BACKGROUND
Nigeria is a food-deficit country that on occasions has been dangerously dependent on food imports for the welfare of its people. Its agricultural sector has ceased to be an important contributor to foreign exchange earnings; even its contribution to employment has declined. This situation has not always been so and in fact; there is a great national optimism that the current predicament would be reversed and Nigeria return to full status of a major food basket in the region.
Successive governments in Nigeria have studied the decline in agriculture and have attempted various efforts to re-activate the sector. Most of such efforts have been frustrated by inadequate attention to the critical social and economic root causes of the decline. However, over time and in review of stunted efforts, new policies have been articulated more in line with current successful world-wide practices that emphasis market rewards as the essential motivations in the application of man to land for a bountiful harvest.
Nigeria is fortunate its geography. It has a fair share of land that is moderate in its geophysical extremes; well watered by rains, river-systems and under-ground water reservoirs, most of the country is arable. The vegetational varieties endow the country with the capability to undertake the successful cultivation of a wide range of crop types. The climate is thankfully clement most of the year. There are enough resource material to manufacture inputs to augment the richness of the soil; there is enough of human capital to tap from to till the soil and its institutions of learning and research have engaged in commend-able efforts in developing and adapting new crop variants that give greater yields and survive the teeming tropical pests.
All these assets have not always been harmoniously mobilized for optimal results in agricultural output. Moreover, Nigeria like many other post-colonial economies, had to engage in herculean efforts to re-direct its production sectors, including agriculture, away from servicing the interests and priorities of the former colonial powers, to serving new national purposes and agenda. The resultant dislocations were also worsened by the sudden impact of a growing oil sector in the Nigerian economy.
It is appropriate therefore to take stock of the encumbrances, distortions and difficulties that hamper agriculture in Nigeria.
Labor
In numerical terms, there has been a major decline in the farming population. Current statistics suggest that less than 65% of the labor force is engaged in agriculture - down from the high 70s, 30 years ago. The national growth in literacy and education is not reflected even in these reduced numbers. In addition, the farming population has considerably aged to reflect the migration of the youth (inclusive of the educated, semi-literate and illiterate) to the exploding urban cities, new and old. Most of Nigeria’s farmers are of course, subsistence small-holders with antiquated traditional practices. The re-distribution of Nigerian farmers as large-scale farming employees has barely started. Ultimately, farm incomes are too low and unattractive to the needed youthful hands.
Land
In the past land tenure had been a serious constraint. Most lands were held by communities. This hindered transfers and acquisitions. Land usage coincided with the communal and family requirements, which meant sharing of small holdings to members for subsistence production. There has now been adopted a Land Use Act which reserves full title to land in the different states of the federation, although, communities remain traditional custodians. It is, thus easier to obtain rights of occupancy once traditional settlements are reached with the custodian communities and families. To a great extent this has made possible the acquisition of large tracts by willing entrepreneurs in agriculture. Tenancy is usually on generous lease terms (25 - 99 years). Most states willing to negotiate easy term that will attract serious farmers/investors. Outright purchases or freehold of land are not legal.
Estates & Plantations
During the colonial and the immediate post colonial era, regional governments and major trading companies established and operated extensive cash crop plantations and grew such tree crops as Oil Palm, Cocoa, Cashew, Rubber and even timber trees like Teak and Gmelina.
The worldwide fall in prices of primary produce and other factors highlighted earlier forced near abandonment of these estates. But as Nigeria’s economic fortunes have turned in cycle, much attention is being paid to the rehabilitation of these estates and the development of new ones. Most state plantations and estates are being put up for outright sale or long management lease to private investors/enterprises. Government involvement in direct agricultural production has been accepted as faulty. A distinction must be drawn between cash crop estates and plantations and the current and complementary need to grow food crops on large farms with commensurate mechanization and application of science and technology.
Processing and Food Preservation
Part of the plight of the traditional Nigerian farmer has been the loss of income resulting from wastage and spoilage. This has been a disincentive to the traditional farmer. He has been discouraged from extending his acreage. What was a poor infra-structure based deterred the transfer/transportation of farm produce to the urban centres where better prices could be attained. Limited potentials of traditional preservation and processing methods further execrated the situation. Over the years much government effort has been put into opening up the land and linking the rural communities with the cities. Public utilities are also being gradually but steadily brought to the rural population: rural electrification, water and roads have been national priorities for nearly a decade and a half. The media and mass communication are also being used to enlighten the rural farmer.
AGRICULTURAL POLICIES
Earlier government policies towards agriculture amounted to benign neglect. It was as if nature was enough to guarantee production and that little or no public investment was required even for maintenance. Produce taxes collected by the state owned marketing boards were in fact motivated by the revenue requirement of governments rather than the needs of agriculture.
In contrast, as the decline of agriculture assumed an economic security threat, various attempts, between the mid 1970s and 1985, were made by government to quicken agriculture and if possible, transform it. The various programs had little impact and constituted significant drain on the public purse. In desperation, attempts were even made by the various governments to go into direct food production through three programs: Rural-Integrated Agricultural Program; National Grain Production Company; and the National Root Crops Production Company. These three programs aimed specifically but unsuccessfully, to establish large-scale farms in every state. Eleven River Basin Development Authorities were also established and became very active in direct food production. It was only the National Accelerated Food Production Program that was aimed principally at assisting private farmers. It established centres to supply inputs. Its successes are found in the way certain high-yield and pest resistant crop varieties have spread all over the country.
Nevertheless it was recognized that there was "the need for a more comprehensive view of the problems of agricultural transformation". It was against this background, that direct production by public sector agencies was inherently faulty and unsuccessful, that the Structural Adjustment Program was adopted in 1986. Subsequently, phase by phase, the governments in Nigeria have withdrawn public sector involvement, including inefficient subsidies such as on fertilizer. The basic Nigerian Agricultural policy of today favors moderation by market forces to which farmers are giving steady positive response. Production has begun to show yearly consistent rise. What the government seeks today is to achieve consistency and inter-relatedness in sub-sectoral policies and maintain stable but improving environment within which farmers and investors may project and function successfully.
PRIORITY INVESTMENT AREAS
The agricultural potential of Nigeria has barely been tapped and demand for agricultural produce may continue to outstrip supply for many years to come. From the background it seems obvious that serious investment is needed across the board in enhancing production. Investment is required in crop, livestock and fisheries production to achieve food sufficiency. Investment is required in industries that will use agricultural produce as raw material. Investment is required in commodity trading to help stabilize and guarantee prices for farmers. Investment is required in transportation and infrastructure. Agriculture inputs supplies and distribution; water resources development especially for flood control infra-structure and irrigation; development and fabrication of appropriate small-scale mechanized technologies for on-farm processing and secondary processing of agricultural produce, are also priority areas of investment.
Crop Production
Nigeria’s needs for increased crop production are two-fold: to achieve food security; and to provide industrial raw material. If Nigeria were to achieve near self-sufficiency in those crops that can be grown with some measure of comparative advantage, immense resources will be spared from food and produce imports for deployment to other sectors that require comparable attention.
As regards food crops, investments in large scale farming operations are required in the cultivation of cereals, root crops, legumes, fruits and vegetables which have all become staples across the country.
The CERESLS most relevant to Nigeria are maize, rice, guinea corn, millet (sorghum) and wheat. Maize and rice are more commonly grown in the rainier southern parts of the country, while millet guinea corn and wheat are grown mainly in the northern portions where climatic disparities are more conducive for maturation, ripening, and irrigated cultivation. Production of cereals reached such inadequate levels that in 1989 a ban was placed on their exportation.
ROOT CROPS are major staples for more that 55% of the population and the primary ones are cassava and yams. Production is concentrated in the southern and middle belt zones of the country. Nigeria is the highest producer of the two crops in the world. Apart from their food uses, they ate also good sources of industrial starch. Potatoes, sweet and Irish varieties, are also grown. So also are Cocoyam (Taro and Ginger. The middle belt region (the Guinea Savannah belt) is best suited for large scale farming of Yams, Ginger, Potatoes, and Cassava - it is a large fertile area with less population concentration.
Nigeria’s major LEGUMES are groundnuts (Peanuts), soyabeans and cowpeas. Production of legumes are on the increase and have about doubled in the last ten years. Increasing industrial usage of groundnuts and soya beans for vegetable oil production, livestock feed and milk substitute in the case of soya, has raised demand and prices and made them good earners for farmers. The legumes are best grown in both the Guinea and Sudan Savannah - (Middle belt and lower far north).
FRUITS AND VEGETABLES are grown all over the country. With the irrigation-based Fadama cultivation process, the northern Sudan Savannah areas have become the major vegetable producers and do very well in onions, cabbage, green pepper, carrots, lettuce, spices, melons, etc. For fruits, small orchards exist all over the country, but more in the south. Nigeria’s major fruits are Mango, Bananas, Oranges and other citrus, Guava, Papaya (Paw-Paw), Aubergine, Pineapples, Avocado, and many other exotic fruits. Experimental orchards for more temperate fruit trees - apples, grapevines, and pears - have been successfully established in the high plateau regions. Horticulture - commercial growing of flowers and ornamental plants - is also doing well in the high plateau. Investments in major orchards of these fruits are of necessity and are viable.
The major Nigerian TREE CROPS are grown extensively on large hectares of plantations. They include Oil Palm, Cocoa, Rubber, Coconut, Kolanut, which are mainly grown in the rainforest areas of the southern zone. Coffee, Sheanuts, Beniseeds, Cotton and Sugar cane are also prominent and are grown in the savannah regions (including the Jos and Mambilla Plateau) in the northern zones. Plantations need new plantings as yields of old trees are on the decline. The gestation period of tree crops range from 5 to 7 years, indicating forward planning to sustain increased production. Sheanut, Cashewnut, Beniseeds and Coconut are comparatively new crop trees in terms of increased production and organized marketing. Their high industrial usage has made them popular. In general, the tree crops are mostly for production of industrial raw material. Crop production in Nigeria is on the increase and attention is being paid to encourage more production to meet food and industrial demands and achieve surplus for export.
Livestock and Fisheries
The protein quotient of the average Nigerian diet is low. The paucity of the meat, poultry, dairy and fish component of the Nigerian meal is a threat to the balanced physical and mental development of the Nigerian child. The adults are equally at risk in maintaining physical and mental alertness and staving immunity deficiency. Unfortunately, to a national embarrassment, very inadequate policy concern has been directed at achieving redress. Belated as response has been, it is a major national agricultural policy to give all encouragement to accelerated investment in this critical sub-sector.
The potentials for livestock and fisheries development are quite enormous. Grazing lands are abundant, facilities for animal feed production are plentiful; the in-land rivers, lakes and coastal creeks are sufficient to augment coastal ocean fishery resources; the local cattle stock, cross-bred with world famous breeds, have shown competence in sustaining viable dairy production.
Investments in the livestock and fisheries sectors are urgently needed in the areas of scientific applications, technology, research, and preservation. The Nigerian population can absorb more than 500% increase of the current protein supply. As a mark of commitment to this national focus, incentives abound to encourage and sustain investments in the sector.
Nigeria’s current favored livestock components are obtained mainly from the products of cattle, sheep, goats, pigs, poultry and wild herbivores (game).
Most of the cattle reared in Nigeria are from the Sahel and Sudan Savannah areas of the northern zone (primarily for reasons of limited incidence of tsetse fly). The dry nature of grass in these areas is well suited to the feeding requirements of high efficiency breed of cattle common to Nigeria. Because Nigeria’s cattle rearing is mostly nomadic, investments in establishments for on-site, weight-enhancement cattle feeding programs will be commercially rewarding.
Fisheries suffer similar disincentive as food crops production as a result of wastage and spoilage due to inadequate preservation, processing and transportation to major consumption centres.
Artisanal fishing has been crippled by rising costs of inputs - boats, out-board engines, fuel, etc.
There are investment opportunities in production of fishing tackles, cold storage and transportation, development of fish ponds in the coastal creeks and swamps and in upland wetlands and rivers, fish canning and packaging, boat construction and out-board engines assembly and manufacture, trawling and ancillary facilities and services.
INVESTMENT INCENTIVES
A combo of incentives has been put together to encourage investment in agriculture. It spans Finance Credit; Tax Holidays; Reduced Customs Charges on Imported Inputs; Technical Support through Research Institutions; Export Financing and Guarantee; Agricultural Insurance Scheme; Extension Services; etc.
Finance Credit
Without prejudice to government commitment to deregulation of the financial sector, banks have been enjoined to recognize differences in the gestation periods within each category of agricultural projects and observe the grace periods on agricultural loans as outlined below:
Crops
12-18 months for seasonal staple and cash crops e.g. cotton; groundnut and cassava; and loans for the construction of on-farm storage structures requiring small capital outlay and short period of construction;
Livestock
Fisheries
12-18 months for aquaculture.
Forestry and Wild Life
For loans in respect of large-scale seasonal crops, fish and poultry farming with extensive capital outlays, the grace period of five years is proposed.
Tax Relief
Company Income Tax:
All incorporated limited companies whether resident or not are subject to company income tax on profit arising from their activities.
Income Tax Rate:
With effect from 1996 fiscal year, the company income tax rate has been reduced to 30% of assessable profit.
Capital Allowance Rate
For the purpose of computing business profit in Nigeria, capital allowance rather than depreciation is granted as deductible expenses.
Apart from the capital allowance currently in existence, consideration may be given to the introduction of Investment Tax Allowance. Under this scheme a company granted the allowance would enjoy generous tax relief in respect of qualifying capital expenditure incurred within 5 years from the date of approval of the project.
The current capital allowance rate on qualifying capital expenditure are as follows:
| Types of Qualifying Capital Expenditure | Initial Allowance | Annual Allowance |
| % | % | |
| Non-Industrial Building | 15.0 | 10.0 |
| Industrial Building | 15.0 | 10,0 |
| Plantation Equipment | 95.0 | - |
| Mining Expenditure | 95.0 | - |
| Motor Vehicle | 50.0 | 25.0 |
|
Housing Estate |
50.0 | 25.0 |
| Plant Expenditure | 50.0 | 25.0 |
| Plant Expenditure (Manufacturing) | 25.0 | 10.0 |
| Furniture & Fittings | 25.0 | 10.0 |
| Agriculture Plant Expenditure | 95.0 | - |
| Ranching Plantation | 30.0 | 50.0 |
| Research and Development Expenditure | 95.0 | - |
| Public Transportation (Minimum of 3 Vehicles) | 95.0 | - |
SUPPORT INSTITUTIONS
The importance of science and technology as critical input of modern agriculture is well understood and accepted in Nigeria. The earliest agricultural research centres and training stations were established in the colonial period. The first ones were Moor Plantation in Ibadan, Provincial Experimental Farm, Umudike (1923); and Stock Farm, Shika, Zaria (1928). Today there are 17 Agricultural Institutes covering four main areas of interest; Arable Crops Research; Horticulture, Forestry and Tree Crops Research; Animal Production, Fisheries and Oceanography Research; and Animal Health Research. The full list of Research and Training institutes are as listed below:
Arable Crops Research Institutes
Forestry, Horticulture and Tree Crops Research Institutes
Animal Production, Fisheries and Oceanography Research Institutes
Animal Health Research Institutes
International Agencies
The International Institute for Tropical Agriculture (IITA), Ibadan, has been most successful and famous contributor to agricultural research and development of all international, multi-lateral agencies and agreements.
LABOUR, HEALTH, TRADE AND ENVIRONMENTAL STANDARDS FOR BUSSINESS
FACTORIES ACT
This Nigerian law makes general and special provisions for the health, safety and welfare of persons employed in places statutorily defined as "factories" and for which a Certificate of Registration is required by law. It makes general provisions as to the standards of cleanliness, over-crowding, ventilation, lighting, and drainage of floors, and sanitary conveniences. All factories must have potable water and washing facilities.
In respect of safety, there are general provisions as to the securing, fixing, usage, maintenance and storage of prime movers, transmission machinery, other machinery, unfenced machinery, dangerous liquids, automated machines, hoists and lifts, chains, ropes and lifting tackle, cranes and other lifting machines, steam boilers, steam receivers. There are in addition to these, standards set for the training and supervision of inexperienced workers, safe access to any work place, prevention of fire and safety arrangements in case of fire and first aid boxes.
Also, the law provides that adequate arrangements should be made for the removal of dust or fumes for factories, provision of goggles to protect the eyes in certain processes and the prevention of eating and drinking in places where poisonous or injurious substances give rise to dust or fumes.
It is mandatory that all accidents and industrial diseases be notified to the nearest inspector of factories and be investigate; it is prohibited for the occupier of a factory to make any deductions from the wages of any employee in respect of anything to be done or provided in pursuance of the Factories Act.
WORKMEN COMPENSATION ACT
The laws provide for the payment of compensation to workmen for injuries suffered in the course of their employment.
NATIONAL MINIMUM WAGE
Due to inflationary factors, further wage increases have been recommended, and minimum wages are about =N=5,000 per annum. An employer, defined as someone employing 50 or more persons, is required to pay the minimum wage, defined as the total emolument payable to a worker.
All employers and trade unions in both the public and private sectors of the economy are permitted to make adjustments to total remuneration packages through the process of collective bargaining. The remuneration agreed requires the approval of the Federal Minister of Employment, Labor and Productivity. Approval will be given where the increases are moderate, non-inflationary and affordable. The agreed and approved remuneration will apply from the first day of the calendar month that follows such agreement. Backdating of increments is not permitted.
STANDARDS ORGANISATION OF NIGERIA
The Nigerian Standards Organization Act, 1971 established as an integral part of the Federal Ministry of Industries, the Standards Organization of Nigeria to carry out among other things, the following functions:-
On the payment of a nominal fee it is possible to obtain from the offices off the Standards Organization of Nigeria the prescribed standards for a number of products.
NATIONAL AGENCY FOR FOOD AND DRUG ADMINISTRATION AND CONTROL ("NAFDAC’)
NAFDAC was established in 1993 with functions to regulate and control the importation, exportation, manufacturing, advertisement, distribution, sale and use of food, drugs, cosmetics, medical devices, bottled water and chemicals.
DRUGS AND RELATED PRODUCTS
No drug product, cosmetic or medical device shall be manufactured, imported, exported, advertised, sold or distributed in Nigeria unless it has been registered in accordance with the provisions of and regulations made under a 1993 Act.
ENVIRONMENTAL IMPACT REGULATION
Similar to what obtains in several other conventions countries, environmental protection is accorded a lot of prominence in Nigeria. The Federal Environmental Protection Agency ("FEPA") is charged with overall responsibility for monitoring, supervising and coordination of environmental impact Assessment ("EIA"). A comprehensive Environmental Impact Assessment Procedure for Nigeria, as well as EIA Guidelines for various industrial sectors of the country, have been compiled.
TRADE MALPRACTICES (MISCELLANEOUS OFFENCES) DECREE, 1992
This Law creates certain offences relating to trade malpractices and sets up a Special Trade Malpractice’s Investigation panel to investigate such offences. The law provides against any person who:-
CONSUMER PROTECTION COUNCIL
A Consumer Protection Council has been established in Nigeria with the objectives to:-
In the exercise of its functions, the Council is empowered to
IMPORTANT REFERENCES
Below are a number of Laws and Regulations governing the establishment and operation of businesses in Nigeria. They include:
(i) Nigerian Investment Promotion Commission
Decree No. 16 of 1995
The provisions of the Decree would allow foreign investors to buy unlimited shares through the Nigerian Stock Exchange, of any Nigerian company in any convertible currency. The Decree repealed the Industrial Development Co-ordination Committee (IDCC) Decree, No. 36 of 1988 which empowered IDCC to grant necessary pre-investment approvals - Business Permit, Expatriate Quota, Approved Status-in-Principle, Management/Technical Fees Agreement, etc. to investors. It also repealed the Nigerian Enterprises promotion Decree No. 4 of 1972 which formerly reserved for Nigerians the ownership of certain businesses.
Decree No. 17 of 1995
This Decree abolishes all restrictions on importation of Foreign Capital and repatriation of dividends. The operation of the Autonomous Foreign Exchange Market as provided for in the Decree liberalizes the FEM operations which hitherto existed. The Decree repealed the Exchange Control Act No. 16 of 1962 in its entirety.
Before any alien can accept employment in Nigeria, practice a profession or establish any trade or business or register or take over any company with limited liability for such purpose, he must obtain a permit to do so.
The Customs Duties Act of 1956 permits, when necessary the imposition of a special duty on any goods which are dumped in Nigeria or subsidized by any Government or authority outside Nigeria.
In accordance with this regulation, importers may in certain circumstances, claim repayment of import duty. Repayment will be made in full if goods are exported in some state other than that in which they were imported and if materials are imported for use in the manufacture of goods which are exported, the administrative bottleneck which hinder faster payment is being looked into for effectiveness.
This law empowers only the Commission to regulate the capital market and determine the price, amount and time at which securities of all public companies and enterprises having alien interests are sold to the public whether by offer for sale or subscription. Foreign investors would be allowed to participate in quoted equity and bond transactions on the Nigerian Stock Exchange without any restriction.
Decree No. 25 of 1988
The privatization and commercialization Decree provides for the divestment of government interest in some public enterprises which are best suited for private sector management. The Law also stopped further injection of government funds into enterprises that could be opened on commercial bases.
The objective of this Act as amended in 1988 is to provide tax holiday for designated pioneer industries considered beneficial to the Nigerian economy. The tax holidays for a period of five years or seven years (depending on the local government area the industry is located) is to enable the companies achieve a reasonable level of profitability. As at 1988, the capital to be invested by the company on or before production, must not be less than 5 million (US$75,000) in the case of joint ventures or 150,00 (US$75,000) in the case of and indigenous company. Application for the grant must be submitted within the first year the company starts commercial production.
(xii) Industrial Inspectorate Act No. 53 of 1970
This act empowers the Industrial Inspectorate Department of the Federal Ministry of industry to ascertain and validate the actual capital (foreign and local) invested in buildings, production machinery and equipment as well as vehicles in existing and proposed ventures in Nigeria mainly for the purpose of tax relief by the Federal Inland Revenue Service. The Act also provides for the certification of the date of commencement of production of companies that enjoy Pioneer Status and the issuance of Certificate of Value of imported machinery which is used for the confirmation of the non-resident equity composition of a company. Other provisions of the Act include the issuance of Certificate of Acceptance for the administration of the industrial incentive relating to Capital Allowance for investment.
This stipulates procedures for registering new companies (Limited or Un-limited) in the country.
Decree No. 18 of 1986
This law provides for the operation of the Duty Drawback Scheme which allows for the refund of duties on raw materials such as packaging and packing materials used for the manufacture of products destined for export.
16.2 List Pioneer Industries/Products
As part of the efforts to provide an investment climate which is conducive to the growth and development of industries encourage inflow of foreign investment and to stimulate the expansion of the domestic productive capacity, the Federal Government of Nigeria has, through its present Industrial Policy, designed a regime of fiscal incentives to industries in the country. One of such incentives enjoyed by industries in the country is the Pioneer Status.
Pioneer Status
The objective of the Industrial Development d (Income Tax Relief Act No. 22 of 1971 as amended in 1988 under the Industrial Policy was to provide tax holiday for pioneer industries. These are industries that Government considers to be beneficial to the Nigerian Economy and whose assistance would be in public interest. The Tax Relief being operated is to enable the companies achieve a reasonable level of profitability which should be ploughed back. By making relief from income tax possible during the early year of the Pioneer Industries, the Act is designed to attract capital to Nigeria in the development of her natural resources and the expansion of the industrial capacity. The Tax Relief is for a period of five (5) years for pioneer industries and seven (7) years if such industries are located in economically disadvantaged Local Government Areas. The qualifying capital expenditure by a company on or before production must not be less than 5 million in the case of joint ventures of 150,000.00 in the case of an indigenous company. In addition, application for the grant of Pioneer Status must be submitted within the first year the company starts commercial production.
Page Transmitted 14 January 2003
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