Monday 09 April 2018 C002D5556 BUSINESS DAY 25 and ensuring price stability percent. Policy boosts local sourcing of raw materials The restriction has encouraged more firms to source raw materials locally. For instance, Guinness Nigeria Plc sources 75 percent of its raw materials locally. Nestle Nigeria Plc has equally joined the fray. Nigerian Breweries Plc is to source 60 percent of its raw materials locally by 2020. Procter and Gamble Plc have started sourcing a significant amount of its raw materials from local suppliers. This means the billions of dollars hitherto spent importing raw materials into the country is now being injected into the local economy, creating millionaires in those raw materials value chain. Investors and Exporters (I & E) Window boosts investors’ confidence The foreign exchange market was fragmented with several rates applicable in the market. In fact, stakeholders said if the regulatory authority did not intervene urgently, those unofficial rates would become official. As a responsive organisation, the CBN came out with an ingenious move christened as Investors & Exporters FX Window. “The Central Bank of Nigeria, in a continuing effort to deepen the foreign exchange market and accommodate all FX obligations, hereby announces a special window for investors, exporters & end-users (hereinafter referred to as “Investors & Exporters FX Window”. The purpose of this window is to boost liquidity in the FX market and ensure timely execution and settlement for eligible transactions” the CBN said through a circular dated April 21, 2017. As at the end of last year, transactions through the I & E window crossed $19 billion, particularly through significant inflows from the offshore investors interested in treasury bills and primary market auctions (PMA) by the Central Bank of Nigeria (CBN). Based on the foregoing, the arbitrage opportunities to rent seekers have shrunk, as the parallel market rates converge to the official rate and volatility associated with foreign exchange transactions has slowed down. Furthermore, as the CBN succeeded in saving scare forex on unimportant items, this has led to a boost in foreign reserves which presently stands at about $46 billion. Capital importation surges The total capital importation into Nigeria in 2016 was $5.12 billion. With CBN ingenuity and confidence boosting policies and programs implemented, capital importation into Nigeria surged 139 percent to $12.23 billion by 2017 year end. In the real sector, inflows into the agric sector rose by 771 percent from $22.47 million in 2016 to $195.65 million in 2017. Fishing industry witnessed 1,557 percent increase in capital importation from $6 million in 2016 to $99.43 million in 2017. The nation’s tanning industry which was almost dead started showing signs of revival as investors injected $520,000 into the sector. In terms of FDI, the President and Commander-in-Chief of the Armed Forces, Muhammadu Buhari, commissioned the largest integrated feed mill in Kaduna State owned by Olam Nigeria Limited. The project cost $150 million to set up. When fully operational, the mill will process 180,000 tons of corn, 75,000 tons of soybean, 360,000 tons of animal feeds annually and 1.6m day old chicks weekly. In addition, the project has the capacity to employ about 600 workers directly and 400,000 workers indirectly. By the second quarter of 2017, the Nigerian economy responded to those ingenious moves leading to the exit from recession. In that quarter, the GDP growth was 0.72 percent. It improved to 1.40 percent at the end of the third quarter and ended the year with 1.40 percent growth in GDP. CBN options for sustaining the growth momentum Nigeria is blessed with large arable land of which only a small portion of it is under cultivation. Therefore, with high youth unemployment, it will not be out of place to advise Nigerians particularly the youths to take interest in agriculture. Interestingly, a lot of successful Nigerians have emerged in this sector in the last one and half years. Here, we take a look at some of the agric and agro-allied areas where millionaires have recently emerged. Rice Farming: This is one area the CBN has vigorously supported in the last few years. Rice is a major staple food in Nigeria, and before the new agric revolutions, Nigeria spent about $2 billion importing rice annually. We have the upland rice; rain fed low land and irrigated rice. With improved yields per hectare, a farmer could harvest between 0.7 to 1 tonne per hectare for upland rice. It is between 2 and 2.5 tonnes per hectare for upland rice while it is between 3 and 4 tonnes per hectare for rice grown through irrigated system. Given the enormous opportunities in rice farming, the CBN introduced the Anchor Borrowers’ Program (ABP). Launched on November 17, 2015, the program is intended to create a linkage between anchor companies involved in the processing and small-holder farmers. Some of its objectives include: to increase banks’ financing to agricultural sector; reduce agricultural commodity importation and conserve external reserves; increase capacity utilisation of agricultural firms; create new generation of farmers and entrepreneurs and employment; deepen the cash-less policy and financial inclusion; reduce the level of poverty among small-holder farmers; and assist rural small-holder farmers to grow from subsistent to commercial production levels. As at the end of 2017, over 500,000 farmers have benefited across the States of the Federation, and more farmers are going to be engaged. Maize farming: Maize industry in Nigeria is valued at $6 billion. The produce is a must have for poultry farmers and manufacturers. Supply of maize is about 7 million metric tonnes whereas demand is 7.5 million metric tonnes. Demand for maize is consistently high due to the large poultry industry. Gestation period of maize is about three months and with new improved yields, a farmer can be sure of considerable yield per hectare. Multinational corporations such as Nestle Plc, Nigerian Breweries Plc, Guinness Nigeria Plc, Cadbury Plc, Flour Mills Plc, etc., have started sourcing raw materials locally. Cereals happen to be one of the major raw materials for these companies. With poultry industry expanding daily while manufacturing giants such as the aforementioned companies competing for the same cereals, you can be sure that there is ready made market for maize in Nigeria. The good news is the CBN programs help farmers to get improved seedlings and finance. Fishery: The catfish subsector of the Fishery industry in Nigeria is worth about N175 billion as the nation currently produces catfish about 370,000 metric tonnes. This is another area of agriculture unemployed youths have made millions of naira by dint of hard work. The CBN’s ABP covers it as well. In 2017, catfish farmers in Delta State Continues on page 26
26 BUSINESS DAY C002D5556 Monday 09 April 2018 CBN: Catalysing real sector development... Continued from page 25 were supported through a soft loan of N1.2 billion. In addition to local consumption, catfish farmers have started exploring the international markets. According to the study sponsored by the Food and Agriculture Organisation (FAO) of the United Nations, the quantity of dried and smoked catfish, tilapia and other types of fish from the West African region to the United Kingdom was worth 500 tonnes per year estimated at about $20 million. Cassava: For domestic and industrial uses, cassava is one of the most consumed foodstuffs in Nigeria and sub Saharan Africa. According to the National Bureau of Statistics (NBS), expenditure on cassava amounted to 23 percent of consumption expenditure and 15 percent of the total expenditure on consumption, which is about N24 trillion. The CBN also supports farmers who show interest in cassava farming. Cotton: Cotton used to be one of the major non-oil exports until the agricultural sector was abandoned during the oil boom, and that led to the collapse of all the textile mills in the country which then were majorly situated in Lagos and Kaduna States. The CBN is determined to bring back the good old days in the nation’s cotton industry through its intervention programs. The Central Bank of Nigeria (CBN) is interested in this segment of the agriculture value chain because between 2014 and 2017, over N400 billion worth of textile and textile articles were imported into the country. In 2014, a total of N106.11 billion worth of textile and textile articles were imported. In 2015, the value of imported textile related materials fell to N92.17 billion. In 2016, it further rose by 24 percent to N114.7 billion and with another 24 percent increase, the value of imported textile materials rose to N141.99 billion in 2017. On the contrary, the export of textile and textile related articles which stood at N145.41 billion in 2014 fell sharply by 97 percent to N4.20 billion in 2015 and has since remained at that level. In 2016 the export of textile related materials earned Nigerian farmers and other players in that value chain just N5.47 billion and in 2017, it was N5.86 billion. The intervention of the CBN is beginning to rekindle interest in the sector. This is so because since 2016, the sector has recorded quarter-on-quarter and year-on-year GDP growth rates. The motive of the CBN is to get farmers interested in cotton production once gain. Success in this regard will make raw materials readily available to textile mills and the final products will be competitive. The immediate impact will be a reduction in the textile related materials import bill and a boost to exchange rate stability. Reducing the import bill of textile related materials by 25 percent will amount to Nigeria saving about N28 billion annually, and this is what the players in the cotton value chain will make as revenue. Let us that assume an average player makes N10 million as revenue annually, and with the CBN’s move to revive the cotton industry, the effort will create at least 2,823 millionaires annually. Palm produce: Palm oil is the most consumed vegetable oil as it accounts for 34 percent of the global vegetable oils production. Apart from crude palm oil (CPO), several other products such as palm kernel cake used in feed mill industry and other variants of vegetable oils used in soap making, food and beverages, and cosmetics industry are derived from oil palm trees. In 2016/2017 farming season, 177 million metric tonnes of vegetable oils were produced. Durfil, the maker of indomine noodles; Nestle, Cadbury, Honeywell Flourmills, Dangote Flour Mills, etc use vegetable oils a lot. In spite of palm tree being a traditionally West African produce, Nigeria occupies the fifth position globally in CPO production after Indonesia, Malaysia, Thailand and Columbia. Meanwhile, expansion in the food and beverages, cosmetics and soap making industry has created a demand-supply gap which is being filled now by CPO producers from Indonesia and Malaysia. In fact, the largest producer in Malaysia, Sime Darby Berhad is about to set up its plantation in Nigeria. In 2016, the company cultivated 1 million hectares of land and realised $11.2 billion as revenue. With growing population and unification of West African economies through trade treaties, more CPO will be required as investors tap the opportunities the young population presents. This is the reason the CBN is supporting the cultivation of palm oil plantation. Soybeans: Advancement in research has led to the development of improved varieties of soybeans in Nigeria suitable for many ecological zones. The importance of soybean cannot be overemphasized as it contains about 40 percent protein content, 20 percent edible vegetable oil and a balance of amino acid. Apart from industrial uses, the domestic market for soybeans is so huge because most of the diets consumed in the country are deficient in protein, and consumption of soybeans provides a cheaper alternative to millions of Nigerians. The crop is harvested at most four months after planting. This implies that with good farming practices and improved seeds, a farmer can harvest soybeans three times in a year. The market demand for soybean is estimated at N300 billion and presently a 75 percent demand gap, translating to about N225 billion exists in the market place.