Dysfunction in the Agriculture value chain: a call to expertise!

If you have invested time or money in Agriculture in Nigeria, here is a story that will resonate with your experience.

Adamu (not real name) is a vegetable farmer in northern Nigeria. He grows onions, tomatoes, ball pepper and occasionally chili pepper. Recently, he decided to raise his game and invested in some greenhouses to help him serve a new group of customers. At least now, he can sell into the fast growing number of hypermarkets such as Shoprite, Justrite, etc. Once he started producing, he realizes that it takes considerable effort to grow these vegetables in the greenhouse but he is committed so he stays. As the flowers started sprouting, it occurred to him that he had not secured any customer yet so he starts running around the country looking to sign contracts with the hypermarkets which took a considerable amount of time. Going about doing this takes him away from the farm considerably and had some impact on his crops, loosing 10% of the crops but he figured he can bear the loss. He was however glad he could sign a contract with Shoprite. As he was about to harvest, he realized he has to transport the tomatoes to Lagos and hence, quickly starts looking for a cold-chain distributor but found none. The few cold-chain distributors for dairy and beef were asking for ridiculous amounts that will wipe away his margins. He decided to stick with using a regular truck. 15% of his produce got destroyed during transportation but eventually sold the rest to Shoprite. At the end of the day, Adamu was asking himself if it was all worth serving this new segment”.

In case you missed it, Adamu functioned as a farmer, a marketer, and a logistics agent. In the end, he lost up to 25% of his produce and ultimately got wasted himself during the entire process. This highlights the big dysfunction in the Nigerian agriculture value chain. Imagine the story played out differently as below.

“Adamu decided to go into greenhouse vegetable farming and he put in all his efforts to get maximum output from the farm. Once the flowers started sprouting, he called Ajoke Enterprises(AE) who markets farm produce to all major hypermarkets in Nigeria and AE goes to secure the contract with Shoprite and Justrite because of her expertise in engaging these type of clients. Once the fruits were harvested, Bello cold-chain company (BCC) was waiting at his gate to pick up the produce and deliver to Shoprite and Justrite in Lagos. At the end of the day, 95% of his farm produce made it to Lagos and Adamu did not move one day away from the farm.

This plays out differently depending on the sector in question and there is no doubt that the government has a major role to play here, creating the enabling environment. However, there is also a call for individuals and companies to start looking for ways to create market linkages through expertise building, hence helping all players to get a larger slice of a larger pie!

Author: Dices...

This is my world from different views!!!

4 thoughts on “Dysfunction in the Agriculture value chain: a call to expertise!”

  1. Adamu like others, was trying to be integrated too early hence the expected outcome. Definitely, there has to be segmentation in support services required by different actors along the value chain and marketing and logistics are very critical. The two go together. However, working out a reasonable margin for both services to the farmer to retain margins still remain a concern. Hopefully, innovative business models currently being worked on by DFID and other players will offer some solutions in the near future.

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    1. Indeed Richard, and for some sectors, it makes sense to integrate to a certain extent. But overall, such business models would be very welcome. Adamu might be integrating too early but he might not have much options other than to stay away completely.

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  2. Well said, definitely the enabling environment is a barrier; other question would be: Is the scale sufficient for the investment in the value chain to be meaningful for players? In order to justify their investment vs. other opportunities and make reasonable gains, scale will be a key variable.

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    1. At the end of the day, its a catch-22 situation. Without that value chain specialization, the margins are not exciting enough for more actors to get into the different sectors. Taking a broader perspective, for example, a cold-chain distributor can focus on adjacent products and aggregate at that level. So if distributing tomatoes, can you also transport fish, meat etc? Not all products will be complementary but there will be platforms for such aggregations. Same with marketing for produce, I believe there is enough market for people trying to sell into the hypermarkets to have someone specialize in this.

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