#farouk gumel nigeria

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Farouk Gumel - The Role of Agriculture in the Economic Development of Nigeria

Nigeria, like many Africa nations, is an agrarian nation. Contrary to the general perception that it is an oil and gas country, the majority of Nigerians in reality earn their living through the agricultural and food value chain. This should not be a surprise. A country with over 200 million people will surely have a large appetite. 

In this article, we are going to briefly look at how agriculture is one of the biggest reasons why Nigeria is the world’s 27th largest economy, and why investing in this sector will propel Nigeria  to greater heights globally.

The Truth About Nigerian GDP

Nigeria is the largest economy in Africa with the highest population on the continent. It was ranked the 27th largest economy globally and is among the largest producers of oil and gas in the world. 

The whole world knows Nigeria for its Oil while ignoring its other assets – arable land, water, solid minerals and ofcourse, its young and talented population. 

Oil is considered by many as the biggest contributing factor to the Nigerian economy, and to some extent, they are right. Oil reserves in Nigeria amount to 35 billion barrels and oil still remains the largest earner for the Nigerian government. Most of the oil is exported in crude form. There is little value addition locally this means only a few jobs are created locally.

So if oil is such a big factor in the Nigerian economy, then why is agriculture the main focus of this article?

Statistically, agricultureis a key factor of the Nigerian GDP. In 2019, agriculture accounted for nearly 22% of Nigeria’s GDP and employs more than one-third of the population. We have 14 million cattle produced in our countryand are the largest producer of cassava (59.4 million tons) and yam (47.5 million tons) plus major exporters of cocoa,  cashew, sesame and beans to mention a few. For local consumption, Nigeria produces maize, sorghum, rice, millet and wheat. It has a vibrant and fast growing poultry and fisheries industry. There have also been significant investments in vegetable oil refining in recent years. 

It is worth noting that as the oil and gas and many other sectors fell into recession in recent years, Nigeria’s agriculture sector continued to grow and create jobs.

What can be Done in the Future?

Just to be clear, Oil is and will remain a huge factor in the GDP of Nigeria, but to create a better and more inclusive economy, Nigeria needs to focus on its secret weapon,  agriculture which supports more than 70 million people in Nigeria, 

In the last 5 years,  the Nigerian Government and the Central Bank of Nigeria have pushed aggressive fiscal and monetary policies aimed at harnessing Nigeria's agricultural potentials. The policies, which target both small scale farmers and large scale corporates, have resulted in significant investments in Nigeria’s agricultural value chain.

TGI Group, through its numerous subsidiaries such as WACOT Ltd is one of the many private sector companies to participate in this latest push by Nigeria to put Agriculture to work.

WACOT Ltd has started up projects of new rice mills across Nigeria and employs over 9,000 workers both in blue and white-collar jobs. Its new rice mill which is speculated to be the turning point in Nigerian agriculture and will provide farming the boost it needs can store up to 120,000 tonnes of rice paddy and has the storage facility to keep that much raw produce for 6 months in advanced silos.

Farouk Gumel, executive director of Tropical General Investment (TGI) Group has rightly stated in an article that TGI/WACOT Ltd projects are made to take advantage of the new government policy direction and that the new WACOT Ltd rice mill will bring with it a lot of opportunities for the people of Nigeria. Farouk Gumel also stated that WACOT is planning to build two more rice mills in the coming years.

In addition to WACOT, many other well known brands are participating in Nigeria’s rice revolution. For example, Dangote Industries, intends to set up 10 rice mills in the coming years. Aliko Dangote, Africa’s richest man announced he is investing over $4 billion in farming and food processing in Nigeria. Olam in a recent press release also announced its plans to make more investments in food production and processingacross Nigeria. As these big names and many more continue to invest in food production, Nigeria’s agricultural sector may finally deliver its true potential.

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Buhari appoints NSIA board members

Buhari appoints NSIA board members

President Muhammadu Buhari has approved the appointment of the Board members of the Nigeria Sovereign Investment Authority (NSIA). In a statement by Special Adviser to Finance Minister on Media and Communications on Wednesday, Yunusa Tanko Abdullahi said the appointment was necessitated following vacancies created in the NSIA Board. The new appointees are Farouk Mohammed Gumel (North West) as…

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Farouk Gumel - Why is the Indian farmer protest important for Africa’s agricultural policy? 

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Farouk Gumel - Why is the Indian farmer protest important for Africa’s agricultural policy? 

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Farouk Gumel - Why is the Indian farmer protest important for Africa’s agricultural policy?

Recently, the media has been reporting about massive farmer protests in India against the implementation of certain agricultural reforms in Nigeria. The protest started on 9th August 2020 and most of the protesting farmers are from India’s two largest agricultural producing states (Punjab and Haryana). It is reported that these States are the largest beneficiaries of the Indian Government’s Green Revolution reforms. 

The first important point to note is the farmers protesting outside New Delhi are among the wealthier farmers in the country who are the major beneficiaries of Government interventions including the Minimum Support Price (MSP), the India government’s grain procurement program which provides offtake assurance through government regulated physical markets. So the views of these large players may not be a fair representation of the millions of smallholder farmers in India. 

The reforms proposed by the Indian Government comes are covered in three (3) new laws and, according to the Government, are meant to create a more level playing field by developing a framework for private traders to purchase crops directly from the farmers and bypass government marketing boards. Below are some of the issues the protestors are raising;

1. The first law, The Farmers’ Produce Trade and Commerce (FPTC) Act, offers farmers a greater choice in selling their produce. Under the act, farmers now have the option to sell outside the government-regulated physical markets, Agricultural Produce Marketing Committees (APMCs), to private channels, integrators, or cooperatives. They can now do this through a physical market or on an electronic platform, directly on their farm, or anywhere else, not just at designated APMCs. Essentially, the law provides more options to small farmers without compromising the avenues already available. 

2. The second law, the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services (AFPS) Act, is a simplified and improved version of the Contract Farming Act that has already been adopted by 20 Indian states. Contract farming acts as a form of price assurance as whatever price was agreed in a contract must be honoured after harvest. The new law is intended to insulate farmers against the market and price risks so that they can cultivate high-value crops without worrying about market fluctuations that could lower prices in the harvest season.

3. The third law, the Essential Commodities (Amendment) Act, is a modification of the Essential Commodities Act that lays down transparent criteria for the price triggers behind government decisions to regulate the supply of essential commodities under extraordinary circumstances.

From the above, it looks like the reforms are meant to make life easier. The Indian government argues that the deregulations will increase efficiency, allow farmers greater freedom and let farmers negotiate better prices for their crops. Under the old arrangements, there were middlemen in the system who would buy grain from farmers, keep a healthy margin for themselves, and then sell it at inflated prices to retail markets and consumers. Some have claimed that these middlemen, who will lose out from the changes, are actually behind the protests, rather than farmers who stand to benefit.

But the protesting farmers say these reforms will devastate their earnings as it will end the MSP program, a safety net that assures farmers that they will be paid a certain price without regard to market conditions. So a balance needs to be struck. 

The Indian government is in talks with all stakeholders on this matter. 

Farouk Gumel, an Executive Director at TGI Group, a pan African conglomerate has been monitoring these negotiations closely. Farouk Gumel, whose company owns and manages food production facilities, explains TGI’s factories are constantly exposed to price and volumetric volatilities in their raw material supply chain. In the last 3 years of the existence of TGI’s rice mill, Farouk Gumel says they have seen huge swings in paddy prices and availability which is raising concerns when it comes to planning for future investments. Such swings, according to Farouk Gumel, “can only be eliminated with strong, reliable and consistent raw material supply with predictable pricing”. 

Farouk Gumel concludes that the Indian case study should be monitored closely by African nations. He states “Many African countries have or are in the process of introducing MSP programs. Many African food companies use outgrowers, under contract farming arrangements, to meet their input supplies. Many countries and marketing boards are looking to set up pricing models for essential commodities”. Farouk Gumel remains confident that a balance will be struck between the Government and Market driven agricultural forcesors which African leaders can replicate to meet their food security needs. 

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Farouk Gumel – The minimum support price in agriculture – what is it important

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Farouk Gumel – The minimum support price in agriculture – what is it important

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Farouk Gumel - The minimum support price in agriculture - what is it important

Farouk Gumel - Most governments intervene in their agricultural markets although the extent of these interventions depend in large part on the wealth of the country. In the last century or so, the most common of these interventions is the Minimum Support Price (MSP) mechanism. In this paper, I hope to explain in simple terms, what the MSP is and how it works.

MSP is the price at which the government commits to purchase crops from the farmers. This acts as a ‘minimum floor price’ farmers will get for their produce thereby shielding them from adverse market conditions because of price drop. Furthermore, in the event of a bumper harvest where there is excess stock, farmers still have a guaranteed buyer as the government, through its agencies, will buy the entire stock offered by the farmers at the MSP. 

The prices of agricultural commodities often vary due to various factors. If a crop has seen a good harvest season during a particular year, it may see a sharp fall in its prices. This will lead to farmers withdrawing from sowing the crop in the next year which will affect the supply. To counter this, MSP is fixed by the government which is supposed to encourage higher investments and production of crops. Furthermore, by buying the excess crops, governments build strategic reserves that can be used to augment any food shortages in future years. 

The successful implementation of MSPs however depends on how wealthy the country is as the government requires huge budgetary allocations for procurement and strong value chains for management of the inventory acquired. In many poor countries, these programs fail due to lack of funding and poor technical capacity to manage the grains procured from the farmers. This leads to lack of confidence in governments and destruction of grains. This subjects countries to very volatile swings in their food security status – from surplus to famine within a few years.

Africa is one continent where countries have seen such volatile swings. Although the policies exist in many nations, the implementation has not been very impactful due to low funding and technical knowledge. Despite Africa’s huge arable land and high population of farmers, food shortages and high food prices still occur. Typically, many African nations create and grant state marketing boards a legal monopoly to buy agricultural products from farmers and to resell them to domestic consumers or export markets. There have been cases where such boards pay farmers only a third to half of the domestic consumer price or the export price. The result, according to the World Bank, is that after growing 0.2% per annum in the 1960s, per capita food production in sub-Saharan Africa fell to 0.9% per annum from the 1970s into the early 1980s.

As the global “free trade” movement continues to gain momentum, many agricultural jobs in Africa will be lost as food imports from stronger and more prosperous nations creep in. African farmers need the MSP protection to continue production for our strategic reserves to be filled. 

Farouk Gumel is an Executive Director at TGI Group, a pan African conglomerate with investments across key agricultural value chains. Farouk Gumel argues that the MSP is not a luxury but an absolute necessity for Africa’s agricultural revolution. Farouk Gumel, whose company owns and manages food production facilities, explains TGI’s factories are constantly exposed to price and volumetric volatilities in their raw material supplies. In the last 3 years of the existence of TGI’s rice mill, Farouk Gumel says they have seen huge swings in paddy prices and availability which is raising concerns when it comes to planning for future investments. Such swings, according to Farouk Gumel, “can only be eliminated with a strong, reliable and consistent MSP program”. 

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Farouk Gumel - Africa’s Agriculture exports and the need for more processing locally

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Farouk Gumel - Africa’s Agriculture exports and the need for more processing locally

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Farouk Gumel - Africa’s Agriculture exports and the need for more processing locally

Farouk Gumel - Despite long standing recognition of the benefits of trade and the importance of improving competitiveness, Africa is performing beneath its potential in global and regional agricultural markets. Recent export growth has been offset by even larger growth in imports, caused by a booming population. More than 60 percent of the population of sub-Saharan Africa are smallholder farmers, and about 23 percent of sub-Saharan Africa’s GDP comes from agriculture. Yet, Africa’s full agricultural potential remains untapped. This has led to a deterioration of Africa’s trade balance. Intraregional trade, on the other hand, is growing, but remains significantly below the levels seen in other parts of the world.

Africa still has strong comparative advantages in many products which include traditional cash crops like coffee, cocoa and tea, as well as new products like legumes, pulses and sesame seeds. Some of these products are becoming the main staples of many African countries, including those classified as least developed countries (LDC). Many nations have started positioning themselves as specialist/centers of excellence in the production of exportable commodities. For example, Ghana and Ivory Coast are focusing on Cocoa, Comoros is focusing on spices and essential oils; Burundi and Rwanda on coffee and tea and many more. 

To prove this, I have summarised Africa’s global leadership position on Tea, Cocoa, Cashew and Sesame for now. Below are some statistics.

Tea - Kenya has remained the leading African tea producer and boasted an output of over 440,000 tons of tea. Combined with other East and Central African nations, Africa is now the second-biggest grower of tea in the world, producing tea of high quality and good bright colors which are used for blending all over the world. In 2018, African tea exports accounted for 23% of the world’s internationally traded teas.  

Cocoa - Some 70 percent of the world's cocoa beans comes from four West African countries Ivory Coast, Ghana, Nigeria and Cameroon. The Ivory Coast and Ghana are by far the two largest producers of cocoa, accounting for more than 50 percent of the world's cocoa production. 

Cashew - African farmers currently grow 48% of the world’s cashews annually. Ivory Coast, Tanzania, Guinea Bissau and Nigeria contribute much to it. Africa is now the largest producer of raw nuts with more than one million tons production. 

Sesame - 59.4% of the world’s sesame is produced in Africa. As a region, Africa has quickly risen as the top producer and exporter passing India. Growth in production is mainly from Tanzania and Ethiopia. 

One thing that is common amongst the 4 commodities above is most of the exports are in raw form. Little or no processing happens within Africa. This means as Africa exports the raw materials, the continent is also exporting all the jobs associated with processing, manufacturing, and packaging. Raw cashew nuts for example are sold to Asian countries where significant value addition takes place before exporting the premium product to the US and European market at higher rates. Of course, Asian nations also want to create jobs. But there is a need for a balance. Africa’s population rate is growing at a faster rate than the jobs we are creating. Unless a proper balance is struck, we will end up in a vicious circle of insecurity, hopelessness, and poverty. 

Farouk Gumel said “TGI’s projects try to strike this balance where we aim to create jobs in both the producer and consumer nations”. Farouk Gumel adds that “as our business operations are located in both Asia and Africa, we are able to maintain an equilibrium that creates a win-win”. TGI’s investments focus on driving inclusivity and value addition using locally sourced raw materials, state-of-the-art manufacturing facilities and a highly skilled workforce to produce world class products. Farouk Gumel added, “TGI for example splits its cashew operations between Benin Republic, Nigeria and India. We have identified ways of meeting consumer needs while maximizing our impact within the producer nations. The key now is for the political leaders to also find ways of enhancing collaboration to ensure this win-win is sustained”. 

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Farouk Gumel - Nigeria’s Fertiliser Revolution – a story of job creation and higher yields

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Farouk Gumel | Pushing Nigeria’s Biggest sector to its limits - Agriculture

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Farouk Gumel - A case for why oil should not be Nigeria’s No.1 Focus

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Farouk Gumel | Pushing Nigeria’s Biggest sector to its limits - Agriculture 

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Farouk Gumel | Pushing Nigeria’s Biggest sector to its limits - Agriculture

Farouk Gumel - Finally, agriculture is taking its rightful place as the sector that will take Nigerians out of poverty and into an era of inclusive and collective prosperity. Although the sector employs millions of Nigerians and accounts for an estimated 20% of the country’s GDP, many still view supporting agriculture as a charitable act as opposed to a business venture. This is the simple reason why many farmers in this sector are classified as “under employed” due to their mere inability to grow beyond the subsistence level. 

Nigeria is blessed as we have the potential to excel in all the key sub-sectors of agriculture. We have the land and forests for farming and grazing. We have the water (sea, lakes and rivers) for fishing and aquaculture. We have the capacity and the climate for livestock and poultry production. And of course, we have the manpower to get all this done. 

Therefore, it is extremely exciting for all of us to see significant investments going into this sector. We are witnessing a gradual but consistent increase in the production of cassava, yams, maize, paddy, millet, fish and poultry products. Our non-oil exports have also increased especially in cocoa, cashew and sesame seeds. This is all because Nigeria finally has alignment in its fiscal, monetary and trade framework when it comes to agriculture. Due to this, we are moving away from the days of handing out fertiliser and seeds to an era of providing loans to farmers and tax incentives to investors in food processing and logistics.  

Many organisations have bought into this new policy direction. One of them is TGI Group who in the last five years have commissioned a rice mill, a multi seed oil crushing facility and a seasoning cubes factory. They have also invested significantly in outgrower farming and farmer extension networks. Farouk Gumel, an Executive Director at TGI states “With an inclusive agricultural policy, Africa can feed itself and create millions of Jobs”. 

Farouk Gumel added “the fact that the majority of Nigerians earn their livelihoods through agriculture means the recent policy push will positively impact millions”.Farouk Gumel concludes that “TGI’s projects will bring with it a lot of opportunities for the people of Nigeria especially in the rural areas. We hope as these investments mature, they will bring peace and prosperity to millions of people”.