Since the outbreak of (COVID-19) in November 2019 in Wuhan, China, the virus has spread to 213 countries and territories around the world. As of 5th June, 2020, there has been 6,714,335 cases recorded with 393,408 deaths (11%). In Africa, about 4,583 deaths recorded; Asia-32,255 deaths; America -107, 029 deaths; Europe, 177 161 deaths; and Oceania, 131 deaths.
The pandemic has continued to reshape global economies, worsening market dynamics, especially import/export trading, particularly shipping and transport of raw materials for manufacturing companies and other essential services. On daily basis, the virus is drastically reshaping the existing interdependency among countries in the world. The development has clearly shown that there is a looming economic crunch that will strike countries across the world.
Since mid-March 2020, the USA has reportedly lost 20.6 million jobs, resulting in an unemployment rate of 14.7%, (USA Today). In the UK, around 7.6 million jobs, representing 24% of its workforce, are at risk of losing their jobs. In Africa, AU report has projected 20 million job losses in the continent, shrinking by 0.8% while up to 15% for foreign direct investment (FDI) could be withdrawn. However, World Bank has warned that the sub-Saharan Africa’s economy could contract by -2.1% to as much as -5.1% in 2020.
Nigeria in view
In 2019, agriculture contributed about 22.12% to the total Nigeria’s nominal GDP. It points to the fact that economic activity that increases the productivity, profitability and the life of farmers will definitely expand and stimulate socio-economic growth and development, including food security. Experts and research institutes have made different projections regarding impending acute hunger. The International Food Policy Research Institute has projected that an extra 148 million people will fall into extreme poverty if the world economy contracts by 5% in 2020. It has been estimated that 200 million across the world could be rendered unemployed while over 140 million people could fall into extreme poverty, and consequently escalate food insecurity, (ILO). In the same vein, The United Nations World Food Programme has also cautioned that a projected 265 million people could face acute food insecurity by the end of 2020. The Nigerian economy is ranked as the 27th-largest economy in the world in terms of nominal GDP, and the 24nd-largest in terms of purchasing power parity. This is could be better, considering the size of the population and human and natural resources at our disposal. The time has come for a substantial paradigm shift in all sectors of the economy. Irrespective of the different projections that have been made, it is clear that food shortage would be part of the impacts of post Covid-19.
Therefore, for Nigeria to attain food safety, it must expand its agricultural mechanisation programme. It is, therefore, imperative that government should formulate policies that will change the narrative by strengthening the private sector mechanization. This will significantly increase the country’s nominal GDP. Since 2010, the country has been on the race to develop its agriculture sector and ensure food security. Although some laudable initiatives have been achieved, there are still more to be done, particularly to close the gap in the area of agriculture mechanisation. Findings have shown that more than 62% of Nigerian agriculture is dependent on human labour, 26% on animal labour and less than 5% on mechanisation. There is no gainsaying that agriculture is the largest employer of labour in Nigeria. More than 75% of the rural population depends on agriculture as a means of livelihood. Employment in agriculture in Nigeria was reported to have reached 36.38% in 2019 (World Bank, 2020).
Unfortunately, Covid-19 pandemic has dealt a big blow on the source of cheap labour as a result of the restriction placed on intercontinental trading and services. Migrant workers, particularly those in the agro business, are among the group of people being seriously affected by the pandemic. Consequently, different countries around the world are taking different steps and strategies with a view to curtailing the situation and thereby stabilising their economies. The country’s unemployment rate, put at an alarming 23.1%, and is being projected to reach 33.5% in 2020 (NBS, 2019).
Government’s past and current efforts
The $1.1B agriculture mechanisation programme
Stakeholders agree that mechanisation is the pivot of agriculture revolution as seen in the case of India and China, and it has remained the fastest tool to pull people out of poverty. In January 2019, Nigeria and Brazil signed a US$1.1billion agricultural mechanisation programme that covers the entire agricultural value chain. The programme was designed as “a combination of service centers where technical capacity and training will occur to the local assembly of tractors and other machine and processing centres, where agro processing will be done”. “As a policy issue, we were clear that without mechanisation at the bottom of the Agric pyramid in Nigeria, we would not be able to make the quantum leap in agriculture production capacity and create high quality Agric and agro allied jobs,” (Professor Osinbajo, Vice President of Nigeria).
The programme, tagged Green Imperative, according Finance Minister, Zainab Ahmed, was designed “to develop Nigerian agriculture based on a sustainable private business model through a food value chain approach, involving a full technology package transfer that will cover all stages, from agricultural production to industrial processing and marketing.” The project would be implemented largely by the Brazilian government.” In other words, the greater percentage of this loan would be provided through the supply of agricultural machinery and implementation in the form of Completely Knocked Down parts, CKDs. This arrangement is expected to reduce the fiduciary risk and create more employment opportunities for the youth.
Need for a paradigm shift
While the Covid-19 is increasingly ravaging global economies, it has also resulted in US dollar scarcity. The Naira equivalent of the loan facility at the time of negotiation was N396 billion currently, with depreciation, it could be over N495billion. This implies an additional increase of N100 billion which is more than the value being spent on the CBN’s Anchor Borrowers Programme. It suggests that there is need to renegotiate or put the deal on hold. Nigeria cannot afford such colossal loss at present. It is also very important to note that the equipment cannot meet up with this year farming season, while the dollar may well have been stabilised by the time the equipment eventually arrives.
It is safe to assume that the primary objective of government for going for a mechanisation loan is for the expansion of access to all farmers who are the primary source of food production for home, and raw materials for industries. It can also be assumed that one other objective of government is to expand the technological capacity of the country. If the above assumptions are logical, then the question is: “Can we achieve our objective in the long term by exporting the jobs and technological industrial growth opportunity made available by the sheer size of market?” It should be noted that local assemblers and manufacturers that are just reviving, will be negatively impacted by the massive importation that may even lead to loss of skilled manpower. It is obvious that Nigeria needs at least 150,000 tractors to be at par with other countries. However, injecting large number of tractors all at once will not create market shocks, maintenance challenges, back-up limitations and, consequently, the challenges of capacity for management. Government must consider empowering local industries to enhance sustainable development of capacities for benefit indigenous industries.
The need to expand local capacities
As Nigeria strives to stimulate its economy with foreign loans, it must not be done at the expense of the growth and development of its local manufacturing. It is unfortunate that most foreign loans from China and other countries are tied to patronage foreign industries to the detriment of industrial growth at home. Quoting Organisation for Economic Co-operation and Development, (OECD) “Beyond the immediate response, recovery strategies should include a strong structural component to reduce dependence on external financial flows and global markets, and develop more value-adding, knowledge-intensive and industrialised economies, underpinned by a more competitive and efficient services sector. Effective implementation of the African Continental Free Trade Area (AfCFTA) and the African Union’s productive transformation agenda can strengthen regional value chains, reduce vulnerability to external shocks, advance the digital transition, and build economic resilience against future crises.” It is a fact that the economic effect of the pandemic would stay for a long time. However, Nigeria’s speedy recovery from the shock would be contingent upon its willpower to take advantage of the situation by developing, growing and strengthening its local manufacturing in every sector of the economy, particularly the agriculture sector.
Investing in the real sector
The Arab oil embargo of 1973 and the subsequent oil wars (gulf war) brought about major policy changes by subsequent administrations in the United States. The implementation of those changes and consistent strategy helped to limit the US dependency on foreign supply, using all tools available to stimulate production that led to the growth in the entire US energy sector, and the shale oil boom brought the US back to being an oil sufficient nation.
Today, we need similar policy in agriculture that will stimulate production and increase profitability across board. The opportunities that lie in mechanisation are enormous. Mechanisation will, in addition to reducing drudgery, become a vital factor for sustainable growth and increase production which will in turn stimulate other sectors. The new world order demands that governments patronise local industries. This will help to catalyse growth in the real sector, in the manufacturing, create jobs and develop local capacity. As much as government is making efforts to stimulate the economy, using foreign loans, it is important to invest such loans to stimulate real production like manufacturing that will bring tremendous and sustainable growth to the economy.
The contributions of a private sector driven mechanization which come with a better efficiency and effectiveness can be summarized thus
- Stimulates production: Agriculture remains one of the sectors that provides the largest employment opportunities. Hence adequate investment in mechanised farming will not only result in rapid increase in production, but also increase farming operations, jobs creation and efficiency.
- Promotes and strengthens key sectors: Apart from being a great source of employment, agriculture provides raw materials for producing finished products in other sectors, especially the manufacturing sector. This stimulates infrastructure development.
- Strengthens financial institutions: Banks and other financial institutions provide credit or loan facilities for farmers towards increased production that will increase overall to GDP.
It is imperative that government invest heavily in its local economy, particularly in the agro and manufacturing sectors. This will not only drive productivity to meet local consumption, but also transform the sector drastically to commercial agriculture and thereby attract investors and contributes to the national GDP. This is very important at this crucial time. The need to expand the capacity of local manufacturers and service providers cannot be overemphasised. We must aggressively promote local products or allow local businesses to supply the equipment. Various local associations in the agriculture and manufacturing sectors should be financially supported in all ramifications.
Also, SMEs should be strengthened. They account for 96% of businesses and 84% of jobs in the country, contributing about 48% of the national GDP (Nigeria Bureau of Statistics). We must seize this opportunity to develop every aspect of our economy, particularly agriculture and manufacturing. The emphasis is for government to empower the private sector more with its ability for sustainability and efficiency.