INTRODUCTION OF GUARANTEED MINIMUM PRICE (GMP) IN NIGERIA AGRICULTURE by lnd15050

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									       INTRODUCTION OF GUARANTEED MINIMUM PRICE
              (GMP) IN NIGERIA AGRICULTURE


    A PAPER PRESENTED BY DR. S.A. INGAWA, EXECUTIVE
   DIRECTOR, NATIONAL FOOD RESERVE AGENCY, AT THE
  SEMINAR SESSION OF THE 2009 NATIONAL AGRICULTURAL
       SHOW ORGANISED BY NATIONAL AGRICULTURAL
   FOUNDATION OF NIGERIA HELD BETWEEN 13TH AND 14TH
     OCTOBER, 2009 AT NATIONAL AGRICULTURAL SHOW
            GROUND, KARU, NASARAWA STATE

Protocol


      I am delighted to be invited to deliver a paper at this National

Agricultural Show. First, let me salute the organiser of this Seminar

(National Agricultural Foundation of Nigeria) for your keen interest on

an issue which is challenging experts and policy markers on how to

combat the current global food crisis. It also interest me to note that

the organiser of this year agricultural show is not only supportive on

the attainment of food security for the nation, which is one of the key

7-point agenda of Mr. President, but also mobilising Nigerians to

focus their investments in agriculture.

      It is no more news that agriculture is the mainstay of Nigeria’s

economy, as it is known to employ more than 60% of the country’s

labour force and provide the economic subsistence to about 80% of

the population. Regrettably, the agricultural sector is finding it more
difficult to play the crucial role of not only ensuring self-sufficiency in

the food needs of our Nation, but also serves as a major source of

foreign exchange. Past administrations have put in place several

policies and initiatives to bring back the lost glory of the sector.

Unfortunately, these policies and initiatives were geared towards

improving production either through increasing yield per hectare or

increasing the hectarage under cultivation.         These various past

initiatives pay little or no emphasis to other aspect of agricultural

value chains like processing, storage, marketing etc.          Thus, any

initiative plan towards increasing output must anticipate marketing

constraints that will arise from greater output.

      The past arrangement in the agricultural produce marketing left

much to be desired.      For example, the defund Buyer of the Last

Resort (BLR) does not guarantee remunerative producer prices vis-à-

vis effective management of both local and/or external market of

agricultural produce.    To achieve this, the present administration

introduced the Guaranteed Minimum Price Scheme (GMP).

       Guaranteed Minimum Price Scheme is a price support

mechanism that will ensure farmers obtain fair prices for their

produce. It is a pre-determined remunerative price the farmer will get

for a given unit or measure of his produce. Nigerian farmers are

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often forced to sell their produce immediately after harvest at prices

that are below cost of production due to the need to meet immediate

financial obligations, lack of storage and processing facilities as well

as the perishable nature of their farm produce. The poor returns on

investment due to these various challenges farmers face in the

production and marketing of their produce is seriously affecting their

ability to produce above subsistence level. A guaranteed minimum

price, apart from enabling the farmers to plan their production, gives

them the assurance that the price guaranteed for the year will not be

influenced by aggregate quantity produced by the entire farmers or

the time of sales.

  An effective GMP will ensure that farmers get remunerative price,

keep him in business, improve his income livelihood and alleviate

rural poverty.       The scheme will improve agricultural sector’s

contribution to GDP, promote income redistribution in favour of the

poor, ensure food security, promote quality assurances, increase the

demand     for   Nigerian   agricultural   produce   both   locally   and

internationally as well as reduce rural-urban migration.

      To arrive at the GMP, the production and other value chain

budget for each crop is determined. The elements considered are

land rent, land clearing, land preparation, seeds, agrochemicals,

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planting,   weeding, fertilizer, fertilizers applications, harvesting,

threshing and bagging, cost of transportation, handling and cost of

fund (5%). Yield per hectare is used to determine average cost per

metric tonnes.    A 20% return on investment is put as mark-up,

otherwise know as profit. The final figure is tagged GMP, which is

believed to have provided and guaranteed income to the farmers.

      There are some basic elements and infrastructure that must be

in place before we can have an efficient and effective GMP. Some of

these are an effective Marketing Information System, availability of

adequate fund, the statistics on demand, supply and production cost

must be realistic, buyers or markets must be close to the farmers

(collection centres), there must be enough storage facilities as well as

legal framework for all stakeholders to have confidence in the

scheme.     It is also necessary for farmers to be organised into

cooperative to make procurement easier and cost effective.

      At the on set of this scheme in 2008, most of the parameters

and infrastructure listed above were not in place.        But, Federal

Government decided to jump start the scheme with a view to,

overtime ensure provision of necessary infrastructure.      In order to

give the scheme wide publicity, Federal Government advertised last

year for expression of interest by the would-be Licensed Buying

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Agents (LBAs).     Majority of those who applied did not meet the

minimum requirements for appointment as LBAs.              Their main

constraint was the availability of warehouses and quality control

equipment. This notwithstanding, Federal Government commence

the scheme with the available structures on ground and provided

some basic technical assistance to the appointed LBA’s to enable

them deliver.    They were required to procure various grains and

cassava products at earlier announced GMP. A fee, which serves as

commission, was paid to these LBAs.      As   a   way     of   ensuring

adequate support and provision of infrastructure to the scheme, we

have commenced construction of 75 units of 2,000mt capacity

Community Warehouse and an additional 20 silos with combined

capacity of 1,025,000mts at various locations in the country. This is

to provide adequate storage facilities for the scheme. Also, one-stop

agro service centres are to be constructed in all Local Government

Areas of the Federation.       At these centres, Information and

Communication Technology (ICT) facilities will be provided for the

education of farmers on produce prices, best farming practices and

the use of improved agricultural inputs which will lead to increase in

production and quality of the produce.    Quality control facilities will

also be provided at all these centres. Adequate funds have been

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provided in the 2009 year budget for the implementation of the

programme.

      With all these infrastrcuture in place, the long term objective is

the development of a national produce warehousing practice that

would enable a robust warehouse receipt finance system collaterised

by farmers produce stored in the warehouse. Financial institutions

would be involved to provide financial liquidity to farmers and LBAs

against their produce, thereby enabling them to sell their produce at

the time they will have optimal returns.   Efforts is being put in place

to back this with the required legislation of the National Assembly so

as to ensure its recognition by the Central bank of Nigeria and the

financial institutions.

      By early next year we intend to undertake a publicity and

sensitisation of the scheme.    This is to create awareness on the

scheme for effective participation of all stakeholders in order to

ensure improved production, better farming practices and the

evolution of a fully developed commodity exchange that would

provide an organised market for agricultural produce.

      Ladies and gentlemen, I want you to join me in saluting this

Foundation for their past efforts and the new programmes being put

in place to showcase Nigeria’s agricultural potentials and products

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through this Agricultural Show. Let me also seize this opportunity to

request the National Agricultural Foundation of Nigeria to assist in

mobilising farmers into co-operative groups, educate them on best

farming practices and promotion of Federal Government policies on

agriculture especially the major shift from the current subsistence

nature of agriculture to mechanised agricultural production, storage,

processing and marketing.

     I also want to employ every one here present to key into the

various special interventions introduced by the administration of His

Excellency, President Umaru Musa Yar’Adua.              The Special

Intervention Fund he provided can only be meaningful when all hands

are on deck to ensure revitalisation of our agricultural sector. Our

Guaranteed Minimum Price Scheme will always ensure that you

make profit on any agricultural business.

     Once more, I congratulate you for a well organised fair.

     God bless you and I thank you all for listening.




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