Courtroom Mail has obtained the trending paper delivered by Mr Paul Usoro SAN at the law week of Nigerian Bar Association- calabar branch today.
The paper which borders on diversification into agriculture gave an interesting slant into the need and how Nigeria can diversify its economy beyond oil.
Below is the paper in full
Nigeria is often referred to as the “Giant of Africa”, a nation with well over 182 million inhabitants which makes it the most populous black nation in the world.
Nigeria is one of the leading oil producing countries in the world and this has consequently led to oil becoming the mainstay of our economy and the major source of Government revenue in the country.
The Government’s sole focus on the oil and gas sector in terms of revenue has led to the dereliction of other important sectors of the economy, particularly the agricultural sector which contributed well over 60% of the Nigeria’s GDP before the early 1970’s.
This huge dependence on oil as a source of revenue and the subsequent fall in oil prices was one of the contributory factors towards Nigeria falling into a recession in 2016.
Crude oil was first discovered in Nigeria in 1956 after which Nigeria joined the ranks of oil producers in 1958.
By the late 1960’s and early 1970’s, Nigeria had attained a production level of over 2 million barrels of crude oil a day.
This led to crude oil exportation becoming the main stay of the Nigerian economy with petroleum production and export accounting for about 90% percent of exports, and 80% percent of government revenue. This economic dependence on crude oil consequently relegated agriculture (which was hitherto the mainstay of the Nigerian economy from the early 1950’s and 1960’s) to the background in addition to other budding sectors of the economy.
This has consequently put the Nigerian economy in the very precarious position of being susceptible to the vagaries associated with oil price volatility.
The need for diversification
The Nigerian economy has been one solely reliant on crude oil exports which ultimately led the country falling into a recession caused by the crash of international oil prices and worsened by a drop in oil production quantities as a result of vandalisation and destruction of the nations oil assets by militant groups.
The result of this recession was the heightened need and the awakening of a consciousness for the need to diversify the Nigerian economy. This is further buttressed by the fact that Nigeria is ranked 125 out of 137 in the Global Competitiveness Index ranking 2017-2018.
In addition to the agricultural sector, there are a number of other sectors such as the broader extractive industry which Nigeria has started exploring as a viable means of attaining a diversified economy. The Ajaokuta Steel Project and the mining of limestone in Okpella are examples of this renewed focus on the larger extractive industry. Our primary focus in this paper however shall be on the agricultural sector.
Agro-industralisation contemplates the use of agriculture and agro-business as a tool for industrialisation of the Nigerian economy.
Apart from the fact that the agricultural sector provides a viable economic alternative to the Government in order to reduce its dependency on crude oil earnings, there are a number of other benefits for diversification into agriculture. These reasons include
- It is a sector with high growth prospects in terms of output that does not require the sort of capital injections required for crude oil exploration and production.
- Reduction of rural-urban migration which ultimately reduces the population density and strain put on amenities in urban areas.
iii. Opportunity for job creation which would in turn reduce unemployment.
Prior to the discovery of crude oil in Nigeria. Agriculture was the mainstay of the Nigerian economy, accounting for over 57% of GDP from 1960 to 1969 and generating 64.5% of export earnings.
However from 1970 to the late 2000’s, the sector’s contribution to GDP and export earnings steadily declined due in large parts to the Government’s focus on petroleum exploration and exploitation.
An agricultural or an agro-industralised economy remains key to the attainment of a sustained and well developed economy in Nigeria. The agro-industry offers huge potentials for growth with important subsectors comprising of : Crop Production and Export, Livestock, Forestry, Fishery
Currently, crop production accounts for about 90% of the output in the Agricultural sector while fishery, forestry, and livestock account for the remaining 10%. The prospects for growth in these sub sectors are high particularly if value chains can be developed that turn raw commodities into processed goods for domestic consumption and export.
To varying degrees, a large number of Nigerians in rural areas already engage in some form of agricultural activity. This creates an opportunity to expand and develop both the number and variety of jobs in the sector as well as making it more attractive to the younger population by creating a value chain comprising of processing, marketing, manufacturing and other opportunities.
Nigeria as a nation is blessed with a total land mass of 92.4 million hectares and a total arable land of 82.0 million hectares. Despite this huge land mass the country spends well over $5 billion as our food import bill. With an agro-industrialised economy, the bulk of that figure can remain home in Nigeria, whilst improving our capacity for food exportation.
Ø The Netherlands with a land mass about the size of Taraba State is one of the world’s 10 leading food exporting countries with fishing and agriculture operating as the major sector of the Dutch economy. With improved focus on agriculture, Nigeria can ultimately become a world leading exporter of food products
The agro-centric economy in Nigeria already has important drivers of growth which include:
- High Consumption Demand: With Nigeria’s population well over 182 million and the country spending billions of dollars on the importation of rice from foreign countries such as Malaysia, the country can divert such foreign exchange back home with improved focus on crop production.
- Arable Land: Every single State is blessed with a particular type of agricultural product it can produce, from Oil Palm in Cross River and Akwa Ibom, Rice in Kebbi, Cotton in Oyo and Ogun, Yam in Benue and Taraba, to Cassava in Imo and Enugu amongst others.
LEGAL & REGULATORY FRAMEWORK FOR
THE AGRICULTURAL SECTOR
The current Legal and Regulatory framework governing the agricultural sector can broadly be classified into three groups. i.e Land, Funding/Finance, Import and Export. Below is a list of some of the key legislations in this regards;
Land Use Act CAP L5, LFN 2004
i National Agricultural Development Authority Act CAP N4 LFN 2004 – This Act establishes the National Agricultural Development Authority and it provides among other things, strategic public support for land development.
ii Water Resources Act CAP W2 LFN 2004 – This Act promotes the optimum planning, development and use of Nigeria’s water resources and other matters connected therewith.
iii River Basins Development Authorities Act CAP R9 LFN 2004 –
This Act establishes the River Basins Development Authorities listed under the First Schedule to the Act.
Funding and Finance
Agricultural Credit Guarantee Scheme Fund Act CAP A11 LFN2004 – This Act establishes an Agricultural Credit Guarantee Scheme Fund for the purpose of providing guarantees for loans granted for agricultural purposes by banks. All lending banks are required to establish at their head offices, a department to be known as the Agricultural Finance Department which shall be responsible for the agricultural credit administration in the banks
Micro, Small and Medium Enterprises Development Fund Revised Guidelines 2015 – The Fund was established in 2013 pursuant to the revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria (“Policy”) that stipulates that a microfinance development fund should be set up primarily to provide for wholesale funding requirements to micro finance banks/micro finance institutions.
National Agricultural Insurance Corporation Act CAP N89 LFN 2004 – This Act establishes the National Agricultural Insurance Corporation for the purpose of insuring agricultural or agro allied projects against selected natural hazards. The Act also establishes the Agricultural Insurance Scheme with the general objective of protecting Nigerian farmers from the effects of natural hazards by introducing measures to ensure an indemnity sufficient to keep the farmer in business.
National Fertilizers Board Act CAP N39 LFN 2004 – An Act to establish the National Fertilizer Board as a body corporate to be charged with responsibility for purchasing and distributing fertilizer to State Governments, at such subsidized prices as may be determined by the Federal Government..
On a related note, opportunities abound for financing through PPP, funding from USAID, African Development Bank and other Nigerian development banks such as Bank of Industry and Bank of Agriculture. For AFDB, it aims to support massive agro-industrial development across Africa.
Import and Export
Nigerian Export Promotion Council Act CAP N108 LFN 2004 -This Act establishes the Nigeria Export Promotion Council and has as its function to promote the development and diversification of Nigeria export trade, spearhead the creation of necessary export incentives and also to collect and disseminate to local manufacturers and exporters information on foreign market and provide technical assistance to local exporters in such areas as export procedure and documentation, transportation, financing, marketing techniques, quality control, export packaging, costing and pricing publicity.
Agriculture (Control of Importation) Act CAP A13 LFN 2004 – This Act empowers the Minister of Agriculture to make regulations for the import of agricultural produce into Nigeria. The Plant, etc. (Control of Importation) Regulations (the “Regulations”) was made pursuant to this Act to prohibit and restrict the importation of plants, seeds and other specified items into Nigeria.
Produce (Enforcement of Export Standards) Act CAP P32 LFN 2004 – This Act regulates the inspection of commodities for export from Nigeria at the ports of shipment for the purpose of enforcing the grades and standards of quality of such commodities. The Act also established the Produce Inspection Board which is responsible for inspecting the commodities to which the Act applies.
Pre-Shipment Inspection of Export Act CAP P25 LFN 2004 – This Act provides for the inspection of goods in Nigeria prior to their export. Clean Certificate of Inspection to be issued in respect of goods exported from Nigeria.
Pre-Shipment Inspection of Import Act CAP P26 LFN 2004 – This Act provides for pre-shipment inspection of imports. Clean Report of Findings and Import Duty Report to accompany goods to be imported into Nigeria.
The extant Legal and Regulatory Framework for the agricultural sector appears quite robust and extensive. What is required is the will to actualize the intent behind these legislations. Thankfully and as earlier mentioned, there appears to be a renewed desire to diversify and grow other sectors of the Nigerian economy (agriculture inclusive).
Recently, the Federal Government has made Executive Orders on the Promotion of Transparency and Efficiency in the Business Environment. Order 23 mandates each Port in Nigeria to assign an existing export terminal to be dedicated to the exportation of agriculture produce within 30 days of the issuance of the order.
This policy is to be lauded and the Government encouraged to come up with more of such agro-centric policies.
In 2017, the Nigeria Investment Promotion Commission (NIPC) & Federal Inland Revenue Service (FIRS) published a Compendium of Incentives for Agriculture and Agro Allied Industries to wit:
Enhanced Capital Allowance (Tax Depreciation) Regime
95% capital allowance is enjoyed in the year a qualifyingexpenditure is incurred pursuant to Paragraph 24 Table 1 & 2 Second Schedule of CITA
Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances pursuant to Paragraph 24(7)
Companies engaged in wholly agricultural activities are entitled to carry forward unutilized capital allowances indefinitely
Agricultural credit guarantee scheme fund: Loan guarantee of up to 75%. This fund provides guarantees on the payment of interest and principal in respect of loans granted by any bank for certain agricultural purposes with the aim of increasing the level of bank credit to the agricultural sector.
Exemption from minimum Corporate Income Tax: Section 33(3) of CITA exempts the income of a company carrying on agricultural trade from payment of minimum tax
Indefinite carry-forward of losses: Section 31(3) of CITA allows companies engaged in agricultural trade or business to carry forward their losses indefinitely.
RECOMMENDATIONS AND CONCLUSION
Nigerian Agric sector has huge potentials with tremendous investment opportunities.
For Nigeria to metamorphose into an agro-industralised economy, the Nigerian Governments should at all levels rigorously push for and apply polices channeled towards improving the focus on agro-industries.
The Government needs to rehabilitate and revive all agricultural research institutes and schools of agriculture and reintroduce farm settlements and other river basin authorities to encourage massive production of agricultural produce.
The agricultural sector requires huge investments in improved machinery and technologies to make substantial impact. Most farmers are still making use of crude and unmechanised methods which yield low productivity.
Multiple investment opportunities abound and the development policies of international, regional and national DFIs must be harnessed to ensure the whirlpool of these funds are directed towards the development of agro-business in Nigeria.
Establish and promote an export-oriented agricultural sector with improved quality of produce comparable with average global standards. This will improve foreign exchange earnings.
Implement policies to attract more foreign direct investment in the sector from foreign partners with the necessary expertise and technological know-how to achieve optimal production capacity.
The drive for achieving an agro-industrialised economy must be complemented with improvement of rural and other basic infrastructure which are critical to agricultural transformation and establishment of a seamless value chain like rural electrification, road and rail for transportation of agriculture produced and processed/finished good, for export and domestic use alike.
NBA Calabar Branch has done well focusing on this untapped area of the Nigerian economy. What is required is consistent focus on it and the different strands thereof, particularly as it relates to our practice of law.