INTERVIEW: Why Nigeria gets too little from $2.7 billion ginger market despite being world’s second largest producer

Dairy Hills Chief Executive Officer, Kelvin Emmanuel, in this interview with PREMIUM TIMES highlights reasons why ginger farmers in Nigeria are benefitting less from the $3 billion global ginger market even when Nigeria is the second highest producer of the commodity globally. Most of the world’s ginger are produced in India, Nigeria, China, Indonesia and Nepal, according to World Mapper. Mr Emmanuel said Nigeria exported $12 million worth of ginger in 2021 (523,000 metric tonnes), which represents 14 per cent of the global supply for ginger, but he believes Nigeria could earn more if that volume is converted into ginger oil (through steam distillation). Ginger oil is used as flavouring agents for beverages, confectionery and perfumes. Mr Emmanuel said Nigeria exports highly valuable agricultural commodities such as ginger and cocoa among others at a giveaway rate and then spends billions in importing back their refined products into the country. He said the Europeans buy ginger from Nigeria at $2000 per tonne and get 35 times the value processing it into ginger oil. Ginger is one of the healthiest herbs and important spices used for pickles and preservatives. It is available in different forms such as raw ginger, dry ginger, bleached dry ginger, ginger powder, ginger oil, ginger oleoresin, ginger candy and more. The “Global Ginger” Market is expected to reach $4.8 billion by 2027. Excerpts: PT: What are your views about Nigeria’s current state of importation and exportation of agricultural products? Kelvin: The challenge with Nigeria is that currently it has about $48 billion total import bill, about 20 trillion naira, about 6 per cent of that is imported from the U.S. — mostly cars, then about 12.1 per cent of that is imported from China. So we have a situation where Nigeria takes out raw materials and then buys it back at four-five times the cost. For example, the ratio of import to export between Nigeria and China, Nigeria exports $2.54 billion worth of goods to China. Nigeria brings back about $12.4 billion worth of imports from China. So, you take cassava for example out of Nigeria to China; dried cassava flakes because you can’t export wet cassava. Cassava has 48 hours of shelf life after you remove the cyanide while harvesting until it starts to rot. So you dry the cassava flakes and then you export it to China. You can produce valuable products from cassava. You can produce industrial starch from cassava and you can produce high-quality cassava flour from cassava among many others. Of which in debates, the Senate currently has a bill before it asking for cassava flour to be made as a mandatory input in the formula composition for flour in Nigeria. So we have a situation where we take out raw materials to process, then bring it back to Nigeria for four-five times the cost. This is the problem. This happens to millet, this happens to sugar, and this happens to sesame and shea butter. Nigeria has a huge output of shea butter, in fact, Nigeria has the highest output of cassava in the world. Twenty per cent of all the cassava in the world is from Nigeria. Why are we not getting the value for cassava? For instance, the total aggregate market for industrial starch in Nigeria which is used for everything from confectionaries, beverages to pharmaceuticals, is about $600 million. The five companies that process cassava into industrial starch, they only address 10 per cent of the local market demands, 90 per cent is imported from the other parts of the world. So the question is, why is the government not working with companies to set up more factories that can process cassava into industrial starch that could serve the market in Nigeria? You see, the first solution to addressing the quagmire with our exchange rate is that a lot of people are under the false impression that the Central Bank of Nigeria can just wave a magical policy and then the Naira will be strong again, it can’t. A structural challenge with the currency which is backward integration, that is the first solution. You have to serve your local market first because every single thing you export that you don’t process into the secondary and tertiary level of the value chain, you have to import it back to Nigeria. Take milk for example, Nigeria has a total aggregate market for milk of $1.6 billion on a yearly basis. Nigeria currently is only able to meet up with 13 per cent of that demand, which means 87 per cent is imported from Europe. So, the question is if you export milk out of Nigeria, first fresh milk through cold storage, you have to bring it back as milk powder for children, or condensed evaporated milk, you have to bring it back. There was a time when Nigeria was importing milk into Nigeria and they said one is foreign and one is Nigeria, I mean this is a country where we are. So, there is no value in exporting raw materials if you are going to bring back the finished raw materials at four to five times the cost. That is, when you have a trade deficit, the current deficit between Nigeria and China is between $ 10.4 billion because we export 2.5 and we bring back $10.7 or $10.8 billion worth of goods. PT: Apparently, you feel there are existing opportunities that Nigeria’s subsistence farmers growing these commodities are not plugging into. What do you think needs to be done? Kelvin: Well, you see for the subsistence farmers who are either alone or outside of any communities, cooperatives or associations, there aren’t more opportunities for them, unfortunately. Infact if you look at the ginger market for example which has most of the output in Kaduna and Kano States, mostly in southern Kaduna, they will tell you that the farmers are not getting up to $1000 per metric tonnes. The question is, where is the money going? The middlemen. So you have a situation where the middlemen buy from the farmers at a peanut amount, export it, making more money than what the farmers are making. That is it. These farmers don’t have the knowledge and the capital to go from the primary level or to even store what they produced to make sure they are not exploited because if you produce a perishable product like tomato, if you don’t sell it off within days, it will go bad and will be useless. If you have cold storage facilities that can store most of those perishable crops that are produced, it is easy for them to negotiate a higher bargain with the off-takers. But the off-takers take advantage of them, especially the middlemen because they don’t have enough storage facilities and the wherewithal for them to be able to do it. For example, it is the work of the Central Bank of Nigeria’s development finance department that controls the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and the Bank of Industry. Even though I have been a critic of that programme’s agricultural interventions, because in my opinion, I don’t think a direct intervention is the solution to the problem. I think the model should be for them to work with the financial institutions through third parties which are the credit guarantees company, so that the issuance assessment and assumption of risk to share by both financial institutions and third parties that exempts the government. Because what you have is you have a lot of loan loss provisions in the balance sheet of the Central Bank of Nigeria right now for direct interventions programs of agriculture. That affects Nigeria so much.So, the solution is to work with private sectors and financial institutions to ensure that funding gets to the companies and cooperatives that are qualified and have the technical capacities to be able to add value to primary produce that they get from their farms. PT: Let’s zero it down to ginger production. What are those things across the ginger value chains you think Nigerian farmers are not doing enough to earn more from the global market? Kelvin: Well, I don’t know if they don’t understand the value chains and if that is the question, or the question is they understand the value chain and they don’t see the need to put focus attention there, because the reality of the situation is that like I said Nigeria does about 523,000 metric tons and controls about 14 per cent of the global supply. Last year they imported about $64 million worth of ginger oil, and exported for $12 million of raw ginger. Now look at the ratio between $12 million export and $64 million import of ginger oil. This is not even taking into question the ginger powder, this is ginger oil mostly used for perfumes, confectionery and beverages flavouring agents. For you to process ginger into ginger oil first it needs to be dried, this requires industrial machines. And you see, the local means of making ginger into ginger oil is not tenable and the reason why it is not tenable is because the demand for ginger oil on an industrial scale and the use of ginger oil for industrial manufacturing and production process demand certain levels of quality specifications that it has to go through based on the International Standard Organisation (ISO). There are certain levels of the global certifications standard and quality specifications that can only be achieved if the ginger is processed through the industry. The average person in Southern Kaduna using the traditional method of processing ginger into ginger oil can never meet those specifications. Which is the major reason why when they go to the market with their traditionally processed ginger oil companies don’t want to buy it. So, this is the work of the government, Bank of Industry, and NIRSAL to go in and see the companies and cooperatives they can work with, by providing them with single digits loans with two to three years moratoriums, training and supporting them to produce. This is backward integration! PT: In specific terms, what are those things you think the ginger farmers as it stands now need from the government in order to plug into these opportunities you are talking about? Kelvin: The ginger farmers need to form cooperatives. They can’t succeed as individuals, they need to coalesce into cooperatives and work with NIRSAL. NIRSAL has a credible guarantee scheme where they provide counterpart funding. They need to work with the Bank of Industry and in some cases, they need technical partners in cases where they don’t have the technical wherewithal or ability to go through the secondary and tertiary levels of the value chains. They need to work with a partner and see how they can set up a technical distillation plant that partners with them that can process fresh ginger and first convert it into dry ginger and then into ginger oil and ginger powder which are some of the derivatives of ginger as a commodity. The important thing is there has been this talk in Nigeria about increasing export, increasing export and for me, my opinion in a lot of areas export is not the solution to increasing net dollars that comes into Nigeria, if you increase the quantity of the export and you don’t increase the quality of the export it’s a problem. For example, you can see that in crude oil. Nigeria doesn’t know that outside of the premium motor spirit comes gasoline oil, dual purpose kerosene and aviation fuel (Jet A1), they are actually other derivatives of crude oil. People don’t realise this, people feel that these are the only derivatives that you get from refining crude oil. There is petcoke for example, it is a sand that you get from refining crude oil used to produce all the aluminium-cans used for your can-drinks. The can-drinks you take, the aluminum can, are gotten from petcoke and petcoke is a derivative from crude oil. You have your liquified refineries gas for example which is also your LDG, there are also four to five derivatives outside of there is also between binders asphalt. So for me it’s not about just increasing the quantity that goes out of Nigeria, it is about investing in the industries that will power the processing of these raw commodities into derivatives to first serve the local market because for every export you take out of Nigeria, I can assure you Nigerians are bringing back the finished products at four to five times the cost. So who loses? PT: Some experts say Nigeria’s ginger is highly valuable in the international market, but what do you think Nigeria is not doing properly to gain more from the ginger international market? Kelvin: The problem is basically that the farmers are not getting the value because they are middlemen who take it from them. The second problem is that we don’t understand how to process ginger as a fresh commodity (raw commodity) into different derivatives that are internationally certified. Like I spoke about how people who produce ginger traditionally into ginger oil powder usually don’t get it scale through the European Union quality standards because they don’t understand that there are international standards for nearly all manufactured commodities, and unless that raw commodity goes through industrial equipment, it can never meet up to international standard. So if you process ginger into ginger oil in Abuja or Kano for example, traditionally, it is most likely not to scale Nigerian Agricultural Quarantine Service, and all the tests that you need to do before you go through ship and go out of Nigeria. They will turn it back, because it doesn’t meet the international standards. Like I said, the reason it doesn’t meet is because it is not processed with industrial equipment. PT: In simple terms, do you mean we are not able to export refined ginger oil even when Nigeria alone is contributing 14% of the ginger global market like you earlier mentioned? Kelvin: We are not. What we are exporting is the raw fresh commodity, either as a fresh ginger or dry ginger, that is what we are exporting. We are not exporting the derivatives like the internationally certified ginger powder or ginger oil. We are only exporting the raw ginger derivative. PT: We understand that your company is into dairy feeds or so, how is that going? Kelvin: Our company is building a manufacturing business to process corn and soybean into poultry feeds. We have been working since 2020. It is a very long tedious process. In the second quarter of 2023 our first production line will begin. PT: Are there any significant roles that ginger plays in feed production or feed formulation? Kelvin: Well to be honest with you, for animal feed ginger does not have any specific use. But it does for beverages and confectioneries. For pharmaceuticals, ginger is actually like a formula composition, but for animal feed ginger does not have any role. Ginger doesn’t have any role in standard feed composition because the Standard Organisation of Nigeria and NAFDAC already have a standard formula for feed production for pet feed and for animal feeds (livestock). For poultry for example, the feed formulation is 54 per cent maize and 16 per cent soybeans, then you have other composition inputs like groundnut cake, sunflower and all forms of vitamins and amino acids. The problem with livestock feed is the lack of maize and soybeans. For example, Nigeria consumes about 16 million tonnes of maize every year and our output currently is only about 11.5 billion tonnes so we have a shortage of about 4.5 million metric tonnes yearly. For soybeans, Nigeria also has about a 28 per cent shortage in production output. For maize, the reason for the maize shortage is because even before the Russia-Ukraine war started, the president banned the importation of maize and restricted it to only five companies by granting them import waiver. The exchange rate also made it really not economically (viable), making it impossible for companies to be able to import maize even if they have import waivers. The insecurity in the north forced a lot of people out of the farms so that cut down the production of maize and now with the whole Russia-Ukraine situation, the lack of access to potash which is the major component of processing NPK fertilisers has skyrocketed the cost of a bag of fertiliser from N12,000- N13, 000 sometimes last year and now is N26,000- N28,000 this year. So, these are the reasons for the shortage of output for maize and soybeans which are the two primary inputs for the processing of poultry feed, and that is the reason why the price of a bag of feed has skyrocketed from like N2800 to like N7,500 and above now. PT: In terms of the value addition for ginger, what are those specific things Nigeria needs to put in place to benefit more from the million dollar ginger market? Kelvin: I think the issue is not so much with the primary production of ginger. I think we are covered so much in that area. The issue is in the second layer of the value chain, the government needs to work with the Federal Ministry of Industry Trade and Investment, the North-East Development Commission (NEDC), Federal Ministry of Agriculture and Rural Development (FMARD), NIRSAL, and the Central Bank of Nigeria. They need to work together as a team to see companies and cooperatives that they can support that are interested in setting up steam distillation plants and processing facilities to process raw ginger into ginger powder or ginger oil. That is what the focus should be. PT: What are your views about Nigeria’s agricultural policies, specifically the Anchor Borrower’s Program policy? How effective do you think this has been with the Nigerian farmers? Kelvin: I think the Anchor Borrower Program policy has not been successful because of the fact that the CBN has a lot of loan loss provisions from defaults to the loans, and this is because it gave out those loans with the understanding that they are high-risk loans to people who don’t have a particular collateral in case they are not able to pay back , the collateral is there to pay for their default. Central banks are not designed to give out loans, they are not deposit money banks or lending institutions. Central banks are regulatory banks and legal last resort for the government. They set monetary policies and they work with fiscal authorities to ensure that there is price stability and they keep inflation in check. These are the primary objectives of the central bank. They are also the issuer of currencies into the financial system. A situation where Godwin Emefiele has championed direct intervention and the CBN has basically taken over the role of the Federal Ministry of Agriculture and Rural Development. I don’t even know who the minister is because they have done such a poor job. And they have not coordinated the fiscal authorities to ensure that they put the right financial structure and make sure that the money given is actually given to the right people on the ground who need the money. In my network of commercial farmers, I can’t count about 2 or 3 people who have gotten that money from the CBN. I can’t because you will always be hearing N200 billion, N300 billion and they are like asking: “who is getting this money”? Are they ghosts? So one of the challenges is that there is a lack of agricultural machinery, tractors, combine harvester, trucks, harrowers, ploughing, ridge, boom sprayers and there is a lack of bulldozers. Diesel is at N900 per litre. It will take you around 150-200 litres to do land opening for one day. If you buy a 150-litre diesel today you will spend about N140, 000 on diesel alone. How many people can afford that? To rent a bulldozer for a day you need N120,000 depending on the location. Now, this is the work of the National Agriculture Land Development Agency (NALDA). But the question is if I call NALDA today to come and open land for me, will they come? That is the question: if they won’t come, how will I fund land opening? How do I fund machinery to be able to prepare land for planting because that is the first step? And the small farmers who have only N70,000 or N100,000 to buy seeds and chemicals and maybe one bag of fertiliser can’t afford it. So they work with the one or two to four plots they have. This is the reason why production output of maize and soybeans is so low, there is also the issue of the fact that the local varieties of seeds that they plant, actually does a fifth of its potential. For example, the average variety of seed is between 6 and 8 metric tons per hectare, the low is just 1.72 metric tons per hectare. The farmers can’t afford the hybrid seeds, they can’t afford to buy fertiliser at N26,000 per bag, they can’t afford the chemical, pesticides, insecticides and herbicides, they cannot afford it. This is where the government needs to come in to work with the private sectors to create invoice factoring and invoice discounting to the cooperatives that need it, and provide the loans to the commercial companies that are into direct commercial farming and agriculture. So, in ways to achieve this industrialisation of agriculture is to either remove the duties and levies in importing agricultural equipment like tractors and all the attachments or bring those parts into Nigeria, assemble them in Nigeria and create a drive for mechanizing agriculture. Also create a national irrigation policy to see that farming is not just done in the wet season, there is dry season and rainy season farming. If there is a rainy season you use the rain and when it is dry there is irrigation to help. These are the issues. PT: So recently the FG said they are introducing this Hello tractor, I don’t know if you have heard about it. Kelvin: Yes I have. PT: So what’s your perception about the initiative? Kelvin: The question I want to ask is, on the ground, can I call hello tractor to come and do land preparatory for me? That is the question? Because you can come up with all these fancy programmes, do excellent PowerPoint presentations, organise a conference, do a lot of white paper. What is the effect on the ground? What are the monitoring and evaluation, and what are they feeding to the minister and the Federal Executive Council? Because as far as I know, the people on the ground are not getting the support they need. So the work that the government has is to cut out as many white elephant people in between (middlemen) that want to hijack the process so that it can get to the people who matter on the ground. There is a problem with inputs for manufacturing. The manufacturing companies especially the consumer manufacturing for food lack the input they need to manufacture. In fact, there is a report published a week ago that said 70 per cent of the raw materials used for manufacturing are imported, across 44 sectors of the Nigeria economy and because there is a lack of access to funding import, the companies are stuck. PT: Which of the Nigerian states can we find this particular commodity, ginger, in abundance? Kelvin: Of course, the highest is Kano and Southern Kaduna for sure because ginger is a root crop rhizome and it requires good soil, it requires some certain level of moisture content and heat, so Kaduna and Kano are good for it, we also have it in Jigawa. It works very well in the northwestern part of Nigeria mostly. PT: So, when you said Nigeria exported $12 million of ginger, where do you get the figures from? Kelvin: I got it from research. PT: Not from any specific government organisation? Kelvin: If you check with the Nigerian Export Promotion Council (NEPC), you should be able to get the $12 million data. PT: Do we have figures, especially the issue of Nigeria’s production of some of these specific commodities you mentioned? You get it right with data for this production like the data you mentioned, the supply of 14 per cent of the global output. How do we get them? Kelvin: If you go to raw material research and development here in Abuja they work with a couple of government agencies, NIRSAL, and NCS, you should be able to get figures if you write to them, they might provide this data for you on most of these commodities. Customs is one of the best agencies to get import and export data because all the manifests are there and the record of what is coming into the country. And you know NBS sink data from the poll also to be able to do their calculation on different areas. PT: As the third largest producer of ginger in the world, do you think Nigeria is producing enough to satisfy its domestic needs before exporting the product? Kelvin: When you said do we consume enough before exporting it, are you talking about the raw commodity for using ginger to cook? There is always so much that you will use to cook. The real value of the raw commodities is in the processing. It is the same problem we have with cocoa. For example, Ghana is like the second or third exporter of cocoa in the world. The question is: the global cocoa industry is valued at $100 billion, how much does Ghana get on that? Africa as a whole produces the most cocoa in the world but gets only 5 per cent of that. Why? What are we going to use cocoa beans to do? Cocoa powder, what are you going to use it to do? How much can you consume? If you don’t convert cocoa into products like cocoa butter for cosmetics, chocolate, or beverages, what use is cocoa? This is the question for Africa. So you take the cocoa beans out there, they will process it there and then you take it back to Africa. This is the problem. PT: Going forward, what are the changes you would like to see across Nigeria’s agriculture value chain? Kelvin: My parting words is that there is a crisis, and the National Association of Master Bakers of Nigeria have gone on strike today. There is a crisis in Nigeria, and the government needs to wake up. If we are going to go back in time over the last hundred years from the food crises that started in Russia in 1918 all the way from until the Arab spring in 2010-11 until last year, every single revolution in the world started from food. That’s my parting words. Read More Related News Here Let here it in the comment below if you do have an opinion on this; INTERVIEW: Why Nigeria gets too little from $2.7 billion ginger market despite being world’s second largest producer