FEATURES: Strategies For Maintaining Sustainable Agricultural Value Chain And Agribusiness In Nigeria || By Oyewole Okewole
Our population growth remains significant. An approximate number of 200 million people live in the country. The annual population growth rate of 2.586% further reinforces the projections in the nearest future.
By 2030; Nigeria’s expected population growth is targeted at 262 million. In addition to the population growth, urbanization is also growing fast. Estimated percentage remains 50.34% share of the total population live in urban areas in year 2018 with the annual urban growth rate at 2.8%-3%. Urban population is therefore expected to double in the next two decades. This basically indicates that more and more people will depend on food produced by the rather diminishing rural population comprising of active farming communities and producers.
Inclusiveness in the agriculture and food system is one of the main enhancer for sustainable food value chain (SFVC) in Nigeria and consequently building a robust food secure nation. SFVC will provide accessibility to sufficient, safe and nutritious food in order to meet the demanding dietary needs for a balanced, active and healthy life of her citizens.
A frictionless food value chain system where the interconnectivity in both actors and roles played is synchronizing and inclusive is most desired for a food secure state. Actors in the value chain are required to be sensitive to the requirements and needs of the customers and consumers. This apt sensitivity enables the actors to take proactive steps in bridging the gaps in the value chain system.
It is against this background of ensuring unhindered and well-coordinated value chain system that backward integration becomes a veritable strategy for agribusiness. Based on the need to explore its possibilities, it becomes relevant to ensure sustainability in the value chain system in order to avoid apparent deficiencies and operational insufficiencies that have ravaged the system and diminish its regenerative measures.
These deficiencies ranges from research and knowledge, infrastructure, marketing, technology, transportation, distribution, nutritional, value addition, etc.
Backward integration in simple terms refers to a situation where a company typically acquires a key supplier or operation and takes over the process done earlier in the value chain. An organisation can simply develop a strategy to merge or acquire its supply chains.
It is a type of vertical integration that also comprises of forward integration as another component strategy. However, I choose to write on backward integration because of my experience with problems associated with value addition and processing of agricultural products. Organisations shut down simply because they couldn’t scale up and ensure consistent supply of their feedstock. This break in the value chain has localized catastrophic impact of the overall food system.
Usually, consumer needs will constantly evolve as agribusiness and organisations become proactive in satisfying their consumers based on feedbacks. They ultimately respond to these feedbacks through innovation, adoption of proven leading strategies and adaptive business models.
One of these approaches used by organisations is integrating into different parts of the value chain. In the light of today’s super competitiveness and disruptions in the agri-food value chains, agribusinesses are looking for opportunities and strategies required to maintain a competitive edge while addressing sustainability gaps in the value chain.
There are therefore specific reasons that inform organisation’s decision to explore backward integration. Apart from the overarching benefits of efficiently addressing apparent shortcomings, they explore this model to ensure:
value chain optimization and seamless operational efficiencies.
consistent supply and cost control.
process transparency.
increase in quality through value addition for example in agro- processing and manufacturing activities.
In our unique local realities, proactive backward integration strategy will build the local capabilities and technologies, develop aggregate working knowledge in innovation and research, minimize capital flight and create robust economic linkages.
For example: an agro- processing industry that engages in value addition processing of oil palm, soybean and cassava may get involved in backward integration to enable consistency and standards in its product.
They may get involved in providing support services in the area of input supply and provision to their raw material producers; engage in contract farming practices support, specialized training and extension services. In addition, they could develop out-grower schemes, engage in backward coordination (clear production guidelines with monitored production process) and in rare cases completely take over the entire processes of backward integration. In addition, contract farming practices can be quite substantial including loan guarantees so as to enhance production profitability and improve cash flows for their producers.
Usually the farmers enjoy some motivation as they are integrated in the value chain. They enjoy access to capital, market and security for their produces, improved farming efficiencies and ultimately stable stream of income. Nigeria’s agricultural value chain system should encourage sustainable boost in domestic on-farm production and effectively reduce dependence on imports to enhance job creation.
Building resilient value chains will greatly promote agri-food systems’ sustainability which will in turn transform the socio-economic life of the actors in the value chain while making reasonable profit for the organisation’s up-scaling process.
Oyewole Okewole is an agro-Industry and agribusiness specialist based in Oyo State, Nigeria. oyewoleokewole@yahoo.com
