While Doing Business bases its evaluation of the ease of starting a business on the steps involved in registering a domestically-owned, limited liability company in a major urban center, the issues involved in the successful launch of a new agricultural enterprise can be more complex. Issues affecting a new agribusiness range from the immediate to the long-term and impact the ability of an enterprise to not merely join the formal sector, but in fact launch a sustainable concern.
In agriculture production, an operator must consider the underlying availability of land, labor, capital, and productive technology. Favorable and cost competitive access to these production factors is necessary, but not sufficient. Additional requirements for a successful agricultural enterprise include supporting infrastructure, organized and accessible markets, dynamic entrepreneurs and skilled management, and investment. Agribusiness is largely characterized by high volume and low margins. Scalable ventures require long-term vision and investment combined with excellent strategy execution for success.
The issues affecting the sustainability of a new agribusiness are organized in this chapter into three primary areas:
· On-farm productivity
· Product organization, transformation, and management
· Consumer markets
In Nigeria, agribusinesses face challenges in each of these areas, despite having had a robust agribusiness sector in the past.
“Up to the mid-1960s, the country’s share of world agricultural exports was more than 1 percent. Nigeria had a leading position for several of its export crops, supplying more than half of all traded palm kernel, more than a third of all groundnuts, and more than a fifth of all palm oil. However, agricultural exports collapsed as the economy shifted towards petroleum exploitation, and by the mid-1980s Nigeria’s world market share for agricultural products had dwindled to less than 0.1 percent. None of the country’s export crops, with the exception of cocoa, commands any significant world market share today.
The poor performance of Nigerian export agriculture was to a considerable extent the result of changes in incentives that farmers were facing. Public neglect of agricultural infrastructure, erratic changes in agricultural policies, and distortions in the exchange rate regime combined to create an economic environment that hampered agricultural producers, while at the same time burdening consumers with high food prices. More than half of all Nigerians continue to live on less than one US Dollar per day (FOS 2005), and the poverty incidence exceeds 60 percent in rural areas, where people overwhelmingly depend on agricultural activities for their livelihood. Hence, getting agricultural incentives right is of utmost importance not only for fostering economic development and growth, but also to directly fight poverty.”
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The four BizCLIR components (legal framework, implementing institutions, supporting institutions, and social dynamics) are addressed separately in each of the subsections below, and recommendations are specified for each as well.
[1] Wlkenhorst, Peter, “Distortions to Agricultural Incentives in Nigeria,” World Bank Group. December 2007
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