Nigeria’s quest for sufficiency in rice production may not be where millions of the staple food’s consumers will want it to be, but incremental progress by local rice producers is showing that; with a combination of the right strategies and public-private sector collaboration, the country’s food security challenges can be met.
With over $1 billion spent on rice importation annually- at least before a ban came into effect, there is little doubt why developing local capacity for rice production has become imperative. Local rice producers had to step up to the challenge, as Nigeria became unable to afford the over $5 billion food import bill.
Among the local rice producers leading the quest for sufficiency is Olam, with a 10,000 hectare fully irrigated paddy farm in Nasarawa State where as at last year when BusinessDay correspondent visited, 4,450 hectares was already under cultivation, with a further 3,000 hectares on target for 2017/18. The farm is expected to yield 10 MT per hectare (over two annual crop cycles), based on four varieties of high-yield rice tested with the West African Rice Development Association. An extensive outgrower network also had to be put in place to support the smooth running of the integrated rice mill, which Ade Adefeko, Olam’s vice president, Government relations and corporate services, put at 105,000 metric tonne.
Olam Nigeria’s Rice Outgrower Initiative has now been recognised by the Financing for Sustainable Development Office of the United Nations as one of 3 high impact success stories identified for global recognition by the United Nations Economic & Social Council. On the basis of this recognition, their outgrower team was invited to participate at the last Sustainable Development Goals Investment (SDGI) Fair which held in New York on April 22nd, 2018, as panelists on one of the thematic panels and parallel working groups that made up the Fair.
Sustainable Development Goals Investment aims at combining competitive financial returns with positive change for people and the planet, in response to three areas:
- Governments in developing countries developing new projects in line with the Sustainable Development Goals with innovative risks mitigating instruments
- Growing interest in creating market opportunities for investments with competitive returns that support environmental & social goals
- New technologies creating innovative ways to invest in productive capacity including in small and medium sized enterprises
The SDGI Fair organized by the United Nations Department of Economic & Social Affairs brought together high level Government officials from emerging markets with the investor community, to explore new opportunities for SDG Investment and discuss specific projects in the pipelines of National Governments.
Olam Rice was represented on the International Fund for Agricultural Development (IFAD), Value Chain Development Programme (VCDP), & Olam Farmers Partnership (Nigeria) Panel by Reji George, Vice President, Olam Rice who shared the roundtable on that panel with Anbua Henkaa James – Commissioner for Agriculture & Rural Development Benue State Nigeria, Ameh Friday Omoja – National Programme Director, VCDP, and Odoemena Benjamin Chuks Okey, Country Programme Officer, IFAD. Together they shared key project actions, challenges and policy measures that helped to overcome the challenges to support long term large-scale investments in the partnership.
Recognised alongside Olam’s Outgrower Initiative were the Ormat Olkaria III Geothermal Power Plant (Kenya) – the first privately funded and developed Geothermal plant in Africa and The Renewable Energy Market & Pacific Hydro Wind Farms in Brazil.
Outcomes and Key Takeaways
The VCDP has shown remarkable growth since its inception. The partnership began in 2015 with only 30 farmers on a pilot basis and expanded to 1,349 participating farmers in 2016 and to 4,976 participating farmers in 2017. Olam has purchased more than 25,200 MT of rice paddy from smallholder farmers and paid $9.8 million USD in exchange. In total 25, 000 people in remote villages benefited from selling their produce to Olam. The partnership also created 3,795 jobs beyond farming, mainly for youth and women in value chain enterprises.
Due to the success of the project, there are currently discussions to expand the programme to additional regions of Nigeria and to different crops. This possible expansion highlights the success of the program, but also its scalability.
The Value Chain Development Programme (VCDP) is a development initiative of the Federal Government of Nigeria along with IFAD and the private firm Olam. The Programme aims to utilize private investment in the agricultural sector in order to increase efficiency and alleviate poverty. Olam made key productive capacity investments and agreed to purchase rice produced by farmers at the prevailing market prices. Olam benefited from the partnership by gaining access to a consistent and high-quality source of rice. Local farmers benefited from the infrastructure investment made by the public sector, multi-lateral partners, and the private sector. Due to the substantial success of the project, there are currently ongoing talks to expand the scale and scope of the programme to other regions of Nigeria to include additional agricultural products.
Ramping up rice production through VCDP
Rice consumption in Nigeria has been increasing over time and much of the increase is supplied by imports. Despite increasing imports, Nigeria has the capacity to be a net exporter of rice. However, rice is not a traditional crop in most of the country so production often fails to even meet domestic demand which is expanding rapidly. The Nigerian Government has sought ways to improve productive capacity in rice production in order to become a net exporter in the future.
With this in mind, the Value Chain Development Programme (VCDP) was created by the Federal Government of Nigeria and IFAD in 2015. The goal of the 6-year program is to improve cassava and rice value chains for small farmers in the states of Anambra, Benue, Ebonyi, Niger, Ogun and Taraba in Nigeria. In doing this, the programme hopes to reduce rural poverty, increase food security and accelerate economic growth on a sustainable basis. The programme utilizes a market-led approach that hinges on private sector participation to leverage investment and knowledge to drive improved productivity in rice and cassava cultivation while continuing to promote commercially oriented smallholder farming practices.
Olam is a private partner of the VCDP programme, and a leading agribusiness that operates in 70 countries and has a track record of establishing commercial relationships with smallholder farmers. Furthermore, Olam also has long history of investing in Nigerian agriculture and estimates that it has invested over 1 billion USD.
The partnership agreement between VCDP and Olamprovides smallholder rice farmers with access to a reliable and profitable market for their produce, and in turn stimulatesproductive investments at the farm level.The partnership involves commitments from Olam, IFAD, the Nigerian government and the farmers (individually and as a collective).
Partner Obligations
Olam provides 15% of inputs to farmers on credit which is repaid with future sales, and is in charge of distributing inputs. Olam commits to purchasing 75% of the rice paddy (leaving the remaining 25% for local consumption) and guarantees payment to farmers upon delivery within 48 hours through direct transfers to farmer bank accounts. Utilizing direct transfers incentivizes the use of the banking system among small-scale farmers. Olam also agreed to construct rice collection depots within a minimum of 25 km of farmers.
The Nigerian government acts as a facilitator and coordinator of various interventions funded by the project to facilitate farmers and provide farmer services, and also acts as a supervisor to ensure that funds are utilised for the intended purposes. The Government also provides support through a 50% grant to farmers on all inputs for the first two years of the program, and links farmers with the Nigeria Agric Insurance Company to provide insurance to farmers.
IFAD coordinates the commodity alliance forum, a platform for the farmers and Olam to discuss issues related to the partnership including pricing, services and financing. IFAD also provides technical assistance and is responsible for the supervision and implementation of project and infrastructure funding.
Farmers agree on a number of product tracking agreements as part of the partnership. Specifically, farmers must meet the quality and quantity standards of the off-taker (Olam). Furthermore, the farmer collective agrees to track the rice paddy movement of their members to prevent side-selling. Lastly, farmers agree to attend the farmer collective meetings and to be part of the pricing committee.
Project Financing
Olam’s most important financial contribution to the partnership is to guarantee the prevailing market price for farmers. In addition to this guarantee, Olam also committed to provide physical infrastructure investments.
Outcomes and Key Takeaways
The VCDP has shown remarkable growth since its inception. The partnership began in 2015 with only 30 farmers on a pilot basis and expanded to 1,349 participating farmers in 2016 and to 4,976 participating farmers in 2017. Olam has purchased more than 25,200 MT of rice paddy from smallholder farmers and paid $9.8 million USD in exchange. In total 25, 000 people in remote villages benefited from selling their produce to Olam. The partnership also created 3,795 jobs beyond farming, mainly for youth and women in value chain enterprises.
Due to the success of the project, there are currently discussions to expand the programme to additional regions of Nigeria and to different crops. This possible expansion highlights the success of the program, but also its scalability.
