The Potentials of Cash Crops for Export Diversification in Nigeria

The evolution of the Nigerian economy is incomplete without mention of cash crops. Cash crops are agricultural products that are exported in their raw form or can be processed into other finished or semi-finished goods for export. In 1970, Nigeria exported 1.08 million tonnes of agricultural products worth N265.2 million. This accounted for 29.7% of total export earnings in Nigeria, 70.9% of non-oil export, and 41.3% of GDP in 1970. At this time, Nigeria was a net exporter of cash crops. By 2019, agricultural export was N269.8 billion, about three times short of agricultural imports worth N959.5 billion. The fortunes of cash crops in Nigeria turned drab since the oil price shock of 1973-74, which led to ignoble neglect for cash crop development.

Compared to crude oil, which is the lifeline of the Nigerian economy, cash crops are competitively resilient on three fronts. First, the demand for food products abroad is very stable and the current trend of Nigerians migrating abroad has lent more weight to this demand. Second, the processing cost of cash crops is significantly lower than crude oil. The latter requires world-class refineries and supporting the petrochemical industry, which is not present in Nigeria. Third, the prices of cash crops are not as volatile as crude oil. While cash crops have stable prices, on average, oil price shocks can be extreme. For instance, it plunged to $29.15 per barrel in November 2016, resulting in a recession. It also nosedived to an all-time low of $7.15 per barrel in April 2020, resulting in a slash in the 2020 budget by N318 billion and affecting the health and education sector primarily.

Nigeria’s cash crop potential is tremendous and the related crops include groundnut, soybeans, cottonseed, palm kernel, palm oil, cocoa, and rubber. The following are the top five exporters of selected cash crops and their values in 2018.

• Palm oil – Indonesia ($16.7B), Malaysia ($9.28B), Netherlands ($997M), Colombia ($452M), and Papua New Guinea ($430M)
• Cocoa beans – Cote d’Ivoire ($3.53B), Ghana ($1.78B), Ecuador ($674M), Nigeria ($621M), and Cameroon ($492M)
• Ground Nuts – United States ($474M), India ($456M), China ($367M), Brazil ($234M), and Argentina ($232M)
• Soybeans – Brazil ($33.2B), United States ($17.2B), Canada ($2.25B), Paraguay ($2.23B), and Argentina ($1.46B)
• Cotton seeds – China ($13.7B), United States ($8.49B), India ($8.12B), Pakistan ($3.55B), and Vietnam ($2.76B)

Evidently, Nigeria is losing so much be neglecting the production of cash crops. A glance at the top exporters also suggests that cash crop production is not peculiar to the developed or developing countries. For instance, despite the technological advancement in the United States and China, they are one of the biggest exporters of cash crops in the world. In Nigeria, however, the top five exports in 2018 were Crude Petroleum ($44.8B), Petroleum Gas ($8.61B), Refined Petroleum ($940M), Cocoa Beans ($621M), and Gold ($577M), four of which are solid/liquid minerals.

Export of selected cash crops in 2019 is shown in the table below

Based on these five cash crops, provided Nigeria can increase the export quantities by 100%, Dollar inflows from these five cash crops will hit US$ 504.3 million.

To realize this potential, the Nigerian government must begin to pay attention to cash crops. They can boost productivity through a university scheme that allows students in the faculty of agriculture to take on commercial production of cash crops. Ease of export must be entrenched to provide an incentive to produce cash crops in the first place. Furthermore, the Ministry of Agriculture should be given a target of ‘X’ metric tons of cash crop to produce and this must be audited by an independent private sector firm.

Data sources

Daramola et al (2005). Agricultural export potentials in Nigeria; Nigeria Bureau of Statistics; CBN Statistical Bulletin, International Trade Centre Trade Map, The Observatory of Economic Complexity

Co-written by Michael Ogunremi and Nkenna Aneke

Nkenna is an agri-business finance analyst in Access Bank, Nigeria