Public-Private Partnerships in Agricultural development: A fair deal

June 28, 2017 | Autor: Alexander Omorokunwa | Categoria: Agriculture, Sustainable Agriculture (Sustainability)
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PUBLIC-PRIVATE PARTNERSHIPS IN AGRICULTURAL DEVELOPMENT: A FAIR DEAL

Omorokunwa Alexander Wayne [email protected]

ABSTRACT This research work accesses the role of public-private partnership (PPP) in Nigeria’s agricultural development and the problems facing the adoption of PPP models in Nigeria’s agricultural sector. Majorly due to the fact that the agricultural sector suffered many setbacks and neglect during the past couple of decades, especially the heydays of the oil boom in the 1970s. From an era of booming export trade in agricultural commodities, the Nigerian agricultural sector has degenerated to an import dependent one. Subsequently, it has failed to generate significant foreign exchange, improve the living standard of the peasant farmers among others. Based on these findings, the study recommends that the government should increase private sector participation in agricultural development because of the important role of the sector to economic growth and development.

Introduction Agriculture is as old as man himself. It started from man’s quest to produce food for his daily sustenance and survival, and hence discovered ways to continuously grow crops (edible plants) and animals he considered desirable for food. He found ways to make efficient use of the soil (which is the primary material on which agricultural activities are carried out) to increase output that can satisfy this need for food as the human population grew. For a very long time, man has continued to discover various means of doing this. Science and technology has come to be an integral part of this development process. This had led to a nearly automated and machine-controlled system where human involvement is hardly felt. As we have it now, agriculture has grown into a multi-billion industry and to a greater extent even the driving force of the economy of some developed nations and economies. A strong and efficient agriculture sector would enable a country to feed its growing population, generate employment, earn foreign exchange and provide raw materials for agro-allied industries. The agricultural sector has a multiplier effect on any nation’s quest for socio-economic and industrial development. But despite being the dominant economic sector with the greatest potentials for growth stimulation and poverty reduction, agriculture seem to have the poorest capital accumulation and the lowest quality of private sector investment in Nigeria[1]. Statistics on national capital formation shows that. And development for agricultural capital stagnated at 12-14% of total capital formation in the 90s

[1].

Nigeria’s agriculture is predominantly low

productivity traditional system relying on simple implements (hoes and cutlass kind of thing) and technologies. Production is characterized by low levels of input use, low rates of investments in soil and infrastructural improvement, high risks and uncertainties and low resource use efficiency - majorly due to corruption and non-interest. This results to low return of investment (especially when compared to other areas like industry and commerce) and an unattractive agricultural sector for high quality human capital, entrepreneurial and financial investment.

Private sector participation in Nigeria’s agricultural sector has over the years been negatively affected by the distorting influence of the direct public sector’s involvement in agriculture. This can be seen from the various ways in which the government intended to tackle agricultural development problems. For instance, the Green Revolution Scheme, which promoted massive involvement of the river basin development authorities in direct agricultural production; establishment of the state-owned agricultural production and marketing companies, the key role of government in input distributions and marketing (through subsidies). Experience has shown that the approaches did not produce desired results; but were counterproductive, as they diminished the incentives for private sector participation. The effort of public sector involvement in direct agricultural production has been to overshadow private sector, distort incentives and discourage potential entrepreneurs and investors from the agricultural sector. Nigeria needs new kinds of agricultural entrepreneurs; agricultural labour force and private investors to transform the agricultural sector into a modern and developed economic system. This is because private sector involvement in agriculture has been shown to play an important role in the economic development of many countries.

Public-Private

participation in agriculture in Nigeria can bring about employment, infrastructural development, proliferation of agro-allied industries, and income for the farmers. Hence, the emphasis on an efficient and sustainable Public-private partnership that can catalyze the rapid agricultural development of the country. STRATEMENT OF PROBLEM The agricultural sector has however suffered many reverses during the past couple of decades. From the period of boom in export trade in agricultural commodities; the Nigerian agricultural sector has degenerated to an import dependent one. Subsequently it has not been able to generate significant foreign exchange for the economy; feed agro-allied industries; improve the standard of living of farming individuals and provide effective demand for industrial goods and services. In reaction to the worrisome performance of the nation's agricultural sector, the federal government has embarked on various programmes and

schemes aimed at reforming the sector to its enviable position in the Nigerian economy. The late 1970s witnessed a tremendous evolution of agricultural policies; programmes, projects and institutions. Some of these included; National Accelerated Food Production (NAFP, 1973), River Basin Development Authority (RBDA, 1973), Green Revolution (GR, 1979). The 1980s saw the establishment of such agencies as the Directorate of Food, Road and Rural Infrastructure (DFRRI, 1986), National Directorate of Employment (NDE, 1987) and National Land Development Authority (NALDA, 1991). In recent years the government have publicized some “private” collaborations that they said is intended to boost agricultural production. But the major investment in Nigeria agricultural sector is that of public foreign investment than private foreign investments. And it is generally in the form of loans, grant and technical assistance from foreign government and international financial institutions - more or less for political than economic reasons. This is the common route taken because government uses it influence with foreign governments and institutions to obtain these various forms of assistance for agricultural development in Nigeria.[2] The government's efforts have not yielded sufficient results as the country still witness increasing food cost, which have majorly led to general high cost of living and perpetual poverty. This call for the attention of government to be redirected to the area of forming partnerships with the private sector, since this can in a long way reverse the present trend of agricultural performance. THE ROLE OF AGRICULTUIRE IN ECONOMIC DEVELOPMENT The potential role of agriculture in economic development in all economies, especially the developing ones, is well known. In Nigeria, the agricultural sector was once the leading contributor to its GDP in spite of the dominant role of the crude oil in the external sector of the economy.[3] The study of economic history provide us with ample evidence that an agricultural revolution is a fundamental precondition for economic development.[4]The agricultural

sector has the potential to be the industrial and economic springboard from which a country's development can take off. Indeed more often than not, agricultural activities are usually concentrated in the less developed rural area where there is critical need for rural transformation,

resource

redistribution,

poverty

alleviation

and

socio-economic

development.[4]The agricultural sector has the potential to shape the landscape, provide environmental benefits such as land conservation; guarantee the sustainable management of renewable resource, preserve biodiversity and contribute to the viability of many rural areas.[4] Due to the strategic position agriculture is placed; it tends to have a multiplier effect on the economy of a nation which desires a rapid socio-economic development. This is to say that a sustainable agricultural growth can be highly instrumental to the rapid rural transformation, the empowerment of peasants and the alleviation of abject poverty in a country like Nigeria. Interestingly the Nigerian economy during the first decade before and after independence could reasonably be described as an agricultural economy because agriculture served as the engine of growth of the overall economy.[4]From the standpoint of the numerous contribution of agriculture to the general development of the country, agriculture was the leading sector. During this period, Nigeria was the world’s second largest producer of cocoa, largest exporter of palm kernel and palm oil respectively. Nigeria was also a leading exporter of other commodities like cotton, groundnut, rubber, hides and skins.

[4]

THE

agricultural sector is estimated to have contributed over 60% of the GDP. And despite the reliance by the farmers on majorly traditional tools and indigenous farming methods, these farmers produced 70% of Nigeria's export and 95% of its food needs.[4] CAUSES OF THE UNDERDEVELOPMENT OF NIGERIAN AGRICULTURAL SECTOR However, the agricultural sector suffered many setbacks and neglect during the past couple of decades, especially the heydays of the oil boom in the 1970s. From an era of booming export trade in agricultural commodities, the Nigerian agricultural sector has degenerated to an import dependent one. Subsequently, it has failed to generate significant foreign exchange, improve the living standard of the peasant farmers among others. Another

indicator of the depressed economic performance of the agricultural sector is the food crisis, which the country has witnessed; from the World Bank[5]shows that between 1980 and 1990, 17% of the entire population experienced food insecurity annually. This data further corroborate earlier findings of other researchers about the precarious food situation in the country. According to Ogen

[4],

the agricultural sector now accounts for less than 5% of

Nigeria's GDP. Historically, the roots of the crisis in the Nigeria economy lie in the neglect of agriculture and he increase dependence on a mono-cultural economy based on oil. Also, the direct public sector involvement in agriculture, in terms of both policies and infrastructures. As a result of this, production is characterized by low inputs; low rate of investments in research and technological innovation; high risk and uncertainties; and low resource use efficiency. The outcome is an unattractive agricultural sector that scares quality human, capital, entrepreneurs and financial investments. African Institute of Advance Economics reported [1] that due to poor investment climate, the value of cumulative foreign investment in agriculture declined persistently from 1981 to 2000. Agriculture shared a total stock of foreign investment declined from about 2% in the 1981 - 85 period to less than 1% in the 1996 - 2000 period. Presently, the primary agricultural sector (arable crop, tree crop and livestock production) is very poorly represented in the Nigerian stock exchange. Out of more than 190 companies quoted on the Nigerian Stock Exchange (NSE), only 5 are primary agricultural companies [12]. These are Ellah Lakes Plc, Gromnel Inds. Plc; Livestook Feeds Plc; Okitipupa Oil Palm Plc, Okomu Oil Plc; Presco Plc;

[15].

This indicates that agriculture

in Nigeria suffers acute shortage of mainstream private sector capital. Underlying the poor quality of private sector participation in agriculture is the fact that the Nigerian agricultural is the 10th most capitalized sector in the NSE [1]. This simply means that it is obvious that the state of private sector participation and investment in agriculture does not give the picture that agriculture is a highly prioritized economic sector in the country. It is against this circumstances that this study set out to emphasize, analyze and evaluate the role of private sector participation can play in the agricultural development

process. This has become necessary, since one of Nigeria's objectives is to become one of the twenty developed economies of the world by the year 2020.So it is important at this point to examine the concept of public-private partnership (PPP) as it affects agricultural productivity and the factors militating against its popularity and adoption in Nigeria.

THE CONCEPT OF PRIVATE-PUBLIC PARTNERSHIP Public-Private Partnership (PPP) has entered both theory and practice of developmental cooperation in many forms. A PPP represents collaboration, defined by contract, between a public and a private sector. The partners’ contributions complement each others in ways that enable both partners to achieve their goals more efficiently within the given PPP than on their own. Each partner formulates clear goals and communicates them to the other. The PPP enables the private partner to pursue their economic goals (such as profitably and opening new markets) and the public partner their development policy goals (such as sustainability and poverty reduction) as the case may be

[6].

Both the public

and private sector benefit in one way or the other - a form of “symbiotic” relationship so to speak exists. PPP, according to the Nation al Council of Public-Private Partnership (NCPPP) [7], involves "a contract between a public-sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operation risk in the project." And it combines the efficiency of private firms and organizations with the trust-worthiness related to a public enterprise. The United State Department of Federal Highway Administration relates[7] that a PPP reduces public capital investment; improves efficiency due to strong profit incentives, create specialized expertise; expedited project completion by grouping multiple responsibility into a single contract; relieves

government

from

staffing

issues

and

share

risk

and

responsibility.

PPPs are becoming popular in the sphere of implementing infrastructural projects all over the world for its awesome benefits. If tailored and applied on the Nigerian agricultural sector it would lead to additional supply of funds for development projects, allow agricultural

researchers to increase their skills, creating a good environment for promoting agricultural research findings and enable knowledge exchange and identification of new research areas.

A General model for implementing a PPP This include several process and stages, they include generally the following;  identifying and negotiating the common interest  financing the solution  regulatory/contractual and legal issues  choosing an organization design/scope based in the above  operative partnerships  evaluation and terminating partnership (if applicable)

SOURCE: Hartwich, F.J.A (2007). Building Public-Private Partnership for agricultural Innovation. Food security in practice technology guide series. Washington, D.C

In practice, PPP can take a wide range of forms; a development agency combine its knowledge with that of a private company in order to realize a joint project; a company already - financing a project and seek support collaboration between a private company and the government of a country. Depending on the situation, the scale of a PPP can vary considerably, ranging from infrastructural projects worth millions down to small scale rural project emerging from personal relationships [1] In rural areas, PPPs can take particulars directions;`  Improvement of some conditions with the aim of attracting investment.  Improvement of production (cultivation systems, market access and others). In both cases, sustainable use of rural resources should be a main objective.[1] The role of the private sector in agricultural development is defined as a core issue by a growing number of institutions, such as the UN Commission on the private sector and development (WBCSD), International Business Leaders Forum (IBLF), World Economic Forum (WEF) and others

[1].This

is as a result of the rapid growth and development observed in sectors in the

economy where the principles of PPP have been applied. Several national development agencies have launched their own initiatives to promote closer collaboration with the private sector in their respective countries. The German Federal Ministry of Economic Cooperation and Development (GMECD), for example, introduced a programme to promote PPPs as early 1999. The United State Agency for International Development (USAID) has founded a "Global Development Alliance" to promote implementation of development projects in collaboration with the private sector [1] ANTI-PPP TENDENCIES The need for the private sector to take on more responsibility in the fight against poverty in Nigeria by being involved in developing the agricultural sector is widely acknowledged. However, several reasons account for the low quality of private sector involvement in agriculture. They include the high risks and uncertainty that is associated with agriculture production as a result of low effective demand, poor agricultural infrastructure, lack of clear property right and land security, low market development and high cost of agribusiness in Nigeria.[1] Furthermore, the policy environment has not been clear, stable and favourable. This is the outcome of long years of industrialization strategy focused more import substitution; enclaved manufacturing sector, dependence on imported raw materials and poor linkages between industry and agriculture. Critical private sector involvement are also constrained by the inadequate supply of highly skilled and motivated agricultural enterprise managers and low quality of output from the agricultural training and educational institutions. Land tenure and property rights problems hinder private sector investments in the agriculture. This prevalent system embodies disincentives for moving agriculture from subsistence to market oriented production, the problem is worse in the south, where land is used by the family, and the inheritance system perpetuates fragmentation of land holdings.

Population pressure in the south amplifies the restrictions. In the north, the lack of ownership right (land belongs to the community) creates a disincentive for long term investment. That is, the will of the community can change anytime respecting the use of the land. Land acquisition is complicated, creating a poor climate. The government owns extensive land and bureaucracy over land issue is excessive, titles to land are hard to obtain; and in some cases multiple titles exist. Despite these critical objections and obstacles in the agro-economic system of Nigeria, PPPs are gaining grounds. At present, they are clearly more widespread, particularly in urban areas. PPPs in agriculture are still rather uncommon, although the increasing opening of agricultural market clearly provides a potential. Current policy thrust on promoting greater private sector involvement in agricultural sector and in the overall economy has tremendous merits. This will sustain a rapid, broad based GDP growth outside the oil sector by realizing that agriculture is the major vehicle for economic diversification. [1] REASONS FOR INCREASING PRIVATE SECTOR PARTNERSHIPS IN THE NIGERIAN AGRICULTURAL SECTOR The quality of private sector investment in agricultural sector is virtually the lowest among all economic sector of Nigeria. Yet Nigeria requires high quality agricultural investments to break the cycle of low productivity, low efficiency and low returns to resources

[1].

It simply means that partnership with the private sector is needed for the

solution to the problems facing Nigeria's agricultural system so as to return it to its past glory, hence the need for private investments in agriculture. The AIAEfurther stated

[1]

that such

investments include human, material financial and institutional capital. Increased productivity cannot be achieved without more efficient technologies and inputs, market systems that encourage production, institutions that guarantee favourable investment climate for agriculture; and enterprise management system that are dynamic and are geared towards commercial and profit oriented goals. Central to these imperatives is a modern, highly skilled and dynamic entrepreneurial functioning workforce. Nigeria needs

new kinds of agricultural entrepreneurs, labour force and private sector investors to transform agricultural practice into a modern economic system.[1] Limited government financial means is not capable to of producing these required improvements. By collaborating with the private sector; the state can make use of technical knowhow otherwise not available and will lead to increase project or programme sustainability and efficiency by the private sector. In view of the worldwide opening of markets, developing countries, like Nigeria, should be interested in agricultural investments that will allow them to gain access to such international markets. And large corporations and companies are seeking to open new markets and are therefore interested in sharing the knowledge and networks of developing countries. One way the government can show a sign of seriousness in all this is to first of all increase the budgetary allocation given to agriculture. And when this is combined with private investments, among previous enumerated benefits, would go a long way to curtail the brain drain of qualified expert and researchers. Most senior executives in agriculture are rather focused in research in foreign countries. And the younger generations have their attention diverted elsewhere as they are not seeing a career in agriculture a likely path that would lead to greener pastures.

KEY ISSUES IN PRIVATE SECTOR PARTICIPATION IN AGRICULTURAL DEVELOPMENT IN NIGERIA A house of Intellectual Properties One major problem that might face PPP is that of intellectual property (IP). It boils down to finding answers to the questions like: If the various participating bodies (government, farmers, investors) decide to come together for a sustainable agricultural partnership, who would be the owner of the findings and results, and determine how they are to be handled?

For instance if in a PPP, a new disease-resistant variety of maize is developed would it be allowed to be in the public domain – available to the public or farmers or would the private sector or even the government want to retain ownership through patenting. The later especially with the private sector, seems to be the common practice as patenting is how most agricultural corporations prefer to make profit. It is usually thought that IP enables them to protect their rights to use their innovations. Sometimes, though rarely, farmers or farming communities might also want to keep some production techniques to themselves instead of sharing – in an effort to protect local knowledge (especially when such knowledge is believed to have been transferred from one family generation to another). Nevertheless any IP policy that would be developed should be balanced and ensure all the parties to the partnership play an active role in formulating and enacting it. So the aims of an agricultural PPP, which include improving food quantity, nutritional quality and the overall agricultural productivity of the country, are achieved. And should not be an avenue to stifle the farmers or any other agent in the agricultural value chain.

Farmers, the key The farmers (or farming communities) make up the linchpin of any agricultural PPP; the role they play would go a long to determine the success or failure of the PPP. So when developing a PPP in agriculture it is very important to always take the interest of the farmers and their indigenous knowledge into account. If committees are set up to discuss and formulate the framework of the PPP, it should comprise the farmers or farming associations that represent the interests of the farmers - and indigenous communities when available. When such structure is not put in place, the farmers sidelined, it may lead to the failure of the whole partnership - because the farmers are the primary stakeholders in agriculture. A good example to buttress the point that no player in a PPP should be taken for granted

(especially the farmers) is that of the “Agropyme” project in Honduras. In 2001, a PPP involving the Honduran government (through its Ministry of Agriculture), some private partners (Swisscontact, Helvetas, Fintrac etc) and a group of 30 independent melon farmers was formed - the “Melon Export Project” - through its Agropyme Programme.[6] It was aimed at exporting melons (canary and water melons) that are competitive in the international market, due to the high international demand for high quality melons especially from Europe and the USA. The PPP project resulted in increased export rate (97%), increased stable and temporary jobs (72% and 20% respectively). In 2002/2003 season, the local farmers felt that they were being cheated by the exporters after they found out they were underpaid - by noticing relatively higher local and regional prices. So they decided to sideline the partnership agreement and market their produce themselves locally during in next season reducing the amount sold to exporters. This led to project lasting just one season before crumbling.

Genetic modified organisms, any change? Another issue that would be of paramount importance to an agricultural PPP would be that of the use of improved organisms (crops and animals) or local ones. This is pertinent now that the apprehension surrounding the use of bio-technologically modified foods in the country is skyrocketing. Since increased production is one of the benefits of a large-scale PPP project, private investors would want every means to make profit and might secretly indulge in the use of non-certified agricultural inputs. So effort should be made by the PPP partners, that the public is enlightened and kept abreast of the given methods of crops and animal improvement being opted for by the agricultural PPP project.

RECOMMENDATIONS The inevitable relevance of agriculture to meaningful national development (has been exposed by this study) cannot be over emphasized. Agriculture accounts largely for the food needs of the country, and its contribution to employment is overwhelming (as it accounts for over 60% of employed individuals in the country). Yet the sector surfers neglect, which is expressed in terms of the fluctuating and low percentage allocation to the sector from the national budget. The study gives the following recommendations in order to enhance the involvement of the private sector in the agricultural development projects in Nigeria; 1. Policy re-engineering: There should be definite policy strategies – channeling and growing domestic private sector capacities towards large scale farming and agro-based investments. Federal state and local government councils should aim to provide the right policy environment and enabling incentives to cause greater quantum and higher quality of private in the sector. Making the policy environment right entails measures to remove the bottlenecks that hinder private sector involvement in agricultural investments. 2. State support: The Federal and state government should cooperate by instituting a number of measures and incentives to attract the private sector to agriculture. Some of the ways to do that include offering long term tax breaks for investors in agro processing, full foreign exchange earnings though product export should be retained by the investors allocating large tract of land on long term lease (20 – 25 years) depending on the requirement to develop the land (community). 3. Past reflections: in order to place current policy thrust in perspective it is important to examine the past experiences in promoting private sector involvement in agriculture in Nigeria. This will provide lessons to guide current effort, help avoid

mistakes of the past and enlighten stakeholders on the challenges associated with private sector investments in agricultural and agro-allied sector.

4. Prioritization: Agriculture should be placed on government top priority list such that its position within the sectoral allocation could be substantially enhanced. Conscious effort should be made by government at all levels towards increasing budgetary allocation to the agricultural sector. Agriculture need to be strengthened in terms of budgetary allocation in order to enhance the quality of agricultural input - improving national development as whole. In addition government should put in place a monitoring mechanism to ensure that the allocation to the agricultural sector are applied as intended – to guarantee good result. 5. Local (Rural) integration: Irrespective of the fact that he greatest percentage of agricultural (farmable) lands in Nigeria are in the rural area, the quest for a greener life in big cities have led to great rural-urban drift of young persons. These young persons from the major labour pool require for the optimum functioning of any agricultural system. One way this trend can be curtailed, and before long reversed. This is for government (plus its private partners) to ensure that PPP projects are cited in rural areas across the country. As this would, create equal socio-economic benefits for rural dwellers in relation with their urban counterparts. This might in turn lead to the development of such rural area; basic amenities would become available – improving the lives of the people.

CONCLUSION This paper is to the view that monopolization of the agricultural sector by the government was a hindrance to the maximum/quantum involvement of the private sector in form of booth private individuals and organizations. Which led to a “scaring away”, so to speak, of potential private foreign and domestic investors from the agricultural sector thereby making them invest in other sectors of the economy and prospective jobs also were eliminated in the process. This paper underscores the fact that the neglect of agriculture (even as a provider of basic human needs) has led to ripple effects in other socio-economic sectors. The shadows of textile processing, oil palm processing, rubber processing factories and the likes all over the country can tell a good supporting tale. Hopefully the Nigerian government would take the bull by the horn by increasing private sector participation in agricultural sector. Especially now, that there is an increasing need for the diversification of the economy and the eradication of poverty.

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13. Warner, M and Kahan, D (2008) Market-Oriented Agricultural infrastructure: appraisal of public-private partnership. FAO, London. 14. SPORE No.161 (2013) Public-private partnerships, a fair deal? (Wageningen) Technical Centre for Agricultural and Rural Cooperation (CTA): pp4, 5. 15. Http://www.africa-markets.com/en/stock-markets/ngse/listed-companies.html [accessed on 20/07/2013]

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