Value Addition - Driving the Success of Nigeria's Local Producers

Food Producers with their products at the PHSB Workshop (2021)
for Stay-At-Home-Women in food business held by Mrs. Saudat Salami

In the late 1990s, I established one of my first businesses, a food processing company that specialized in packaging and processing spices and food condiments such as crayfish, locust beans, palm oil, Egusi, Ogbonno and others. I started this company after realizing that the supermarkets in Lagos only stocked imported spices and that local spices and condiments could only be obtained from open markets. My company successfully supplied packaged condiments to major supermarkets in Surulere, Lagos for a few years, before I launched another company, Easyshop Easycook. This experience opened my eyes to the untapped opportunities in the industry and the potential for job and wealth creation through developing the value chain by promoting the sector. Despite some progress, this sector remains largely untapped even after more than 25 years.

Thirty Six Foods Chocolate

Promoting the growth and development of local producers in Nigeria's food industry is critical to the country's overall economic and social advancement. Agriculture is a key sector in Nigeria's economy, employing a significant portion of the population, estimated at around 35%. In fact, agriculture contributes more to the country's GDP than even the petroleum industry. Given these important contributions, it is crucial to encourage value addition among small local producers in order to enhance their wealth and improve their standard of living. By supporting local producers, Nigeria can not only drive economic growth but also support the well-being of its citizens.

Value addition is the process of transforming raw materials into finished products that have higher value in the market. In the agricultural sector, this involves converting raw agricultural materials into processed products, such as cocoa into chocolate. The benefits of value addition for farmers, the economy, and small producers are substantial and can be seen across Nigeria today.

Loshes Chocolate

 One of the key benefits of value addition for farmers is that it increases their income. For example, many Nigerian, Kenya and Ghanaian companies have started processing cocoa into cocoa powder and chocolate; companies like Loshes Chocolate and Thirty Six Foods Chocolates are a few of them.  The sale of a ton of raw cocoa beans generates less revenue than the sale of a ton of chocolate. By processing their cocoa into chocolate, they earn more money and improve their livelihoods. This increase in income also helps to reduce poverty in rural areas and leads to the development of more sustainable farming practices.

 
Value addition also benefits the economy by creating jobs and increasing exports. The production of processed agricultural products creates jobs in manufacturing, packaging, and distribution. This helps to reduce unemployment and contributes to the growth of the economy. Additionally, by exporting finished products rather than raw materials, countries can earn more foreign currency and improve their balance of trade.

Ady's Foods Mart

 According to a study by the Central Bank of Nigeria, the value addition of agricultural products has led to a significant increase in the earnings of farmers in the country. The study found that the value addition of agricultural products in Nigeria increased by 12% between 2015 and 2020, contributing to a 20% increase in the average earnings of farmers during the same period. This highlights the positive impact that value addition has had on the agriculture sector in Nigeria and demonstrates the potential for further growth and development. Additionally, the study found that value-added agricultural products, such as processed food, accounted for over 60% of Nigeria's total agricultural exports, further emphasizing the importance of value addition in the sector. These statistics highlight the significant role that value addition plays in improving the earnings of farmers and supporting the overall development of Nigeria's agriculture sector.

 

Xtar Kitchen Sauces

One of the main benefits of processing raw ingredients into finished goods is preservation. For example, turning tomatoes into Sauces, ketchup, puree or juice allows for the tomato to have a longer shelf life and be used throughout the year. Tomato Jos based in Kaduna, Nigeria is one of the new companies in this sector. The company started with farming tomatoes and later went on to producing their purees. When raw tomatoes are harvested, they have a short shelf life and can quickly spoil if not used or processed promptly. However, by processing the tomatoes into other products, they can be stored for longer periods, reducing food waste and ensuring that they are available for use when needed. This not only benefits consumers but also helps to increase the income of local producers as they can sell their products for a longer period of time and to a wider market.

Timdol Snacks

 
Another area is producing local snacks, spices, condiments, oils and
other products that can generate significant income for women and youths in Africa. Most of our local condiments and snacks are still being produced traditionally and have still not been packaged in forms that can make it to our supermarkets or exported abroad. According to a study by the African Development Bank, women are often involved in the production of these goods and make up a significant portion of the informal economy in Africa. This means that by producing and selling local snacks, spices, oils and other products, women can create new income-generating opportunities for themselves and improve their financial stability.

 Many things hinder value addition of raw produce, affordable technology, access to capital and infrastructure are some of the major issues. Solving these problems can help local producers to standardize their processes and improve their bottom line by increasing efficiency, improving production capabilities, and supporting business management and competitiveness. By providing access to capital, investing in technology and infrastructure, governments and organizations can help to spur economic growth and support the development of local producers.

 

BCF Oils and Flour

Another way to help the sector is building industrial hubs. An industrial hub can play a crucial role in supporting local producers by providing access to technology, infrastructure, and resources that can help to standardize their processes and improve their bottom line. Industrial hubs can also provide local producers with access to training and resources that can help to improve their business management skills and increase their competitiveness. This should be well situated as the location of industrial hubs is determined by a variety of factors, including the availability of natural resources, transportation infrastructure, access to markets, the availability of skilled labor, and government policies and incentives. The location of an industrial hub should be chosen based on the needs of the industries it will serve, such as proximity to raw materials or access to shipping ports.

 In addition to these factors, the cost of doing business and the quality of life in the region should also be considered, as these can impact the ability of businesses to recruit and retain employees. The availability of infrastructure, such as power and water supplies, should also be considered when selecting the location of an industrial hub, as these can have a significant impact on the competitiveness and viability of the businesses in the hub.

 Finally, we need regulation and standardization to compete and this is where NAFDAC comes in. NAFDAC can help small producers in Nigeria by streamlining regulations, providing technical assistance and training, offering incentives and support, and partnering with other organizations to provide resources. This can help to reduce the administrative burden on small producers and ensure that they are able to meet regulatory requirements and grow their businesses, promoting the growth and development of the food industry in Nigeria while ensuring food safety and quality.

Participants at a PHSB Workshop (2019) for women
in food business held by Mrs. Saudat Salami

Boosting the earnings of local producers in Nigeria's food industry is essential to the country's overall economic and social advancement. By encouraging value addition and supporting small farmers, we do not only drive economic growth but also improve the livelihoods of those in the agriculture sector. Investing in affordable technology, infrastructure, and industrial hubs can help standardize processes and increase competitiveness, leading to a more robust and thriving food industry in Nigeria. By working together to support local producers, we can ensure a bright future for Nigeria's agriculture sector and the well-being of its citizens.