INTRODUCTION

1. THE EXPERIENCE OF NIGERIA SMALL AND MEDIUM SCALE FOOD PROCESSING ENTERPRISE INVESTORS( A SPECIAL PRESENTATION ON THE OCCASION OF 39TH ANNUAL CONFERENCE OF NIFST ON THE THEME – FOOD INDUSTRIALIZATION; A PATHWAY TO AGRIBUSINESS TRANSFORMATION): 14/10/2015.

2. INTRODUCTION • Food industrialization simply refers to all efforts made by several key players in the food processing industries and other allied businesses aimed at making available sufficient good quality food consumed by the world population. • Food industrialization has to do with transformation of raw ingredients into food for human consumption. This involves the whole food industry ranging from food production through farming, processing, packaging & distribution to retail and catering industries. • Industrial agriculture can also be linked to food industrialization hence most activities in the food industry revolve around agriculture. • With the above description of food industrialization, we can go further to discuss how this has affected agribusiness transformation with particular reference to our country Nigeria.

3. Nigeria is a country with a rapid population growth with an estimated population of 170 million people who eat real natural food and processed food daily. • With the advent of fast food industries in almost all urban centers in the country, the rate of patronage of processed food has increased tremendously. • The good news about the food industrialization today is the fact that the food producers at farm levels and also across the value chains have been given the opportunities to increase the scale of production and consequently challenged with the task of providing all the food raw materials required in the food processing sector.

4. Farmers can now embark on serious agribusiness with the assurance that they will always find the processor who will transform their produce to food industrial raw material or as finished product. • Unfortunately, another school of thought is worried about the rate at which industrial agriculture has taken over organic food supply all in an attempt to meet up with the high demand for food products. • So many farm crops present with high doses of residual agro chemicals used as agro inputs. • This helps in maximizing yield, plant and pest management and for mass production; • A lot of processed foods are feared to contain inorganic chemicals used as preservatives or industrial raw materials which are suspected to shorten human lifespan through diseases like cancer, obesity, brain damage, high and low blood pressure, diabetes and so many others. • However, it is worthwhile to note that some of these problems may actually be over exaggerated by medical experts.

5. It is necessary to recognize the organized restaurants and eateries (ranging from ‘food is ready’ to those involved in franchising like MR. BIGGS, TANTALIZER etc.) as integral part of the food industry and their importance in the society can never be over emphasized as food industries . • Transforming the agribusiness in Nigeria is currently receiving very serious attention from both private and public sectors and by my assessment, I believe we shall soon get to a stage when locally produced food will compete favorably with the imported foods. • Agribusiness is growing rapidly in Nigeria to the extent that small and medium scale processing industries are working assiduously at transforming most agricultural raw materials to finished product or as raw materials for larger scale manufacturers either for export or local use. • Let us at this point look at the cassava and cereal crops which are in high demand by large industries for high quality cassava flour (HQCF) and beverage industries such as the breweries looking for Barley, sorghum, wheat and other cereal crops.

6. It is also important to observe that small and medium enterprises (SME) in agribusiness contribute a lot to the GDP of the country. They employ a greater proportion of the national labor force. • The SMEs produce over 65% of processed locally made foods such as rice, cassava, and vegetable oils with all the processing challenges notwithstanding. • It is on record that the SMEs represent about 90% of the manufacturing and industrial sectors with particular reference to the overall population of enterprises. • Many investors would have loved to embark on agribusiness but for the prevailing problems which have predominantly affected the progress and viability of the existing SMEs. • Let us at this point examine the problems mitigating the growth of small and medium agribusinesses in Nigeria.

7. PROBLEMS OF SMALL AND MEDIUM INVESTORS IN AGRIBUSINESS IN NIGERIA Prominent among the problems of the SME food processor is the Insufficient and in most cases unavailability of affordable source of electric energy. • This has consequently raised the cost of production and made the finished product very expensive as compared to the imported counterparts. • The cost of running processing industries based on standby generators operating with diesel at the cost of N150/liter is unimaginable hence cannot be compared with cost of energy in other developed countries where most imported goods are imported from.

8. High cost of locally sourced raw materials used in the processing industries especially those produced by peasant and small scale farmers who do not have access to mechanization and high yielding varieties. • Typical example is the rice industry which contends with the problem of high cost of paddy and in most cases the quality of paddy is full of impurities due to the use of crude post harvest handling techniques. • The average current cost of paddy at N78,000=/Ton makes it impossible to obtain a finished 50kg bag of well processed fresh milled rice at any cost less than N9,000=. This may be the reason why most large mills tend to favor the importation of husked rice which gives them a price advantage of producing a 50kg bag for less than N8,500=. • Lack of good feasibility studies before setting up an agribusiness or food processing business. A bad business plan is the beginning of failure in any agribusiness because it causes the under listed problems: • Under utilization of plant capacity due to under productivity • Employment of workers whose salaries overwhelm the income of the establishment • Wrong siting and localization of the investment due to political undertone or being too far from source of raw materials or targeted market. • Wrong choice of machineries and equipment (procurement of very expensive machines or buying substandard machines may hinder investment cost and may affect efficiency and durability.

9. High interest charges on loans or other initial expenditures on bank charges, consultancy and professional fees, bribery and tips, product registration charges spent before obtaining credit facilities and shortly after will normally eat deep into the working capital and most times raise investment cost out of proportion. • Government policies on Tax, Local levies, Import and export regulations occasionally affect the survival rate of local SMEs especially in the agricultural sector. Inconsistency in policy implementation tends to kill most SMEs. • A typical example is the case of rice. Any attempt to over import or smuggle rice into Nigeria consequently affects local production and processing. • How can the Customs declare that a country’s border is so porous that they cannot implement import regulations rather they allow smugglers to overcome them, this is a big puzzle.

10. Use of wrong personel , inexperienced worker and half baked staff who does not have proper training can shut down an investment. • It is very unfortunate that most recently employed workers in Nigeria as at today are not employable. • They obtain theoretical education and in most cases are unable to convert academic knowledge to practical industrialrealities. • The absence of trained middle manpower in the labor market needs to be addressed urgently.

11. The value chains in most agribusinesses have not been properly developed and linked resulting to lack of harmony between producers, processors and sometimes the market. • Developing the chains based on cluster or commodity associations is still a bottle neck. This causes lack of trust and mutual relationship among key players and may degenerate to closure of an investment. • The inability of quality and statutory government regulatory bodies to carry the industries along pose serious challenges to the growth of Small and Medium agro based investments. • The duties of these organizations are targeted towards revenue drive and punitive measures instead of training and protection of these agribusinesses. • Some of the agencies are contributing to what accountants will regard as ‘multiple taxation’. • In most cases, some official and unofficial charges may prompt the investors to opt out of business.

12. The consumer preference for imported goods is a serious challenge to agribusiness transformation. • There is no justification for Nigerians to prefer expired grains such as some imported brands of parboiled rice to the Nigerian rice which in most cases are milled fresh within 6 months from harvest. • Until such a time when consumers are properly indoctrinated (by Food Scientists) on the true values of the food they consume , local processing industries will always have problems with market and our poor ignorant food consumers will suffer the negative effects of eating poor quality food.

13. THE WAY FORWARD • Experience has shown that a stitch in time saves nine and this opportunity of the 39th Annual conference of NIFST will open a new corridor for all stake holders in the food industry to re- examine our past activities and plan A BETTER FUTURE. • As a matter of urgency, NAFDAC should come up with a policy which will empower a qualified food scientist to evaluate and scrutinize any business plan for establishing a food processing industry to ensure that all standards are integrated in the plan. • Part of the regulations will be to evaluate the inclusion of all Good Manufacturing Practices (GMP), Environmental issues and Health related matters at the onset of the industry and periodically monitored. • It is better to organize trainings and workshop aimed at educating an investor at the beginning of the project rather than invade him to impose fines and charges which may be difficult to pay.

14. The government should expedite action on provision of regular and affordable electricity to provide the required energy for the smooth running of food industries. • The central bank is always coming up with very wonderful lending policies but the disbursement and implementation is hardly accessed by investors. • The Agricultural bank should be empowered by the Government to the standard of the Bank of Industries. This will enable them reach the farmers and agribusinesses faster and better. • But mention must be made about the robust advertisement carried by BOI in the recent times and other commercial banks should emulate such or be compelled by the central bank.

15. Investors must patronize well qualified consultants who will design a factual business plan because a bad plan is a design to fail. A good business plan will serve as a guide and will provide all necessary information required for a smooth running of the investment. • The Ministries of Agriculture and Water resources should provide well developed farm plots and preferably with irrigation. • The farmers should be given the opportunity to acquire farm machineries and be properly trained on how to use them for increased output and cost effective best practices. • Experienced extension workers should be deployed to the field to train the farmers. All these will enable farmers and producers avail the processors the required raw materials at reduced prices. • The commodity value chain actors should embark on massive value chain development to improve the relationship and linkages between the various chains.

16. Adequate market infrastructures should be developed by the government agencies at federal, State and Local government levels. • All those who have been in the rice and other cereal products will understand the implication of opening the land borders for the importation of food and food items. This will create a disaster for Rice, Sugar, wheat and related agricultural raw materials and foods. • I strongly recommend and insist that the Nigerian Customs should wake up to their responsibilities in checking the excesses of smugglers at least to save the local industries from collapse. • The tariff on the imported items should be increased and used to develop the local SMEs.

17. All hands must be on deck by government agencies and processors of agricultural goods to improve the welfare of producers of agricultural raw materials so that the farmers produce well in order to protect the “geese that lay the golden eggs”. • This may sound ridiculous but very embarrassing to ask the Ministries of Education and Science & Technology to improve on the curriculum and design of middle manpower education and training. • This may be an indirect way to urge the government to invest more on technical education and provide enough funding for research and acquisition of machines and equipment used in training our youths in the tertiary institutions.

18. SUMMARY: • I must end this speech by commending the NIFST for consistently organizing this conference periodically and hope that all deliberations in this year’s workshop will be communicated to the appropriate government quarters as the new executives are being sworn in. • I challenge the organization to spend a little more effort in educating the Nigerian food consumer via well articulated mass media organizations. • The rate at which junks are consumed all in the name of cheap food may be the cause of the alarming rate of sudden deaths and high rate of malnutrition in Nigeria. • I wish this conference will usher in a nationwide HEALTHY LIVING through the Christmas season to the coming new year. Thank You for the Audience. Anthony UchechukwuMuoneke (Managing Director- ANNES AGRO PROCESSING INDUSTRIES LTD). atumaapilrice@yahoo.com