The dark shadow behind the food pyramids, By Olaoluwa Samuel-Biyi

It is time to admit that the era of food pyramids is long gone, especially not government-inspired ones. Today, the pyramids only cast shadows of a spent past. The agricultural sector currently engages a majority of Nigeria’s labour force, most of whom are still living in poverty. It is important to focus on the poverty problem and make agriculture a truly profitable enterprise, following which the activity will be self-promoting and not require grand displays of overground pyramids.

In light of the rising cost of rice in Nigeria, the Federal Government recently made the news by unveiling “mega” rice pyramids in Abuja. A million bags of paddy rice were said to have been conveyed from all across the country to the capital for geometric stacking and commissioning. To relive the sentiments of the nation’s Tafawa Balewa-era groundnut pyramids, the Rice Farmers Association of Nigeria (RIFAN), through their “Pyramid Sub Committee”, made the financial decision to transport the robust national harvest to the centre of the country before onward redistribution nationwide. The additional input costs were deemed necessary to demonstrate the results of the Central Bank of Nigeria’s Anchor Borrower’s Programme. Afterall, previous administrations had also tried and often failed to revive these prosperity-signalling food structures.

Through the Anchor Borrower’s Programme (ABP) launched in 2015, the government, via the Central Bank, offered low-interest loans and other forms of support to farmers. These types of interventions have been successful at improving local farm yields across the country and Nigeria is no longer dependent on imports for some staples like rice. Self-sufficiency in food production is however not synonymous with food security, and in the shadows of the food pyramids are gloomy realities that call into question their integrity. The CBN’s Q4 2020 economic report shows that of the N497.2 billion deployed to 2,504,690 projects under the ABP at the time, only N118.7 billion had been repaid, implying a 24 per cent loan performance rate, assuming the full amount disbursed were due. The CBN and RIFAN have nonetheless had cause to launch a debt recovery campaign due to poor performance.

The inference from this is that despite the significantly low cost of capital, the CBN’s efforts to offtake supply to subsidise the market, and persisting food price inflation, farmers are not profitable enough to recycle their loans. Indeed, despite the country’s increasing self-sufficiency in food, smallholder farmers who are responsible for 99 per cent of Nigeria’s agricultural outputs remain at the very bottom of the economic pyramid. According to a National Survey and Segmentation of Smallholder Households in Nigeria by the Consultative Group to Assist the Poor (CGAP), nearly two-thirds of smallholder farmer households in Nigeria live in poverty. It is therefore no wonder that despite the country’s massive youth population, and the repeated calls by voices in government for younger people to take to the farms, only 12 per cent of smallholder households are headed by people under the age of 30. The next generation are simply not as interested in agriculture.

Given the Nigerian government’s resource limitations, it must instead target its investment on fixing the infrastructure layer and focus on de-risking the sector by improving on factors that make it otherwise unprofitable. This most prominently includes poor internal security, high importation barriers and costs (especially for technological inputs), low research investment, and weak mobility of both local and foreign investment capital.

The reason for this is clear. The economic incentives to engage in agricultural production are not visible. The future population are not interested in merely producing food for subsistence, and neither sentiment nor patriotism will change that. In 2019, banks in Nigeria disbursed just 4.2 per cent of total loans to the agricultural sector, which is a reflection of their internal risk-return models and perhaps competition from the government. For agriculture to become profitable and sustainable long term, market forces and data must demonstrate that the sector has the potential to create wealth directly and consistently.

Going by the template of other sectors like telecommunications and media, private capital – along with the innovation it forces – must take the lead in financing and developing agriculture, and state intervention cannot be seen to distort the supply side. This is not to say that government interventions like subsidies and import restrictions are entirely bad; in fact, they have been highly successful at boosting local supply in countries like China. But unlike China, the government of Nigeria cannot afford to make up a significant portion of farmers’ revenue (38 per cent of revenue for wheat, 29 per cent for corn and 32 per cent for rice in China). The government can also not afford to purchase produce from farmers at above-market prices for stockpiling in national reserves, as it is done in some other countries.

Given the Nigerian government’s resource limitations, it must instead target its investment on fixing the infrastructure layer and focus on de-risking the sector by improving on factors that make it otherwise unprofitable. This most prominently includes poor internal security, high importation barriers and costs (especially for technological inputs), low research investment, and weak mobility of both local and foreign investment capital. The government also has land in abundance, which is a primary factor of production. Commercial and arms-length equity relationships can be brokered with entrepreneurs to cultivate latent arable land across the country.

It is time to evolve towards more modern entrepreneurship in the sector, a consequence of which will be the reduction of low skilled agricultural labour, which anchors workers to poverty in favour of more high-skilled research, technical and distribution expertise. If we are to achieve food security powered by capitalist efficiency, we must overwhelm government capital and interventions with private capital, competition, innovation and fair market pricing.

The government’s preoccupation with agriculture, which makes institutions like the Central Bank excessively hands-on with stakeholders, might be the sector’s bane. It forces progress to be inorganic, triggers premature actions like import bans and border closures, creates very fragile supply systems, limits private sector competition and innovation and distorts trade without the intended outcomes of reduced poverty or reduced price inflation.

It is time to admit that the era of food pyramids is long gone, especially not government-inspired ones. Today, the pyramids only cast shadows of a spent past. The agricultural sector currently engages a majority of Nigeria’s labour force, most of whom are still living in poverty. It is important to focus on the poverty problem and make agriculture a truly profitable enterprise, following which the activity will be self-promoting and not require grand displays of overground pyramids.

It is time to evolve towards more modern entrepreneurship in the sector, a consequence of which will be the reduction of low skilled agricultural labour, which anchors workers to poverty in favour of more high-skilled research, technical and distribution expertise. If we are to achieve food security powered by capitalist efficiency, we must overwhelm government capital and interventions with private capital, competition, innovation and fair market pricing. Industry participation and advocacy should no longer default to raw material production, but also extend to processing and intermediation for price discovery and distribution. Only then can we have a sustainable sector that is aligned with the future.

Olaoluwa Samuel-Biyi is a Partner at Hacked Ventures, Venture Partner at Greenhouse Capital and Doctoral Candidate in Cryptoeconomics at IE Business School, Madrid.