Nigeria: A Conversation with Economist Shuaibu Idris

Image by David Hecht. Nigeria, 2009.

In my last blog entry I wrote about the many commercial farms in northern Nigeria that have failed. I wrote that my visiting them did not help me much in fathoming what went wrong with them all. But I have since gotten more clues from talking with various experts such as Shuaibu Idris a development economist and the Executive Director of Dangote Flour Mills. He talked to me about some of the local and international constraints that big farmers face as well as the constraints faced by small peasant farmers. He also points to the potential risks that the country's dysfunctional food production system poses for food security in Nigeria, as well as for surrounding countries. Here are excerpts from our conversation:

HECHT: How much of the wheat you mill at Dangote Flour Mills is produced in Nigeria?

IDRIS: None, unfortunately. Nigeria imports about 3 million metric tons annually. There were times in the 1980s and 1990s when we produced noticeable quantities. And government supported farmers by insisting that a portion of what we millers milled was grown locally. There was even a period when Nigeria banned the importation of wheat completely and indeed bread was produced in Nigeria. But Nigerian government policy has not been consistent and midway through the program it was jettisoned. So we went back to the drawing board. Today there are some farmers who still grow a little wheat but it is not even enough to be captured in national statistics. So for our purposes Nigeria produces none.

HECHT: Traveling around northern Nigeria I saw many dams and other infrastructure, more than any other African country besides perhaps South Africa. Yet I also saw mostly subsistence-type farming. Why hasn't the infrastructure been effective in supporting more modern, commercial farming?

IDRIS: There are many problems: transport, irrigation and above all storage. If you come to Nigeria at particular times of the year you will shed tears for the farmers. If you go to Hadeja-Jama'are near Kano you see tomatoes being thrown away. There are no storage facilities [or processing plants] and tomatoes can't last longer than 72 hours. During the orange season if you go to Makurdi [capital of Benue State] you can buy a 100 kg sack of fresh oranges for just one US dollar. And if you go to Jos [capital of Plateau State] you will see women throwing away Irish potatoes.

HECHT: But what about larger farms, why have so many of those failed? Don't they have access to export markets and better storage and processing facilities?

IDRIS: The best way to understand why so many large farms have failed is to compare the circumstances in which they operate to the circumstances of big farms in, say, the United States. [Nigerian farms] are mostly buying fertilizer from the open market and the prices of these and other inputs are high. And if the selling price of the outputs are lower than the cost of production – and there is a limitation on how long these farms can store their commodities until prices rise – they are compelled by circumstances to sell at a loss. If they lose this year and lose the next year, by the third year they don't have the strength to produce again.

When you look at what the U.S. does for its farmers you just wonder, 'Why should I even farm in Nigeria?' The U.S. dictates a minimum price for grains. If the markets move below that minimum price Uncle Sam will come in and ensure that the farmer doesn't lose. We don't get that kind of support here. One of the paradoxes of this world is that some parts of the world are dying of hunger and malnutrition and the U.S. is buying wheat to dump into the sea just to maintain a certain level of pricing. It's a paradox.

HECHT: I recently met the owner of a modern commercial farm that he had abandoned in the 1980s called Annaderyia Farms. When I asked him what went wrong all he would say is it's too complicated to explain.

IDRIS: There may well have been many factors but the bottom line is the relationship between inputs and outputs - the cost of production. At that time, in the 1980s, Annideryia couldn't have operated at a profit [because commodity prices were too low]. There were no subsidies so all those categories of farms went under.

There is also Sambo Farms in Futura owned by Shehu Musa Yar'Adua the elder brother of the current president, Umaru Yar'dua. It grew a lot of grains and cotton and was a gigantic operation but there were no subsidies. How could they succeed? They couldn't!

HECHT: But with agro-businesses like Sambo Farms being so close to government why didn't it get the support it needed. I mean if the brother of the president owns one of the biggest farms in Nigeria he could just say 'Hey brother can you help me out?'

IDRIS: Actually the late brother of President Yar'dua died some 10 or 12 years ago before Umaru took power. But certainly the two brothers were part of the Nigerian elite and they have influence. The problem I think is that even when they tried to get support for the farm it didn't help.

HECHT: So are you saying that the members of the elite who were the big farmers sought the wrong kind of support?

IDRIS: Yes. For example, as a big farmer I am going to import agricultural implements like tractors. 'OK you're my brother. For all agricultural implements: zero duty. There's your subsidy'. And maybe I'll sell you fertilizer at a control price. But what all farmers need is subsidies that ensure that if they are able to produce one bag of maize at, say, 5,000 naira, then the government will peg a bag of maize at 6,000 naira thus giving an average minimum of 10 to 15 percent return on investments. That way if the local market is pricing maize at 4,000 naira the farmer should have the option of going to government buying centers and selling his or her produce at the minimum government price.

HECHT: So what you are talking about is a kind of democratization of subsidies as against what has been happening with only those who are wealthy getting subsidies.

IDRIS: Yes. Because in the end even the wealthy farmers cannot survive when they have to sell their produce below cost.

HECHT: Does the food sold in Nigerian markets mostly come from peasant farmers or big industrial farms?

IDRIS: There are no real statistics on that but what we know is that Nigeria has close to 150 million people and about 70 percent are in agriculture from the north to the south to the center. And when you travel across Nigeria you hardly come across large-scale farmers. Mostly its subsistence farming, in which people use the most basic technologies – hoes, cutlasses. [The farms are so inefficient that] they can at best feed a man, one or two wives and five or six children. And I'd say that maybe 25 or 30 percent of what is produced [by peasant farmers] is sold into the market. [The food that peasant farmers keep is often not enough to sustain them year round so part of the year they must also earn money from manual labor or by trading]. As to the quantity of grains sold in Nigeria's markets that is produced by commercial farmers compared to peasant farmers: I estimate it is probably a ratio of 60:40 in favor of the peasant farmers. There are so few big commercial farm functioning you can count them in each state. If you are lucky you find five, and in some states you will even go without finding one.

HECHT: In those areas where there are commercial farms I have sensed there is often conflict with peasant farmers. Is that part of the problem?

IDRIS: There is this notion that commercial farmers take water and other resources away from peasant farmers but if it happens it is only in isolated cases. If you go to Zobe Dam in Katsina there is close to 10,000 hectares of land with [irrigation] water channelization. But there are no commercial or peasant farmers there. People [both commercial and peasant farmers] are not prepared to farm there even with the channelization. And I have been to other dam sites, like the Hadeja Jama'are River basin, where there is a lot of canalization and where no commercial farmer is preventing subsistence farmers from accessing water.

HECHT: How much of the land in the north is arable?

IDRIS: That's the thing: There is no shortage of arable land. Nigeria has more than 900,000 sq km in total land mass [twice the size of California but with more than 5 times the population]. The majority of it is arable. All of the north could be arable [if there were irrigation] even with the encroaching desert. The Jibyia [irrigation project] is in the extreme far north [approaching the Sahara Desert] on the border between Niger and Nigeria and it is now fertile. The problem is that only a small portion of the arable land is being farmed.

HECHT: So is there no competition between peasant farmers and commercial ones?

IDRIS: Not competition if you mean working to do better than one's competitor and maximize one's returns. Yet clearly there is a level of rivalry. The agricultural system in Nigeria makes the peasant farmer [almost invisible]. And even when he is recognized, whatever subsidies are directed to him like fertilizer, often come too late or are inadequate and too expensive because of middlemen. Somebody takes a share at every goal post, at every border post, and by the time it trickles down to the farmer it is not a subsidy at all. Peasant farmers are largely on their own. Commercial farmers, because of their size and their ability to network with the powers-at-be are able to get some modicum of subsidies at least in terms of lower prices for fertilizer or lower import duties or whatever.

HECHT: So peasant farmers have reasons to resent industrial farmers?

IDRIS: Commercial farmers are able to command and control resources at peasant farmers' expense. And when you look at the antecedents of commercial farmers -- many were in government and when you are in government one may ask, 'How much was your salary?' 'How did you get the massive resources needed to undertake these operations that you are doing at my own expense?' And quite a lot of these commercial farmers actually confiscated farmland belonging to villagers. Of course that clearly sets the stage for confrontation and antagonisms that could last forever. You know what land means to an African. So when you look at that angle these are problems waiting to happen.

HECHT: I have heard peasant farmers have been known to intentionally undermine commercial farms, like burning down their fields.

IDRIS: There is a kind of institutionalized antagonism. For me the issue is similar to how I see colonization. I say the Europeans didn't come intentionally to colonize. It happened by chance without adequate planning. The same is true of commercial farmers and, in response, the downtrodden employed in a large scale operation may cause damage or pilferage but to what extent do the downtrodden say 'Let me destroy, let me kill so I can survive'? That is in most instances not the reason [peasants] pilfer and steal. It's more so they can make up for their losses. They say 'I am poor and I see this guy is wealthy'. They probably believe that he must have stolen government money to get what he has. He is taking his own share from the national cake. 'So let me also take my own share through him.'

HECHT: But in the end do all Nigerians get enough to eat?

IDRIS: When you look at it from that angle, indeed Nigerians are able to feed themselves. But why, today, despite the large arable land Nigeria has, we import wheat given the quality of our soil. And Nigeria still imports sugar. Almost in every part of Nigeria there are thousands and thousands of [hectares of] arable lands where you can grow sugar cane. And in the same valley you can grow rice. Today Nigeria is the world's top importers of rice in the world. So when you look at it from that angle you can't actually say Nigeria is able to feed itself given this dependence on importation.

HECHT: Does much of the food get imported from neighboring countries?

IDRIS: Yes but it is largely smuggled. I tell you, just three or four days ago I was in Kano [regional capital in the north] to meet with some of my customers [wholesalers and bakers] about the importation of bread flour from Niger Republic.

HECHT: But they don't produce wheat or bread flour in Niger?

IDRIS: Exactly! They don't produce it. And yet such food items are imported to Nigeria from Niger, Benin or Cameroon and even Chad. How?

HECHT: It must have come to these countries from donor countries as food aid, no?

IDRIS: Yes! Commodities like wheat are sold [by Western countries] below the cost of production.

HECHT: So do you source your bread flour from Niger?

IDRIS: No! No! No! What I am saying is that one of the challenges I face, as a Nigerian flour miller, is the influx of [cheap] bread flour [which Western countries give or sell cheaply to Nigeria's neighbors] and which ends up here. I am having a lot of competition [from international food aid and subsidies], which reduce my market share.

HECHT: Why is the flour not being consumed in the countries it was intended for? Does flour fetch higher prices in Nigeria?

IDRIS: Yes! This is what I am saying: that these countries are supposedly facing famine so food aid is coming from the [UN] World Food Program or other aid agencies that are trying to assist the less privileged in these countries. But the powerful and mighty misdirect and corner the free or subsidized grains and dump them at a cheaper price to those neighboring countries with some level of economic prosperity.

HECHT: Meaning Nigeria?


HECHT: Does this have something to do with Nigeria being an oil economy?

IDRIS: I agree entirely with economists that say oil is a curse and not a blessing. Up until the early 1960's when Nigeria discovered oil, agriculture was the main stay of Nigeria's economy, from cotton to groundnuts to cocoa and rubber. Upon the discovery of oil there has not been much upgrading of farm technologies or support for farmers. Oil has generated a lot of revenue, which assisted us to engage in projects that were mostly not productive, and now we are almost 98 percent dependent on oil.

HECHT: But what I am asking is, does the oil have an impact on the subsidized food coming from Niger because Nigeria has petrodollars?

IDRIS: That linkage is not really clear. You would need to do a lot of analysis, except from one angle: Because the government can exist solely from oil revenue, taxation in Nigeria has been reduced to nearly zero. When I was growing up in the early 60s there used to be grains markets and taxes were collected from the merchants. But the government no longer bothers to collect internal revenue, as it should and no taxes are collected from grains merchant. State governments get their revenue mostly from the federal government and the federal government gets its revenue from oil. So all other buying and selling that takes place in Nigeria goes untaxed so that makes items cheaper. Plus people who don't pay tax have higher disposable incomes. So if you like you can link it up this way to why Nigeria is a good place to sell things.

HECHT: But you just said 70 percent of Nigerians are subsistence farmers? Why would they have more wealth than subsistence farmers in other countries?

IDRIS: Look carefully at the statistics: First off, the population of Nigeria is almost 150 million. Although seventy percent are poor subsistence farmers, the remaining 30 percent, which has a higher level of prosperity, makes up more than the combined populations of all of Nigeria's neighbors -- Togo, Benin Republic, Cameroon and Niger Republic -- put together.

HECHT: So is the flour being smuggled into Nigeria just going to the 30 percent?

IDRIS: You can't say that either. It is targeted to a broader spectrum of the population. The same flour you sell to the rich can also be sold for a profit to the poor. [As no taxes are paid] bread can sell here for about 50 naira a loaf, which is less than 50 [US] cents. And remember, most peasant farmers sell a portion of the food they produce to buy what they don't have: clothes, services like electricity, water, transportation and, of course, bread.

HECHT: So does the economic system you describe work or do many people go hungry?

IDRIS: Nigeria can't claim to be insolated from the risk of hunger, particularly if there is drought. Yes we are lucky that we have some financial resources to import food but today a bag of local sorghum or maize is being sold at 4,500 naira and this is the harvest season when you would expect a glut. This time two years ago the same bag sold for 2,000 naira. Could we say the farmers are smarter to extract more value? Could we say there is shortage of supply? Could we say we are possibly facing hunger? These are all questions that need to be asked and that no one really understands.

HECHT: But Nigeria does have food reserves in case of shortages, doesn't it?

IDRIS: I think we do. Certainly on paper we are supposed to have a system so that if there are shortages the government can release food into the market. It was started some 20 years back. The problem is that the contracts for the construction of the silos were given out but not all of the silos were constructed. And in the last one or two years I cannot tell you I experienced, or witnessed, or noticed government buying grains for these silos. Maybe they did buy but I don't know about it.

HECHT: And you should know.

IDRIS: Well I'm in the business -- I am a stakeholder -- so obviously I should know. I do remember three or four years ago there was a shortage of grain in the region and the government released some grain reserves in order to stabilize prices. Then subsequently when the harvest season came around the government bought again but I don't know of them buying up any grains since then.

HECHT: Three of four years was 2005 when there were sever food shortages in neighboring Niger. Do you think Nigeria had something to do with what happened in Niger?

IDRIS: What happened in Niger [in 2005] is at least tangentially related to events in Nigeria because that was when gain prices here were soaring. And because we in Nigeria have a higher per capita income than people in Niger we had more buying power while people in Niger went hungry. And when the international donor agencies or benevolent countries sent food aid to Niger obviously a lot of it ended in northern Nigeria where middlemen could earn more for it, even though it is supposed to be free.

HECHT: And so while people were going hungry in Niger Western food aid and subsidized food was being redirected from Niger to Nigeria and undermine your companies ability to sell food at a profit?

IDRIS: The problem is not peculiar to my business and not peculiar to what happens on the Niger-Nigeria border. Go to the big food markets in neighboring Cameroon. You will find food aid selling there that came all the way from Darfur in Sudan or eastern Chad or Democratic Republic of Congo. And that food aid also often ends up in Nigeria. It's the nature of free markets.

HECHT: So what needs to happen in order for the free market to help Nigeria and other African countries become more productive?

IDRIS: Certainly governments need to give better support to commercial farming by implementing the kind of subsidies that Europe gives to its farmers and the kind of subsidy system the US gives its farmers. That means guaranteeing minimum pricing so farmers avoid losses. And peasant farmers need maximum assistance with soft loans so they can buy hybrid seed varieties and use new technologies to become more efficient. There is absolutely nothing wrong with a peasant one-man proprietor farm as long as the farmer can learn to adapt to new realities.