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    Background paper for the COMPETITIVE COMMERCIAL AGRICULTURE IN

    AFRICA STUDY (CCAA)

    NIGERIA CASE STUDY

    Professor Aderibigbe S. Olomola

    Director, Agriculture and Rural Development Department

    Nigerian Institute of Social and Economic Research (NISER), Ibadan

    Disclaimer:

    This background report is being made available to communicate the results of Bank-funded work to the development community with the least possible delay. The manuscript therefore has not been prepared in accordance with the procedures appropriate to formally edited texts. Some sources cited in this report may be informal documents that are not readily available.

    The findings and interpretations expressed in this report are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent, or those of the Food and Agriculture Organization of the United Nations (FAO).

    The World Bank and FAO do not guarantee the accuracy of the data included in this work. The designations employed and the presentation of the material in this work, including the boundaries, colors, denominations, and other information shown on any map do not imply any judgment on the part of the World Bank or FAO concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

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    COMPETITIVE COMMERCIAL AGRICULTURE IN AFRICA:

    NIGERIAN CASE STUDY

    By

    Professor Aderibigbe S. Olomola

    Director, Agriculture and Rural Development Department

    Nigerian Institute of Social and Economic Research (NISER), Ibadan

    FINAL REPORT SUBMITTED TO THE CANADIAN INTERNATIONAL

    DEVELOPMENT AGENCY (CIDA) AND THE WORLD BANK

    OCTOBER, 2007

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    CURRENCY EQUIVALENTS, WEIGHTS AND MEASURES

    Currency Equivalents (as of December 2005)

    Currency Unit: Naira ()

    Official Rate: US$1 = 131.7

    Naira 1 = US$0.0076

    Autonomous Market Rate: US$1 = 142.6

    Naira 1 = US$0.0070

    Mass and Weight Measure

    1000 grammes = 1 Kilogramme (kg) 1000 kilogrammes = 1 Tonne

    Area Measure

    100 Acres = 1 Hectare (ha)

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    TABLE OF CONTENTS

    Table of Contents iii List of Tables v List of Figures viii Abbreviations and Acronyms x Executive Summary xii

    CHAPTER

    1. INTRODUCTION AND BACKGROUND 1 1.1 Objectives 1 1.2 Conceptual Framework 2 1.3 Methodology 4 1.4 Structure of the Report 7 2. REVIEW OF BROAD DEVELOPMENT EXPERIENCE IN NIGERIA 8

    2.1 Macroeconomic Performance 8 2.2 Review of Agricultural Development in Nigeria 10 2.3 Constraints to Competitiveness of Commercial Agriculture in Nigeria 18 3. THE VALUE CHAIN ANALYSIS FOR SELECTED COMMODITIES 23

    3.1 Value Chain Analysis of the Cassava Industry 26 3.2 Value Chain Analysis of the Cotton Industry 47 3.3 Value Chain Analysis of the Maize Industry 58 3.4 Value Chain Analysis of the Rice Industry 75 3.5 Value Chain Analysis of the Soybean Industry 94 3.6 Value Chain Analysis of the Sugarcane Industry 108 3.7 Comparative Analysis of Value Chain By Type of Crops 118 3.8 Sensitivity Analysis 127

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    4. SUMMARY, CONCLUSIONS AND POLICY RECOMMENDATIONS 131

    4.1 Main Findings and Conclusions on Profitability and Export Competitiveness 131 4.2 Constraints 134 4.3 Opportunities for Improved Agricultural Commercialization and Competitiveness 134 4.4 Recommendations for Improved Agricultural Competitiveness in Nigeria 141

    REFERENCES 148

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    LIST OF TABLES

    TABLE PAGE

    2.1 Selected Macroeconomic Indicators 9 2.2 Phases of Agricultural Development Policies in Nigeria: 1960-2006 11 2.3 Average Credit Disbursed By Trading Banks Under the ACGS, By Zone 14 2.4 Moratorium for Agricultural Loans 15 2.5 Index of Production of Selected Crops: 1961-2005 17 2.6 Share of Agriculture in Total Imports and Non-Oil Exports 17 2.7 Trend in US Agricultural Export Dumping Levels, 1990-2003 22 3.1 Farm Sectors and Locations for the Value Chain Analysis 23 3.2 Basic Features of the Agro-Ecological Regions of the Selected Commodities 24

    3.3 Gross Margin in Cassava Production in South-west Nigeria 26 3.4 Cassava Starch Value Chain Activity Results 28 3.5 World Cassava Production, 2002 30 3.6 Cassava Production in Nigeria, 1999-2004 33 3.7 Structure of Financial Costs in Cassava Enterprises 37 3.8 Profitability Indicators of Cassava Enterprises (Per MT) 38 3.9 Cassava Value Chain Indicators for 1MT of Final Traded Products 40 3.10 Cassava Profitability and Value Chain Indicators By Level of Commercialization 42 3.11 Comparison of Composition of Cassava Shipment Values in Nigeria (%) 43 3.12 Comparison of Selected Cassava Production Indicators in Nigeria 44 3.13 Build-up of Cassava Final SV in Nigeria By Stage (%) 46 3.14 Cotton Production in Nigeria, 1999-2004 51

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    3.15 Structure of Financial Costs in Cotton Enterprises (FAM) 53 3.16 Profitability Indicators of Cotton Enterprises (Per MT) (FAM) 54 3.17 Cotton Value Chain Indicators in Nigeria (Per MT) 56 3.18 Composition of Cotton Shipment Values in Nigeria (%) 56 3.19 Build-up of Cotton Final SV By Stage (%) 56 3.20 Gross Margin in Maize Production in Nigerian Agro-Ecological Zones 59 3.21 Gross Margin Analysis per Ha of Selected Enterprises 59 3.22 Maize Production in Nigeria, 1999-2004 63 3.23 Structure of Financial Costs in Maize Enterprises in Nigeria 67 3.24 Financial and Profitability Indicators of Maize Enterprises in Nigeria 68 3.25 Value Chain Indicators for Maize Enterprises in Nigeria 70 3.26 Maize Profitability and Value Chain Indicators By Level of Commercialization 71 3.27 Comparison of Composition of Maize Shipment Values in Nigeria 72 3.28 Comparison of Selected Maize Production Indicators 74 3.29 Gross Margin in Rice Production in Nigeria 75

    3.30 Comparison of Domestic and Import Price of Rice in Nigeria 76 3.31 Rice Production in Nigeria, 1999-2004 80 3.32 Structure of Financial Costs of Rice Enterprises in Nigeria 84 3.33 Profitability Indicators of Rice Enterprises in Nigeria (Per MT) 86 3.34 Value Chain Indicators for Rice Enterprises in Nigeria (Per MT) 88 3.35 Rice Profitability and Value Chain Indicators By Level of Commercialization 90 3.36 Comparison of Composition of Rice Shipment Values in Nigeria (%) 91 3.37 Comparison of Selected Rice Production Indicators in Nigeria 93 3.38 Build-up of Rice Final SV By Stage (%) 93

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    3.39 Soybean Production in Nigeria, 1999-2004 96 3.40 Structure of Financial Costs in Soybean Enterprises in Nigeria 99 3.41 Financial and Profitability Indicators of Soybean Enterprises in Nigeria (Per MT) 100

    3.42 Soybean Value Chain Indicators in Nigeria (Per MT) 102 3.43 Soybean Profitability and Value Chain Indicators By Level of Commercialization 104 3.44 Comparison of Composition of Soybean Shipment Values in Nigeria (%) 105 3.45 Comparison of Selected Soybean Production Indicators in Nigeria 105 3.46 Build-up of Soybean Final SV By Stage (%) 107 3.47 Sugar Supply in Nigeria, 1990-2000 110 3.48 Sugar-Cane Production in Nigeria, By Zones, 1999-2004 112 3.49 Structure of Financial Costs in Sugar-cane Enterprises in Nigeria 114 3.50 Profitability Indicators of Sugar-cane Enterprises in Nigeria (Per MT) 115 3.51 Sugar-cane Value Chain Indicators in Nigeria (Per MT) 116 3.52 Composition of Sugar-cane Shipment Values in Nigeria (%) 117 3.53 Deviations of SVs From Parity Prices of Selected Commodities in Nigeria 126 3.54 Ranking of Selected Commodities in Order of Degree of Competitiveness 126 3.55 Changes in Profitability Indicators With 50% Increase in Yield and 50% Reduction in

    Transport Cost 128

    3.56 Changes in Shipment Value With 50% Increase in Yield and 50% Reduction in

    Transport Cost 129

    4.1 Summary of Main Findings By Crops 132 4.2 Value Chain Constraints of Agricultural Commodities in Nigeria 136

    4.3 Achievements and Challenges of the Presidential Initiatives on Agriculture 139 4.4 Key Strategies for Improved Agricultural Competitiveness 142

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    LIST OF FIGURES

    FIGURE PAGE

    1.1 Stages in the Value Chain 3 2.1 Real Export Prices of Selected Agricultural Commodities, 1993-2003 20 3.1 Production of Cassava By Agro-Ecological Zones in Nigeria 34 3.2 Land Area Cultivated to Cassava in Nigerian Agro-Ecological Zones 34 3.3 Composition of