Smallholder formers’ fortunes grow in banks’ outgrower programmes interventions

By Onome Amuge

• FCMB’s Babban Gona‭, ‬Psaltry‭, ‬PIL initiatives making a difference

In February 2017, famine was declared in South Sudan and Nigeria was mentioned, alongside Ethiopia, Kenya, Somalia, and Yemen, as countries with a high risk of a similar condition. The situation turned grimmer when the 2020 Global Hunger Index ranked Nigeria 98th out of 107 countries surveyed, with a score of 29.2. This placed the country among the top 40 countries facing serious threats of hunger.

The two developments, capped by the geometric increase in the country’s population growth compared to low food production, threw stakeholders into a scramble for ideas to prevent famine in Nigeria.

As of 2016, Nigeria’s food demand was 243,168,942 metric tonnes and this is expected to average 335,100,918 metric tonnes in 14 years at the pace of the population growth, which is currently estimated to stand between 206 and 208 million tonnes.

Over the years, different governments have come up with several deliberate efforts and initiatives to stimulate growth of the agricultural sector and improve production, including initiatives such as Operation Feed the Nation (OFN), Green Revolution, Lower River Basin Development Authorities, National Agricultural and Land Development Authority (NALDA); and the Directorate of Foods, Roads and Rural Infrastructure (DFFRI). While they had some impact, these programmes have not been able to adequately address the challenges or bring about sustained change in the sector, especially in the case of food security.

Despite playing an essential role in the farming system, especially in sub-Saharan African countries like Nigeria where they represent more than 80 per cent of all farming activities and provide up to 98 per cent of the food supply for most crops, smallholder farmers possess small-scaled plots of land where they grow subsistence crops and one or two cash crops, relying almost exclusively on family labour. These farmers are besieged with challenges including, plot sizes, limited access to markets, lack of sustainable inputs and finance, which makes smallholder production unprofitable. As a result, they are often caught in a cycle of producing low-yielding, low-quality crops barely enough for domestic consumption.

To assuage some of these challenges, agricultural companies and key private sector players in Nigeria’s agricultural sector have paid close attention to supporting smallholder farmers in traditional cash crop sectors such as cotton and maize, and developed smallholder out-grower schemes to source raw materials in recognition of their importance in the global agricultural value chain. These out-grower schemes, which allow companies to provide agricultural inputs (and sometimes, training) to farmers and then buy the produce at the end of the season under some form of contractual arrangement, have also been developed – often with donor support – in a wider range of value chains, including food crops, livestock, and natural products. 

The out-grower scheme has also been designed to address numerous sustainable agricultural objectives by bringing smallholder farmers into mutually beneficial partnerships with large aggregators or processors and increasing incomes by improving yields and produce quality through training, access to credit and markets.

To promote and initiate sustainable development in the out-grower schemes and agricultural sector as a whole, financial services and solutions providers in Nigeria have in recent times, committed a lot of effort and facilitated innovative infrastructure. Most notably, significant impact has been achieved by some financial institutions through the provision of credit facilities to out-grower initiatives targeted at helping smallholder farmers to maximize their yields, while also contributing to the nation’s development.

A case in point is the partnership between First City Monument Bank (FCMB) and Babban Gona (meaning “Great Farm” in Hausa language), an award-winning, financially sustainable, and highly scalable social enterprise, partly owned by the participating farmers. Through the Babban Gona Agricultural Franchise Model supported by FCMB, member farmers received training, credit in the form of agricultural input and tillage services, harvesting and marketing support that resulted in increased productivity and profitability that is two to 2.5 times the national average.

The programme, which started with just 100 farmers, currently has over 20,000 member farmers and today, signifies one of FCMB’s most significant commitments to the development of the agricultural sector.  Similarly, the bank has reportedly intervened with various initiatives and support to the agricultural sector and has supported over 100,000 farmers in Nigeria to boost food production and foster financial inclusion through its various cutting-edge schemes and partnerships with individuals, groups, and other stakeholders in the agriculture sector.

FCMB has also worked extensively with Psaltry International Company Limited (PICL), an indigenous agro-allied company established in 2005 to market cassava produce. With support from FCMB and other stakeholders, Psaltry’s robust out-growers’ programme has grown to more than 2,000 farmers cultivating within 80km radius from the factory in four different local governments in Oyo State. With funding from FCMB, Psaltry’s Sorbitol Production Plant, with a capacity of 6,000MT per annum, is expected to meet 60 per cent of the country’s 10,000 tonnes annual sorbitol demand.

FCMB is also working successfully in partnership with Plantation Industries Limited (PIL), a leading cocoa processing company that engages in the processing and conversion of raw cocoa beans into cocoa liquor, cocoa butter, cocoa cake and cocoa powder. This GFSI Markets Award recipient has a modern processing plant with the capacity to process over 15,000 metric tonnes of raw cocoa beans per annum. The raw cocoa beans are sourced from suppliers and also directly from cocoa farmers with emphasis on quality control. Under the Anchor Borrowers Programme, FCMB supported 1,424 outgrower farmers that rely on PIL for offtake.

Speaking on the development efforts and importance of the bank’s support to various out-grower programmes, Kudzai Gumunyu, divisional head of agribusiness, FCMB, noted that through its relationship with partners such as Babban Gona, Psaltry and many others who have set up robust out-grower programmes, the bank has been able to provide smallholder farmers with tillage services, fertilizers, as well as extension services.

Analysts and experts opine that with the achievements of FCMB and the actualisation of similar agribusiness interventions by other Nigerian banks, Nigeria’s financial institutions will be well positioned to create more opportunities for farmers to add significant value to the quest of Nigeria to attain food security and wealth for the nation.