Disclaimer: This work has been submitted by a student. This is not an example of the work produced by our essay writing service.
You can view samples of our professional work here.
Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.
Increase of agricultural exports from Nigeria is important for both countries. Whilst agriculture in Nigeria, which for many years has become subservient to oil, is being re-invigorated, the UK is looking for new, reliable and economic sources for supply of agricultural products to meet its increasing demand. The two countries should thus be able to work in mutually beneficial ways with regard to export and import of Nigerian agricultural produce.
Nigerian agricultural production however faces a number of challenges that need to be overcome in order for it to achieve its true potential. This report analyses and assesses the country’s agricultural exports sector from different perspectives and makes recommendations for its improvement, with particular regard to the UK market.
This report takes up the investigation and analysis of increasing agricultural exports from Nigeria to the UK. It deals with various aspects of the issue and assesses the ways in which Nigerian agricultural exports to Britain can be increased in the coming months and years.
The UK and Nigeria have a long and complex relationship, and strong historical, constitutional and language ties. Nigeria became part of the British Empire on January 1, 1901 and stayed under British domination until 1960, when it finally achieved independence from centuries of harsh European colonisation (Central Intelligence …, 2011, p 2). Nigeria’s legal system, accounting norms and parliamentary institutions are strongly influenced by British thinking, norms, and standards. Trade between the two countries is increasing steadily (Central Intelligence …, 2011, p 2). Nigeria is the 33rd largest overseas market for the UK and the 2nd largest African market for British goods. The UK is home to approximately 800,000 people of Nigerian origin and thousands of Nigerian students come every year to study in UK universities (Foreign & …., 2011, p 1).Whilst the overwhelming majority of current Nigerian exports comprises of oil, the country is at present reinvigorating its agricultural sector and is making robust efforts to increase agricultural production, not only for domestic consumption, but also for sale to other countries (Osagie, 2010, p 1-2).
The UK is a net importer of agricultural products and sources a range of agricultural produce from various countries across the globe. The British government is constantly looking for ways and means to ensure and consolidate food supply sources for its growing population (Ray, 2011, p 2). Nigeria contributes little at present towards UK’s very substantial agricultural imports, but its significant agricultural potential and growing economic strength make it an important potential supplier of different types of agricultural products to the UK (Ray, 2011, p 2). Whilst agricultural production and exports in Nigeria currently face a number of infrastructural and environmental challenges, efforts are being made by private and public agencies to remove such barriers and free the country’s agricultural sector to embark on a high growth road in the immediate future. Growth in agricultural exports from Nigeria to the UK thus has the potential to bring about benefits for various stakeholders in both countries.
This report aims to analyse various aspects of Nigeria’s agricultural sector, with particular regard to the possibility of increasing agricultural exports to the UK. The report is sequentially structured and deals progressively with various issues that are relevant to the process.
2.1. UK Agricultural Imports
The United Kingdom depends significantly on agricultural imports to meet domestic food demand. Such demand is expected to increase steadily in future on account of anticipated growth in population levels.
The population of the UK is expected to reach 70 million by 2030, compared to the current figure of 58 million. Such anticipated growth in population implies that the country will increase its dependence upon agricultural imports in the coming years. Whilst the UK imports more than 40% of its total food requirements, up from 25% in 1990, it is estimated that the country will need to import half its food requirement by 2030 (Spedding & Wibberley, 2004, p 2). Again, whilst the UK does export a number of food and agricultural products, its balance of trade is significantly negative (Living Countryside, 2011, p 1). The following table provides details of exports and imports of major farm products from 1999 to 2008. (Source: Living Countryside, 2011, p 1)
As obvious, (from the above table), imports of agricultural products in the UK is increasing in every major sector, including meat, dairy, fish, cereal, fruit and vegetables, sugar and animal feeds. The total imports of all foods amounted to 31.6 billion GBP in 2008, up by practically 80% from 17.2 billion GBP in 1999 (Living Countryside, 2011, p 1). Whilst exports of foods from the UK have also increased from 8.9 billion GBP in 1999 to 13.2 billion GBP in 2008, the market for exports is progressively becoming competitive with growing exports of agricultural products from China and India and increasing competition in the export market (Living Countryside, 2011, p 1).
Many experts believe that more agricultural products should be produced in the country to reduce its growing dependence upon exports. However it is very likely that the UK will necessarily have to import more agricultural produce in the coming years to provide adequate food supplies to its growing population. The country’s policy makers, as well as food importers, will thus have to constantly look for new and economic supply sources of different agricultural products from across the world.
With Nigeria making strong and concerted efforts to increase its agricultural production and to reduce its dependence on oil for foreign currency earnings and economic growth, it provides an attractive supply source for Britain’s agricultural imports.
2.2. Agricultural Exports from Nigeria to UK
Whilst Nigeria achieved independence from decades of often harsh British colonial rule in 1960, the following decades were marked by severe internal strife, political volatility and long periods of military rule. Democracy was re-established in the country in 1999 and the country has since then witnessed a period of relative political stability and economic growth.
Oil dominates the economy of the country and its contribution to the Nigerian GDP has risen from 29% in 1980 to more than 50% today. Oil and gas presently contribute to 99% of the country’s exports and make up practically 85% of Nigerian government revenues, even though the contribution of these sectors to employment is less than 5% (Central Intelligence …, 2011, p 4). The country’s economy was in the past dependent primarily on agriculture. Whilst the agricultural sector has been overtaken by oil and gas, it remains Nigeria’s 2nd largest economic sector (Central Intelligence …, 2011, p 4).
Agricultural production has however reduced from 48% of GDP in the 1970s and now hovers at approximately 24 to 27 % of the GDP. Agricultural exports are also low and constitute less than 0.5% of total country exports. Agriculture however continues to provide employment to more than 60% of Nigerian citizens. Whilst the country’s GDP has grown since 1999, the rate of growth has been slow and at about 3% has just about exceeded population growth (Food & Agricultural â€¦, 2010, p 2-3). The country has a total area of 98 million hectares, of which 71 million hectares can be cultivated. However only 34 million hectares are actually under cultivation and less than 1% of the land available for agriculture is irrigated. The agricultural sector experienced growth of 6-7.5% in the present century. The important crops grown in the country are bulleted below (Food & Agricultural â€¦, 2010, p 2-3).
Fish / Shrimp
The country’s wide climate variations enable it to produce a range of crops and food. Staple food crops, apart from the ones listed above, include bananas, beans, cassava, cocoa-yams, corn, cow-peas, millet, plantains, rice, sorghum, sweet potatoes, yams and a variety of fruits and vegetables (UNEP Country Projects, 2010, p 2). The leading cash crops are Benin seed, cocoa, citrus, cotton, groundnuts (peanuts), palm oil, palm kernel and rubber. Nigeria comes 25th in the world and first in Africa in farm. Agricultural production has been hampered on account of mismanagement, lack of infrastructure and inappropriate government policies (UNEP Country Projects, 2010, p 2).
The country’s exports of cocoa, groundnut, rubber, and palm oil have reduced. Annual cocoa production, stagnant for some years at 180,000 tons, is significantly lower than what it was (300,000 tons) two decades ago. The decline in production of groundnut and palm oil has been even sharper. Corporate poultry output has halved from 40 to 18 million birds per year (UNEP Country Projects, 2010, p 2). Constraints on imports reduce availability of required agricultural inputs. The country’s land tenure system discourages investment in technology and adoption of modern production methods and works against increase in rural credit (UNEP Country Projects, 2010, p 2).
The major agricultural export consists of cocoa beans, rubber, fish / Shrimp and cotton. Whilst the country’s agricultural exports have been increasing, export growth has been slow and Nigeria continues to depend extensively on oil revenues for its economic welfare and growth (UNEP Country Projects, 2010, p 3). The agricultural sector, which experienced extensive neglect in the years before the establishment of democracy in 1999 is now being reinvigorated through the introduction of policies and strategic measures. The agricultural sector however continues to be disadvantaged an account of poor infrastructure and high input prices. The lack of basic infrastructure in rural areas, especially roads raises the cost of farm inputs. Average farm holdings are extremely small and farmers are unable to exploit scale economies (UNEP Country Projects, 2010, p 3).
Despite increasing agricultural production, the country remains a net importer of agricultural produce. Agricultural exports in 2009 were 1.4 billion USD, whilst agricultural imports amounted to 3 billion USD in the same year. The following table provides details about the major agricultural exports and imports (UNEP Country Projects, 2010, p 3).
The important agricultural destinations of the country are as under.:
United States of America
2.3. Market Analysis
2.3.1. Market Overview
The United Kingdom provides an attractive market for Nigerian agricultural products. The growing dependence of the UK increases this attractiveness because of Nigeria’s long historical association and present cordial diplomatic relationship with the UK. With it being important for the UK to establish strong sources of food supply, Nigeria and its agricultural exporters could find attractive markets in the UK for cocoa, rubber and marine products (World Bank, 2006, p 3)
Nigeria enjoys comparative cost advantages in a number of agricultural goods, but its low productivity is a barrier to its international competitiveness. The country, from ecological and climatic perspectives, has more than 95 commodities that can be successfully cultivated (World Bank, 2006, p 3). Agricultural productivity is also hampered on account of inadequacies in areas like roads, power and water supply. Most of Nigeria’s agricultural products are exported in primary form, without any significant value addition (UNEP Country Projects, 2010, p 4).
Most western importers tend to discourage local value addition for their imported products, more so for cocoa, because it reduces employment to their citizens and increases their import costs. The Nigerian economy is not globally competitive and has been recently ranked at 88 out of 117 on global competitiveness by the World Economic Forum (World Bank, 2006, p 3). Experts also feel that the Nigerian agricultural sector needs to radically improve its competitiveness and worker productivity. The country will have to face competition from various countries and will have to establish its competitiveness in specific agricultural areas like India has done with rice, Tanzania with cashews and Malaysia with palm oil (World Bank, 2006, p 3).
2.3.2. Competition from Ghana and Kenya
Kenya and Ghana are two other African countries that are making rapid strides in agricultural production and exports. Agriculture, after services, constitutes the second largest sector of Kenya’s GDP (JamboKenya, 2010, p 1-2). Agriculture provides for practically 25 % of the national GDP, constitutes 50 % of exports and provides employment to 18 % of the workforce. The country’s most important cash crops are tea, coffee and horticultural produce, even though a wide variety of other crops are grown in different parts of the country (JamboKenya, 2010, p 1-2).
Ghana’s economy revolves around agriculture, which constitutes approximately 36 % of its GDP and provides employment to 55 % of its workforce. Ghana produces a range of crops including cocoa, yams, grains, nuts and timber (U.S. Library…, 2010, p 1-2). Agricultural exports constitute 49 % of the country’s total exports and have increased from 1 billion to 3 billion USD from 2002 to 2009. The country’s cocoa exports amount to more than 1 billion USD per year (U.S. Library…, 2010, p 1-2).
Whilst both Kenya and Ghana are aggressively pursuing agricultural exports, Ghana represents a more important competitor for Nigeria because of its existing production and exports of cocoa. Cocoa from Ghana is already being sold in the UK through Fairtrade and is being appreciated by customers.
2.3.3. Environmental Analysis
The business performance and the competitiveness of organisations, sectors and even countries depend to a large extent on various environmental conditions. An analysis of such conditions, usually taken up through the assessment of PESTEL (i.e. political, economic, social, technological, environmental and legal) factors helps in understanding the broader environment in which business activities must take place (Hill & Jones, 2009, p 37). Such analyses, in the case of exports and imports of goods between countries, must take account of the environmental conditions in the two countries and the actions, attitudes and opinions of various stakeholders like the respective governments, producers, exporters and importers, regulatory authorities and consumers (Hill & Jones, 2009, p 37).
The political conditions for exports of agricultural products from the UK to Nigeria are favourable. With both countries having common historical ties and cordial current relationships, the flow of goods should not be hindered by any political considerations.
It is also important for both economies to engage in two way trade. Whilst both the countries already have good levels of trade, the overwhelming majority of Nigerian exports are made up of oil and there is a clear trade deficit in areas like agricultural products and manufactured goods. The economic recession of 2007-2010 resulted in decline in British demand for manufactured goods, but had little impact in the agricultural and foods sector. Although economic conditions are favourable for export of agricultural produce, the effectiveness of Nigerian exports will depend upon its competitiveness, with regard to other exporters of similar products to the UK.
Social considerations should not by and large be an important determinant in trade of agricultural produce. Consumers of agricultural products in the UK are however becoming increasingly conscious about issues like exploitation of agricultural labour, use of child labour and over use of chemicals and fertilisers.
Technology also plays a major role in contemporary agricultural production. The small size of farm holdings in Nigeria, along with lack of modern day infrastructure and technology could therefore result in reduction of competitiveness of Nigerian exports.
Whilst environmental factors are not expected to cause much concern, Nigerian agricultural exports to the UK could be affected if it were to lead to significant environmental degradation.
Legal issues assume great importance in all types of cross country trade. Nigerian exports of agricultural products to the UK will have to comply with various legal regulations in place, not just for the UK but also wherever relevant for the European Union.
2.3.3. Porter’s Five Forces
Michael Porter’s Five Forces analysis provides a simple tool for gauging the effectiveness of a market. Involving an assessment of (a) the power of suppliers, (b) the power of buyers, (c) the threat of new entrants, (d) the threat of substitutes, and (e) the extent of rivalry between market participants, Porter’s analysis allows analysts to assess the level of competitiveness or the attractiveness of a specific market (Porter, 1985, p 40).
The power of sellers in the UK market for generic agricultural products can be considered to be low because of the many available suppliers. Whilst some agricultural products like high quality cocoa, exotic fruits like mangoes and special varieties of fragrant rice are in demand because of limited sources of supply, most sellers of agricultural products have little power (Porter, 1985, p 40).
The power of buyers is conversely quite high because of the various sources of supply. The threat from new entrants can be considered to be high because many countries, especially among the emerging nations, are (a) improving their agricultural production, (b) increasing their competitiveness, and (c) aggressively pursuing export markets. The power of substitutes is expectedly low because of the genuine demand for agricultural products and their continuous need for human consumption (Porter, 1985, p 40). The extent of rivalry between market participants can be considered to be high because of the attractiveness of the English market and the desire for most exporters to enter the market.
The conduct of Porter’s five forces analysis reveals two of the forces to be low, and the balance three, including, rivalry to be high. It can in such circumstances be safely assumed that the extent of competitiveness in the market is likely to range between medium and high and that Nigerian exporters will have to become substantially competitive in order to penetrate the UK agricultural products market.
2.3.4. SWOT Analysis
A SWOT analysis helps analysts to assess specific internal and external environmental features, namely strengths, weaknesses, opportunities and threats, in order to make appropriate strategic decisions (Hill & Jones, 2009, p 54). The SWOT analysis for Nigerian exports of agricultural products to the UK is provided below.
Good historical and current ties with the UK.
Strong and increasing trade between the two countries.
Nigeria has good skills and expertise in agriculture.
There is substantial scope to increase Nigerian agricultural products in the UK. Products like cocoa, fish, shrimp and some other items have good demand in the UK.
The two countries are not very distant from each other and transportation costs are thus likely to be low.
Agricultural infrastructure in terms of roads, power and electricity is poor.
Agricultural productivity is low.
Farm holdings are small.
Economies of scale in agricultural production are poor.
Consumption of agricultural products in the UK is steadily increasing.
Demand for agricultural products in the UK is expected to grow steadily in future because of increasing population.
There is good demand for agricultural products like tobacco, sea food and groundnuts, which are grown extensively in Nigeria in the UK.
The comparative proximity of the two countries should result in low transportation costs and make Nigerian agricultural products more competitive.
Many emerging nations are improving the scale and quality of their agricultural production and aggressively increasing their exports of agricultural products.
Competition is bound to be strong in the UK market because of its high volumes and steady demand. Nigerian exports to the UK could face range of competitive threats
3. Recommendations and Conclusions
This report attempts to assess the existing position of Nigeria’s agricultural production and exports and recommend ways and means to improve agricultural exports to the UK.
Nigeria’s current exports are overwhelmingly dominated by oil but the agricultural sector has the potential not only to contribute significantly more to the country’s GDP but also add to its export revenues. Nigeria’s agricultural sector currently suffers from a number of constraints like small farm holdings, inadequate availability of power and water and poor road connectivity. The country’s government should therefore focus on two basic issues, namely improving agricultural output and aggressively pursuing export markets in attractive destinations like the UK. It would be advisable for the government to make a time bound plan for improving infrastructural conditions, consolidating land holdings, improving productivity and thereby achieving significant quantum jumps in agricultural production. Special attention should be paid to important crops like cocoa, soya, groundnut and rubber, as well as marine products like shrimp and fish, all of which have strong export potential. The government must implement time bound target oriented plans that focus on increase of yield, development of scale economies, reduction of production and transportation bottle necks, optimisation of costs and improvement in supply chain management. Export markets in the UK for products like cocoa, soya, groundnut and rubber should be actively perceived. British companies should be invited to enter into joint ventures for processing of agricultural produce and production of value added products. Such organisations, both local and international, which take up of agricultural produce or value added products, should be provided with carefully designed incentive packages to encourage them to enter the area and invest resources and time. It is important for all stakeholders, namely the governments of the two countries, agricultural producers, processors, exporters, importers and consumers to be involved in the process. Ghana and Kenya are aggressively exporting their agricultural produce and achieving significant success. Nigeria should also be able to achieve significant success in export of agricultural products to the UK if the issue is assessed in a holistic manner and appropriate and wide ranging measures are adopted, both in areas of agricultural production and exports.
Cite This Work
To export a reference to this article please select a referencing stye below:
“Thank you UK Essays for your timely assistance. It has helped me to push forward with my thesis.”
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please.