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.

E-commerce and the Future of Food Security in Africa

 

My effort to address work-life challenges of working professionals by creating an e-commerce platform for their shopping needs revealed the need to view Easyshop Easycook as not just a tech platform but a crucial player in the agriculture value chain. The challenge of delivering fresh produce to the customer successfully highlights the necessity of partnerships with farmers across Nigeria and the need for better infrastructure.

It is evident that e-commerce companies like Easyshop Easycook play a crucial role in expanding market reach for farmers, allowing them to connect with customers globally, broadening their customer base, and boosting their income. This is particularly significant for small-scale farmers who face limited access to local markets and resources for traditional sales channels. Our partnership with the World Bank and the Ministry of Agriculture in Lagos on the APPEALS project, Oxfam and other partnerships we have continues to support this stance.

E-commerce not only expands market access but also decreases transaction costs and minimizes adulteration. By cutting down on middlemen in the value chain, e-commerce platforms decrease business expenses for farmers and increases their profits restoring trust in the system. This is especially relevant in Africa where high transaction costs and contaminated goods pose significant trade barriers and hinder farmers from reaching markets and receiving fair prices for their products.

Food security is a critical issue in Africa, where millions of people lack access to adequate nutrition and suffer from hunger and malnutrition. The agricultural sector is a crucial part of the solution, providing food and livelihoods for millions of people across the continent. 

The agricultural sector is a vital part of the African economy, employing more than 60% of the population and contributing to over 30% of the continent's Gross Domestic Product (GDP). Despite its significance, the sector faces numerous challenges, such as limited access to markets, low productivity, and limited access to finance. In recent years, e-commerce has emerged as a potential solution to these challenges, offering farmers in Africa new opportunities to increase their income and connect with customers.

According to the African Development Bank (AfDB), e-commerce has the potential to transform the agricultural sector in Africa by improving market access and reducing transaction costs. In a recent report, the AfDB found that e-commerce could increase agricultural productivity by up to 25% and reduce transaction costs by up to 60%. These benefits are particularly significant for small-scale farmers, who often struggle to access markets and finance.

Despite these advantages, e-commerce adoption in the African agricultural sector remains low. According to the AfDB, only 5% of African farmers are currently using e-commerce platforms to sell their products. This is due to a number of barriers, including a lack of infrastructure, limited access to technology, and a lack of awareness of e-commerce opportunities.

To overcome these barriers and increase e-commerce adoption in the African agricultural sector, there are several key infrastructure components that need to be in place at the farm end. These include:

Reliable electricity and Storage- Farms need to have access to reliable and affordable electricity in order to power the technology needed for the sourcing process. This includes refrigeration and storage systems to keep produce fresh, as well as computers, printers, and other technology to manage orders and shipments.  

Internet connectivity - A dependable internet connection is vital for maintaining communication with farms, executing orders, and overseeing supply chain logistics. This internet connectivity also gives farmers access to market data and information, enabling them to make informed decisions on crop selection and sales timing. Many farmers today cultivate crops based on readily available seeds from government agencies rather than market demand.

Transportation - A robust transportation infrastructure is crucial for transporting produce from farms to e-commerce companies. This can encompass a combination of road, rail, and air transportation, and may also entail the establishment of logistics centres and cold storage facilities to preserve produce freshness during transit. While it is encouraging to see investments in cargo airports and rail in Nigeria, further action is required to ensure that farm roads are suitable for and accessible by logistics companies.

Packaging and labelling - Proper packaging and labelling of produce is vital for food safety and maintaining quality standards, which is imperative for e-commerce companies. Standardized packaging and labelling systems that conform to international food safety norms must be adopted. Currently, there are several states using various local measuring methods such as bowls, baskets, tubs and cups, which cannot be accepted as standard units of measurement in e-commerce platforms.

Traceability and transparency - Maintaining a clear and comprehensive record of the journey of agricultural produce from the farm to the customer is essential for ensuring the transparency and traceability demanded by e-commerce companies. In order for these companies to meet international food safety standards, farmers must have accurate documentation covering each step of their farming process; which needs to be enforced by relevant agencies.

The issues in this sector present clear investment prospects for the private sector, but not all challenges can be addressed through monetary means. That is why we have more investment in FinTech than in E-commerce or AgTech. It's important to acknowledge the limitations of market-based solutions and collaborate to resolve the complex issues that cannot solely be solved through financial means. This necessitates a comprehensive approach that brings together government, communities, and individuals to work towards a shared objective. This also encompasses reducing obstacles for e-commerce startups, enhancing intellectual property protection, and expanding financing options for farmers and other industry players.

The growth of e-commerce has greatly influenced the agriculture industry in developed nations, leading to more efficient processes, lower expenses, and higher revenues for those involved in the sector. African countries can benefit from these examples by investing in necessary infrastructure, enhancing the business environment, and highlighting the advantages of e-commerce, which can result in increased food security and economic expansion.

 

Tackling Food Waste in Nigeria with E-commerce

Nigeria, a land of vibrant culture and rich history, is facing a major problem of food waste. Despite the fact that tons of food go to waste daily, many people still struggle to access food. However, there is a solution that can tackle this issue and save money for all. 

Online grocery delivery companies, such as Easyshop Easycook and other e-commerce businesses, are leading the fight against food waste. These companies provide a platform for fresh food to be delivered directly from the farm to the table, saving produce from being wasted on the farms or in wholesale markets due to infrastructure challenges like bad roads, lack of storage facilities and affordable cold chain vehicles. 

These delivery companies use various platforms, including websites, mobile apps, and social media, to connect farmers with consumers. They not only tackle food waste but also create jobs, empower people, add value, and create wealth through e-commerce. Small business owners who source directly from farmers have also become processors or manufacturers, eliminating food adulteration and offering easy-to-cook local foods. 

Food waste is a major challenge in the agriculture supply chain in many African countries. Although the number of businesses in this sector is increasing, they face infrastructure challenges that make operating expensive. Addressing this requires government intervention, community involvement, and a collective effort. 

E-commerce can play a significant role in reducing food waste by improving supply chain efficiency and reducing the amount of surplus food that goes to waste. One way e-commerce can do this is by connecting producers with consumers in real-time, allowing for more accurate forecasting of demand and reducing the amount of produce that is over-grown and goes unsold. This helps to ensure that food is produced and sold in a timely manner, reducing the risk of spoilage and waste.

Furthermore, e-commerce companies can play a role in reducing food waste by promoting more sustainable and conscious consumer behavior. For example, some e-commerce companies like Easyshop Easycook offer customers the option to purchase products in bulk, reducing packaging waste and allowing customers to only purchase what they need, reducing the amount of food that is wasted at the household level. E-commerce can also help to promote food waste reduction by making it easier for consumers to access surplus food from farmers and food producers, reducing the amount of food that is left unsold and ultimately discarded.

According to the Food and Agriculture Organization of the United Nations (FAO), up to 30% of food produced in Africa is lost due to inadequate storage, transportation, and marketing systems. By providing farmers with access to new markets and reducing food waste, e-commerce has the potential to increase the availability of food and improve food security in Africa.

As Nigeria takes advantage of the African Continental Free Trade Area agreement, it is crucial to recognize the role of the fresh grocery delivery companies in the agricultural value chain. Supporting them is vital to reducing food waste, creating wealth, and ensuring the success of the agreement. Whether small or big, these companies are essential to a thriving agriculture industry and must be supported to succeed.