to tariffs and import bans.
-- Strengthen institutions and streamline agencies such as the
National Agency for Food and Drug Administration and Control
(NAFDAC), and Consumer Protection Council (CPC).
-- Greater capacity to develop fact based analysis of agriculture
policies and strategies.
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-- Build capacity to establish international standards: training,
skill acquisition, and risk analysis.
-- Enhance public-private partnerships.
-- Encourage the use of computer program ASACUDA 3.0 (++) and extend
to all port terminals.
-- Fully integrate ASACUDA mechanism into export trade/transactions.
-- Review service charges.
-- Make operational inland container terminals.
-- Integrate the informal trading sector.
-- Create benchmarking for product lines in Nigeria.
19. (SBU) Priorities to significantly expand agribusiness are:
-- Improved application of science and technology to increase
production to meet market demand.
-- Increased access to finance/credit access, including storage and
inputs.
-- Development of promising value chain and formation of business
linkages and clusters for staple crops.
-- Improved information dissemination about markets and prices.
-- Political willpower to enhance policies and increase investments
favorable to private sector led growth of the agriculture sector.
20. (SBU) A final draft of the USAID/BAH report on agribusiness
findings and recommendation for way forward will be made public at
the beginning of 2009. Consultations with the GON, donors, and the
private sector will be held in Nigeria to validate key findings and
help establish priorities for action. USAID will use these findings
to develop an active program to address agriculture trade,
transportation reforms, and agriculture policy in support of
Nigeria's development of a Comprehensive African Agriculture
Development Program (CAADP) action plan for Nigeria. The follow up
program will accelerate the implementation of the US Global Food
Security Response program in Nigeria.
21. (U) This message was coordinated with ConGen Lagos.
SANDERS