Policy Options for Agricultural Investments and Governance of Markets: In support of small-scale agriculture in Nigeria

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In 2012 Oxfam and IIED joined forces to create Tipping the Balance a global report exploring the connection between the policy and practice of investment and market governance in small scale agriculture in four countries: Nigeria, Tanzania, Guatemala and the Philippines. This research report examines the role of policy in Nigeria in influencing corporate investment in agricultural land, production and
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  RESEARCH REPORT AUGUST 2013 POLICY OPTIONS FOR  AGRICULTURAL INVESTMENTS AND GOVERNANCE OF MARKETS IN SUPPORT OF SMALL-SCALE AGRICULTURE IN NIGERIA  ADERIBIGBE OLOMOLA International Food Policy Research Institute (IFPRI) Small-scale farming in Nigeria is characterized by a low level of investment and unequal access to key resources. With regard to market governance, small-scale farmers in some parts of the country suffer from the oligopsonistic abuses of marketing agents who prevent them from having a voice in determining the prices of their products. Several policies including output expansion through agricultural projects, investment promotion policy, agricultural finance policy, land tenure policy, input subsidy, tax policy and agricultural insurance have been designed to shape agricultural investment in a positive direction; although during implementation, discrimination against small-scale farmers is still a common phenomenon. The policies and instruments that shape agricultural market governance include tax policies that are generally import-restrictive and support for state trading enterprises. These policies have not been fully effective due, in part, to infrastructure bottlenecks. For improved agricultural investment and market governance there is a need to entrench women’s access and entitlement to land in the ongoing land reform, promote greater access by women to formal credit facilities, encourage private sector involvement in delivering extension services and link small-scale farmers to agribusiness firms through appropriate contract farming arrangements. Oxfam Research Reports  are written to share research results, to contribute to public debate and to invite feedback on development and humanitarian policy and practice. They do not necessarily reflect Oxfam policy positions. The views expressed are those of the author and not necessarily those of Oxfam.  www.oxfam.org  CONTENTS Summary I   Introduction 7 1.1   Purpose of the study 7   1.2    Analytical framework 7   1.3   Country context 8   II   Issues mapping – How smallholders experience investments and market governance 10 2.1   How do women and men smallholders experience corporate investments? 10   2.2   How do women and men smallholders experience poor market governance? 17   2.3 What appear to be the policy gaps? 19   III The policy environment 20 31.Mapping the policiies and legislation that shape agricultural investment in Nigeria22   3.2 Mapping the policies and legislation that shape agricultural market governance 26   IV Key policy levers 29 4.1 Key policies and instruments driving corporate investments in favour of smallholders 29   4.2 Key policies and instruments driving market governance in favour of smallholders 33   V Conclusions and recommendations 35 5.1 Conclusions 35   5.2 Policy recommendations 35   VI References 37Notes 39 2 POLICY OPTIONS FOR AGRICULTURAL INVESTMENTS AND GOVERNANCE OF MARKETS In support of small-scale agriculture in Nigeria    SUMMARY Introduction This research report seeks to examine the policy options for agricultural investments and market governance in support of small-scale agriculture in Nigeria, and the extent to which the implementation of relevant policies creates incentives or disincentives for bridging the gender gap in agricultural production and marketing activities. The analytical framework that has been used will consider three outcomes in order to categorize the various policies into those that shape investment and market governance. For instance, do the policies display negative discrimination (i.e. presenting disincentives and an uneven playing field for small-scale producers, especially women and those who are poorer) or positive discrimination for smallholders (i.e. tilting investment and markets in favour of small-scale producers)? Or, in specific terms, do they offer positive discrimination for women smallholders (i.e. tipping the distribution of benefits of smallholder agriculture towards women)? The analysis begins with an exploration of how smallholders experience corporate governance and market governance, followed by mapping the policies and instruments that shape agricultural investments and market governance, with a distinction being made between those that discriminate against smallholders in general and women in particular and those that work in their favour. The key policy levers that drive investment and market governance in the right direction are then highlighted in order to fill the policy gaps and form part of the basis of recommended actions for improved performance. How do women and men smallholders experience corporate investment and market governance? Small-scale farming in Niger ia is characterized by unequal access to key resources and low levels of investment 1 . Access to land is severely curtailed by the way it is inherited, owned and passed on by men to their male descendants in most patrilineal ethnic groups, especially in southern Nigeria. Although women represent between 60 and 79 per cent of Nigeria’s rural labour force,   men are five times more likely to own land than women. There are regional differences: women in the South are more likely to own and access land than women in the North. In general, land ownership is very low among women, a factor that limits their ability to exploit a land-based livelihood strategy. This affects their ability to access finance, for example, and often delays investment decisions or reduces the earning potential of agriculture. Moreover, women’s access to formal finance is highly restricted. Women are more likely to rely on family and friends for finance, partly because they lack collateral and also because they are more likely than men to be deterred from applying for formal loans by the complexity of the application process. The variation in opportunity between men and women in terms of access to finance is more prominent in urban areas and in respect of marketing activities compared to farming activities in rural areas. Apart from land and finance, men also perform better than women in terms of access to other farm inputs. Evidence suggests that male farmers’ access to chemical inputs, extension services, storage facilities and hired labour is more than twice as high as that of their female counterparts. In recent times, various women’s groups and producer organizations have emerged and are making efforts to empower women farmers in an attempt to bridge the gender gap in agriculture. POLICY OPTIONS FOR AGRICULTURAL INVESTMENTS AND GOVERNANCE OF MARKETS In support of small-scale agriculture in Nigeria   3  With regard to market governance, small-scale farmers in some parts of the country suffer from the oligopsonistic abuses of middlemen and marketing agents who prevent them from having a voice in determining the prices of their products in the marketplace. Institutions to regulate the actions of middlemen in the market are lacking, which creates inefficiencies in the market in that those who invest in the production of commodities earn less than the middlemen who derive benefits without adding any tangible value. In addition, there are no institutions to prescribe and enforce standards. The producers lack the capacity to aspire to higher standards that would fetch them higher returns in the market. In the absence of effective quality control, they are left to sell their ‘sub-standard’ products at a discounted price rather than being helped to produce better quality products that they can sell at a premium. At the household level, the choice of commodities to be marketed is often subjected to a power struggle between husbands and wives. The husbands often take charge of marketing the high-value commodities like yam and rice; while other commodities which command low values, such as cassava, maize and melon, are left for the wives to take to the market for sale. Mapping the policies and instruments that shape agricultural investment and market governance The policies shaping agricultural investment include output expansion through agricultural projects, investment promotion policy, agricultural finance policy, land tenure policy, input subsidy, tax policy and agricultural insurance. By design, these policies are intended to shape investment in agriculture in a positive direction. During implementation, however, discrimination against small-scale farmers sometimes emerges. Specifically, discriminatory tendencies are rampant in three areas – land, finance and input supply policies. For instance, the land tenure system in the country undermines small-scale farmers’ security of tenure. Restrictions on land sales (in the absence of clear title to land) impede the use of land as collateral, thereby hindering the development of the rural credit market. The communal system of land ownership is a disincentive to improving land quality and long-term investment in land management. Moreover, inheritance leads to land fragmentation among future heirs, and subsequent uneconomic farm sizes. As regards agricultural finance policy, the major disincentive is that banks with large loan funds are generally difficult to access, due to stringent criteria. Rigid collateral requirements and high interest rates are major impediments to the use of formal loans for the majority of small-scale farmers. Women farmers face even greater hurdles if they are required to get a counter signature from their husbands as part of the loan application. The discriminatory nature of input supply policy is evident in the actions of politicians who often corner incentives meant for farmers thus preventing the inputs from reaching the farmers directly. The policies and instruments that shape agricultural market governance include tax policies that are generally import-restrictive and support for state trading enterprises, including the Abuja Securities and Commodity Exchange and the agricultural market and trade development corporations that are currently being developed. The government is also pursuing a number of market development policies, including the policy of blending 10 per cent ethanol with petrol supported by incentives for investors to establish blending plants. 2  This is expected to boost cassava production by smallholders. The Government is also introducing policies to encourage the substitution of high quality cassava flour for wheat flour in bread-baking. 4 POLICY OPTIONS FOR AGRICULTURAL INVESTMENTS AND GOVERNANCE OF MARKETS In support of small-scale agriculture in Nigeria  
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