Nigeria’s industrial sector has historically been a critical driver of economic growth and diversification, and the country’s rich agricultural resources offer immense potential for industrial development, providing essential raw materials for various industries. However, the interaction between agricultural produce aggregators-for-export, and local industries has proven to be a significant hurdle. The government’s industrial development goals, as outlined in the National Development Plan (NDP) 2021-2025 and the Nigeria Industrial Revolution Plan (NIRP), aim to transform the country’s economy by promoting value addition and reducing dependency on raw material exports. Nigeria has struggled with industrialization due to various factors, including inadequate infrastructure, inconsistent policies, and a lack of technological investment. The continuous export of raw materials by aggregators-for-export exacerbates these challenges, limiting the availability of essential inputs for local industries.
Agricultural produce aggregators-for-exports play a pivotal role in Nigeria’s agricultural value chain, serving as intermediaries who collect, consolidate, and facilitate the trade of agricultural products from farmers to both domestic and international markets. These actors operate across various scales, from small-scale local aggregators to large export companies, creating vital links between producers and end-users while providing essential market access for countless smallholder farmers. Their activities involve purchasing agricultural products directly from farmers or through local markets, sorting, grading, packaging, and ultimately selling them to processors, manufacturers, or primarily the export markets.
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Sadly, their activities make it difficult for local industries to compete and thrive. For example, while lucrative, exporting raw cocoa beans means local chocolate manufacturers lack the necessary raw materials to produce value-added products. Similarly, exporting raw soya beans and cashew nuts deprives local processors of the opportunity to create higher-value products such as soya flour, soya meals, and processed cashew nuts.
The frustration with Nigeria’s industrial development is mainly attributable to its export-oriented focus on raw agro materials. In 2023, Nigeria’s agricultural exports reached ₦1.244 trillion, while imports stood at ₦2.281 trillion, creating a significant trade deficit of ₦1.037 trillion. Local industries struggle to secure raw materials as aggregators-for-export prioritize shipping agricultural commodities abroad. For instance, despite being Africa’s largest producer of cashew nuts, with an annual production of approximately 250,000 metric tons, Nigeria processes less than 6% locally, with the majority exported raw to Vietnam and India. This situation is also the case in the cocoa sector, where Nigeria, producing about 250,000 tons annually, processes less than 13% domestically, unlike Côte d’Ivoire, which processes over 50% of its cocoa production.
The trade deficit in agricultural goods further compounds the impact of this export-oriented approach. In 2023, Nigeria imported agricultural goods worth ₦2.281 trillion, exceeding exports valued at ₦1.244 trillion by ₦1.037 trillion. This ugly performance marks the fifth consecutive year that agricultural imports have surpassed exports, highlighting the inefficiency in the current agricultural trade practices.
This trade deficit and the reliance on raw material exports also affect the overall industrial ecosystem. Local industries face increased production costs due to the scarcity of raw materials and their relentless exports, without value addition and losing all the benefits of their local processing. For instance, Nigeria imports significant amounts of palm oil despite being a palm oil producer, indicating a missed opportunity for local processing and value addition.
Unarguably, major Nigerian agricultural produce aggregators-for-export play a pivotal role in the agricultural value chain, serving as intermediaries who collect, consolidate, and facilitate the trade of agricultural products from farmers to both domestic and international markets. Companies such as Olam Nigeria Limited, TGI Group, Export Trading Group (ETG) Commodities, and Valency Agro Nigeria Limited are notable players. While these entities provide essential market access for smallholder farmers and contribute to the economy through significant export revenues, their practices often hinder local industrial development. For instance, their large-scale export of raw cashew nuts to countries like Vietnam and India for processing deprives Nigeria of the opportunity to develop its local processing sector. The same applies to their export of raw sesame seeds, which limits the growth of local oil processing industries, and extensive grain exports, which create shortages that adversely affect local food manufacturers. The dominance of these aggregators-for-export in the supply chain often drives up local prices, making it difficult for domestic processors to compete and thrive.
The cumulative impact of these practices perpetuates a cycle of underdevelopment in Nigeria’s processing capacity and economic diversification. By prioritizing raw material exports over local processing, these companies limit value-addition opportunities that could generate jobs and stimulate technological advancements. This approach also fosters market access inequality, as small-scale local processors struggle to secure quality raw materials due to the dominance of large aggregators-for-export. Consequently, while these companies earn foreign exchange through exports, Nigeria faces a net loss as it imports processed goods, resulting in higher costs.
The emphasis on raw agricultural exports stifles value-addition opportunities and undermines industrial growth. For example, while Vietnam earned approximately $3.5 billion from processing and exporting Nigerian cashews in 2022, Nigeria’s earnings from raw cashew exports were just around $250 million. This pattern is particularly concerning compared to countries like Malaysia, which transformed its agricultural sector through policies like the Industrial Master Plans (IMP) and Palm Oil Registration and Licensing Authority (PORLA) regulations, achieving over 80% local processing of its palm oil. In contrast, Nigeria’s Industrial Policy, including the Nigeria Industrial Revolution Plan (NIRP), has struggled to achieve similar results due to implementation challenges and the continued dominance of raw material exports. The Nigerian Export Promotion Council (NEPC) reports that the country loses approximately $1.2 billion annually in potential revenue from the cashew industry alone due to limited processing capacity.
An excellent example of the frustrations faced by Nigeria’s industrial development due to the activities of agricultural produce aggregators-for-export is evident in the cocoa industry. In 2023, Nigeria exported superior-quality cocoa beans valued at ₦258.45 billion, a substantial increase from the previous year. However, this focus on exporting raw cocoa beans comes at the cost of local chocolate manufacturing. The lack of raw materials for local processors means Nigeria misses the opportunity to add value to its cocoa produce. Processing this exported raw cocoa into chocolate or other cocoa products instead of raw beans would have generated more jobs and enormous revenue and contributed more substantially to the country’s industrial development. For instance, the export of natural cocoa butter, a processed product, saw significant growth to ₦35.32 billion in 2023, but this pales compared to the raw cocoa bean exports, indicating a missed opportunity for more extensive value addition.
Another case is the cassava industry, where Nigeria’s potential for producing starch, flour, and other cassava derivatives suffers because of the increasing preference for exporting raw cassava. In 2023, while there was a notable increase in the export of soya beans and other products, the cassava sector did not see similar value addition. For example, exports of soya beans (excluding seeds) rose to ₦120.10 billion, but there was no corresponding increase in cassava processing into higher-value products. This dynamic highlights how the emphasis on raw material exports deprives local industries of the raw materials needed for processing, thereby stifling industrial growth and creating job opportunities.
The palm oil industry provides another example of this issue. Despite being a palm oil producer, Nigeria imports significant amounts of palm oil and its derivatives, such as fractions of palm oil. This situation exists because of the penchant to export raw palm oil instead of processed locally. The import of palm oil products in 2023 was part of the more significant trend where Nigeria’s agricultural goods imports exceeded exports by a substantial margin, with imports valued at ₦2.281 trillion against exports of ₦1.244 trillion. This trade deficit in agricultural goods underscores the inefficiency of the current export-oriented approach and the need for a more balanced policy that promotes local processing and value addition.
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Successfully addressing these issues requires implementing policies such as the Raw Materials Processing and Local Production Protection Bill, which has undergone the first reading and mandating a minimum of 30% processing of raw materials domestically before export. This proposed bill and the attendant policies echo successful strategies implemented in several countries, showcasing the potential benefits for Nigeria’s economy. Countries like Indonesia and Malaysia have successfully implemented similar policies. Indonesia’s raw material export restrictions, implemented through Law No. 4/2009 and Ministry of Trade Regulation No. 1/2017, effectively boosted domestic processing. Similarly, Malaysia’s PORLA regulations and industrial policies have created a robust processing sector.
Enhancing the competitiveness of local industries is vital for overcoming the challenges presented by aggregators-for-export. Significant investments in technology and infrastructure would enable local manufacturers to improve their production processes and product quality. Capacity-building programs aimed at developing the skills and expertise of local industry workers are also crucial. Nigeria can reduce its dependency on raw material exports by fostering innovation, creating an enabling environment, and building a resilient, diversified industrial base.
In conclusion, the analysis of Nigeria’s agricultural exports reveals a paradox where increasing foreign exchange earnings from raw material exports hinder the country’s industrial development. The significant trade deficit, exemplified by the contrast between agricultural exports valued at ₦1.244 trillion and imports reaching ₦2.281 trillion in 2023, underscores the inefficiencies of an export-oriented approach that prioritizes raw commodities over local processing. Major players in the agricultural sector, such as Olam Nigeria Limited and TGI Group, while essential for market access, perpetuate a cycle that deprives local industries of necessary raw materials, ultimately stifling value addition and industrial growth. Nigeria must enact strategic policy interventions to break this cycle, such as the proposed Raw Materials Processing and Local Production Protection Bill, which mandates minimum local processing requirements. By fostering investments in processing infrastructure, enhancing technological capabilities, and building a robust agro-processing sector, Nigeria can transform its agricultural potential into a powerful engine for economic growth. This transformation is vital for creating jobs, stimulating innovation, and achieving sustainable economic development, ensuring the country can compete effectively globally while leveraging its rich agricultural resources.
