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Saving poultry sector with FMN, other backward integration strategies

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There is increasing attention to producing agro-allied products locally to sustain food security and enhance good nutrition, especially if the talk about ending hunger and reducing poverty in Nigeria is to be achieved.

With a focus now on home-grown alternatives to achieve this purpose, it may not be long before the nation begins to witness a drive towards sustainable processes that ensures local agro-industries become pivotal to the country’s entire agricultural value chain.

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Experts have reiterated that meticulous and phased implementation of the Backward Integration Policy (BIP) of the Federal Government would not only boost local content utilisation, import substitution but also enhance job creation potentialities of agro-allied industries, increase the Gross Domestic Product (GDP) and ensure food security and industrial growth.
 
Restriction of over 45 commodities in the foreign exchange window by the Central Bank of Nigeria (CBN) to minimize importation of products and raw materials months back is aimed at encouraging the policy for industries that are investing in locally-made solutions. 
 
In agriculture, BIP is already boosted by the CBN by forcing stakeholders, particularly in agriculture, to look homeward in sourcing raw materials through intensification of cultivation, the productivity of farmers, and out-grower schemes.

In the palm oil industry, industrial crude palm oil users such as Presco, Okomu, DUFIL, and JB Farms, which mostly process palm oil and palm kernel oil into edible and industrial vegetable oils, have invested in the cultivation of more plantations to reduce the import of the palm oil, which the CBN puts at $500 million yearly.

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Also, Flour Mills of Nigeria (FMN), through Agri Palm Limited, has invested in the crude palm oil. The Agri Palm production initiative is geared towards closing the gap to ensure Nigeria becomes sustainable in oil palm production. The Agri Palm development sites are spread over three locations: Agri palm 1- Iguobanor and Iguiye; Agri Palm 2, Usen LGA; and Agri Palm 3 in Owan South LGA of Edo State.

Agri Palm in Igobanor and Iguiye make up phase one of development. The company’s investment initiative, once in full capacity, is projected to fulfill 25.3% of Nigeria’s Crude Oil Palm production gap. A plus for Nigeria.

In animal feeds and processed foods, maize and soybeans are critical raw materials, and their production locally has remained inadequate for a long period for several reasons. Hence, experts said deepening local production, in the long run, to close the demand gap is inevitable.

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To play its role, FMN’s 10,000-hectare farm in Kaboji, Niger State, acquired since 1978, supplies inputs to its subsidiaries such as Premier Feeds and Northern Nigeria Flour Mills (NNFM) Plc and serves as a model for cultivation of maize and soybean in a completely developed value chain.

According to FMN, “Our objectives at the farm include primarily producing maize and soybean using quality inputs, world-class management practices and showcasing the potential of commercial agriculture. With the support of our out-grower schemes, the model farm supplies maize and soybeans, which provide raw material supply to our feeds milling operations in Ibadan, Kaduna, and Calabar.”

Over N15 billion has been invested in the sub-companies supporting its value chain linkages to accelerate backward integration. These companies have the combined capacity of employing about 2,000 direct workers with an additional 10,000 indirect workers through the out-grower schemes. 

Premier Feed Mills is the leading animal feed producer in Nigeria and consistently ensuring utilisation of local raw materials except during shortage in supplies. FMN acquired the company in 2008 and consequently founded Premier Feed Mills Co Ltd, manufacturer of the leading Topfeed brand in Nigeria, with factories in Calabar, Kaduna, and Ibadan, off-taking animal feeds inputs from contract out-growers. To solve the challenges of feeds by fish farmers, a fish feed-producing plant was established in Ibadan in 2013 with a production capacity of 18,000 metric tonnes/year. Again, locally sourced inputs are used, sustaining the local production process.

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All of these investments by some of Nigeria’s local firms, analysts said, should be encouraged and supported by a friendly environment so they can fully embrace and deepen crop industrialisation using the BIP to grow and diversify the economy.
 
Soaring demand for maize, others
Over the last several months, there has been a critical imbalance in the demand and supply of maize in the country, which could have a spiraling negative impact on the wider economy. The impact could be as widespread as to affect farmers, jobs, growth potential and by implication, GDP.

Nigeria’s macroeconomic environment is a fertile ground for maize production expansion, a crop that most players in the livestock industry depend on. Production of poultry and fishery, in particular, piggery and other livestock, in general, would be seriously imperiled without maize.

Demands for maize and soybeans have outgrown production in Nigeria. Food and industrial demands for maize are estimated by the US Department of Agriculture, Foreign Affairs Service, at over 18 million metric tonnes yearly as of 2019, while locally produced maize was estimated at over 12 million tonnes.

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As a matter of fact, Africa’s largest producer in Nigeria, followed by South Africa, Egypt, and Ethiopia. Africa imports 28% of its required maize as most of the maize production is done under rain-fed conditions with limitations.

According to FAO (2017), the total maize harvest in Africa was estimated at 40 million hectares, with Nigeria being the top producer (16%). In 2019, maize production for Nigeria was 11,000 million tonnes. In Nigeria, production increased from over 1.3 million tonnes in 1970 to over 11 million tonnes in 2019, growing at an average annual rate of 6.89%.

One area that has remained underdeveloped in Nigeria’s agro-industry is the animal feed sector. The underproduction and underdevelopment are largely due to high production costs, among others. 70 per cent of the operational costs of most poultry, aquaculture, and other livestock operations go to feeds. Nevertheless, the animal feeds sector, estimated at more than $2 billion, continues to attract significant local and foreign investments in large-scale feed mill operations.

For most poultry farmers, roughly, 60 per cent of production goes to animal feed while other commodities utilized in lesser amounts in feeds have included groundnut, sorghum, other cereals, and fats and oils. The current year has recorded the highest cost of maize in Nigeria, in the region of N180k to N200k per tonne. This increase is coming from a pre-COVID price of N80-N90k in March, which coincided with the conclusion of the harvest. The increase has been attributed to the current pandemic, the Boko Haram insurgency, and the spread of fake fertilizer brands.

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The rise in maize price necessitated a one-off emergency supply of maize to supply the poultry and fish industries. Hence, both industries are facing a challenge of near collapse due to scarcity and the high cost of maize. Many feed millers have significantly cut back or stopped production for lack of this commodity.

One of such interventions being President Muhammadu Buhari’s approval for the release of 5000mt of maize from the nation’s Strategic Grain Reserves to the Poultry Farmers Association of Nigeria (PAN) and the one-off license to four firms to import 226,000mt using their technical advantages to distribute to feed mills across the country.

To qualify for the one-off import license, the four firms were able to prove their capability to handle the logistics and smooth operations of the import and distribution of 262,000 mt of maize in a fairly narrow window. These companies include WACOT, CHI Farms, Olam, and Premier Feed Mills.

The urgent intervention by the CBN is significant and timely as poultry and fish farmers must make commercial decisions today on whether to continue growing their poultry and fish stock which have gestation periods between 60-180 days to maturity leading to the end of year period which is a peak sales season. The animal protein and feed sectors in Nigeria employ millions all over the country largely in the form of MSME.

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Poultry, fish, and eggs make up the primary form of protein provided to the nation. By making this one-off, emergency supply, the organised poultry, and fish sectors could continue to be supplied with raw materials until harvest season when supply would become abundant and prices should moderate.

Industry watchers said it was apposite to restrict importation to these four companies because they have an adequate storage capacity in or around the ports of Lagos, Port Harcourt, Sapele, and Calabar to manage the quick off-load from vessel and storage, and the handling, bagging, and distribution of the maize to different parts of the country within the next 45 to 60 days.
 
In addition to providing feeds, it also directly provides maize to 30-50 other members of the PAN.

Mr Adewale Adeniyi, Sales Director Animal Care, said: “The ones that were imported are already available, even though there were some complaints that it was only foreign companies that were given the license to import, but I’m of a different opinion.

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“Did any of the local operators or local stakeholders apply and was not given? I’m definitely not aware of any. Then do we have any that has the capacity to bring in a shipload? I don’t think so. Do they have the handling facility?”

Another industry player, Mr Frank Ikemefune, MD of Rainbow Feeds, Sapele, said: “We buy from those that have been allowed to import, mainly multinationals, they have the money and we don’t have, they also have the facilities to import and receive and they are selling to us.”

Managing Director, Hybrid Feeds, Dr Leye Alayande, Kaduna, also said: “For now maize imports have been highly impactful because at a point before the importation, there was a drastic drop in supply and a high demand gap from the feed millers and it really made the price of feed to skyrocket. Our company accessed from WACOT and that has brought our production back to the full capacity of 1,000mt per day in all our plants.”
 
Chairman of Premium Farms Abuja, Mahey Rasheed, said permitting four firms to import has brought back life to the sector.

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National President of All Farmers Association of Nigeria (AFAN), Kabir Ibrahim, said: “It takes more than the government to take decisions on what needs to be done. The poultry industry itself should be able to come up with its total requirement of feed and other inputs. And since it is a business concern, it should know whether it is able to meet those needs from in-country and where it discovers that there is a shortfall in the country, it should make it very obvious to the government that all these things are not available, this quantum is not available, so the government can allow guided importation if need be to meet that shortfall.”

Meanwhile, the President of PAN, Mr Ibrahim Mam, affirmed that the poultry industry had suffered losses caused by the restriction of movement of goods and services, which included eggs, Day-Old-Chicks (DOCs), poultry feeds, and other essential inputs for poultry production.

“That the price of maize went up from N95,000 per metric tonne to N165,000 in June 2020 compounded the challenges of the poultry sector, which the government release of 5,000 tonnes of maize at subsidized prices could not alleviate, as maize is currently selling between N145,000 and N160,000 per tonne as against the price of N85,000 per tonne this time last year,” he said.    

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Hence, PAN and experts have suggested that to save the country from the demand crisis, the government must allow the immediate importation of soya beans and maize into the country as a stop-gap measure to mitigate impending doom in the poultry industry, while implementation of import substitution should go on and the total ban on maize should be programmed and done strategically to encourage local manufacturers.
 
Along with the government, giant corporates are in the frontline to make a consensus to curb the scarcity of maize for sustained poultry production. The gap created by the ban on importation of the crop initially had an adverse effect on the industry, but recent steps taken to bridge the shortfall through importation and intervention by companies to leverage BIP is​ a​ welcome development.
 
The government has taken notable steps in agriculture to protect the lives and livelihoods of citizens amid the coronavirus outbreak, it is the hope of players that the BIP policy could have a silver lining in reshaping the local industry’s potential to support greater food security, thus paving the way to efficient food systems.
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