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  • Oyewole: Cashew is one of strategic products to replace oil

    Aug 28th, 2016

    Currently Employs 500-700 Factory Workers, Yields $250m Yearly

    Managing Director/CEO of the African Cashew Alliance (ACA), Dr. Babafemi Oyewole, in this chat with GBENGA SALAU, spoke on the potentials in the cashew sector of the agro allied industry in Nigeria and how it could be one of the ways to diversify the economy.

    Why do you think government should support the cashew initiative?

    Current global market trends show a growing demand for cashew. There is great potential and opportunity for cashew-driven national economic growth, development, and employment creation, as well as better income for rural farmers.

    Under the Federal Government of Nigeria’s “Transformation Agenda,” the government has committed to a policy of economic diversification. To that effect, NEPC identified 13 National Strategic Export Products, targeted at replacing crude oil. Cashew, as one of the five identified strategic agro-industrial products, has, therefore, become a priority of the Nigerian government.

    The cashew industry currently employs between 500-700,000 people, factory workers are about 2,000 formal and 1,000 informal. 90 per cent of those employed are women, 40-60 per cent are youth. The cashew sector has the potential to provide livelihood and jobs for thousands more if adequate policies and programmes are in place to support its development in the country.

    What are the definite supports that should be provided for cashew farmers in Nigeria?

    There is a need to address current issues, including: High felling rate of old cashew trees without replacement with new, higher yielding varieties; Inability to develop and fully process cashew by-products (cashew apples for prunes, juice, wine, and pulp; cashew nut shell liquid (CNSL) which can be used in the manufacturing of paints, varnishes, resins and brake linings; and the shell used as processing fuel); Subpar cashew peeling techniques, which lead to discounted prices on the international market; The poor handling and export packaging responsible for high rates of rejection of cashew exports. The government has been asked to grant National Cashew Association of Nigeria (NCAN) a 100 percent duty waiver on jute bags imports.

    There is also a need to address the issue of Poor quality cashew exports, leading to a significant loss of export earnings. Raw Cashew Nut (RCN) are often denied access to international markets due to lack of quality control and certification caused by inadequate accreditation. The ACA Seal – an industry-accepted mark that confirms compliance with internationally-recognized standards of quality, food safety and social and labor standards – would increase market access for Nigerian cashew processors if they are certified; Insufficient investment in local cashew processing leading the exporting of over 90 per cent of the crop as RCN. NCAN has urged the government to set aside $53million for a cashew intervention fund to expand local cashew processing and the need for a more transparent market and regulated prices for the crop, possibly through the establishment of a National Cashew Marketing Board that will be responsible for the regulation of the industry.

    What is the potential contribution of cashew sector to Nigeria’s GDP?

    The cashew sector currently contributes approximately $250million to the Nigerian economy each year, with over 300,000 families depending on cashews for their livelihood. The average production growth during the last five years has been 11,300 MT/year and the expected average production growth in the next five years is 13,500 MT/year – one of the highest expected growth rates in Africa. Cashew export is the third largest agricultural export foreign exchange earner for Nigeria. About $110 million was earned for cashew exports in 2013, representing about eight per cent of all agricultural exports.

    The potential revenue generated by increased value added processing is tremendous. In 2002, a USAID study estimated that an increase of 20 percent from Nigeria’s current processing level would create more than 344,000 new jobs and additional income of over $75million. Current estimates of these indicators would be much more higher today. Current consumption is low, but if just 20 per cent of Nigerians eat more cashews – they will consume all the cashews produced in Africa. The market potential is huge. With more support, cashew could be the number one cash crop in Nigeria soon and make the country a leading producer in the continent and globally.

    How could farmers better access finance to grow their business and what role government could play in this?

    The lack of adequate working capital for farmers, local buying agents, exporters, and processors is hampering the development of the industry. ACA has sought to assist in increasing the bankability of cashew processors through linkages with financial institutions. One way we are doing this is through the recent workshop where we launched the “Linking Cashew Value Chain to Financial Institutions Initiative”. Without access to the vital credit and working capital necessary to purchase RCN, the long-term potentials of the African cashew processing industry would not be realised.

    Classical financial institutions do not fully understand agricultural value chains, particularly cashew. Poor finance intermediation by financial institutions has lead to inadequate access to finance for farmers to rehabilitate and replant their ageing farms. Mismatched expectations have created a need for greater mutual understanding between the agricultural and banking sectors.

    Greater access to finance is critical to the strength and sustainability of a thriving cashew value chain. Nigerian farmers need capital to ensure the long-term sustainability of their trees and procure new varieties that will significantly improve yields. Additionally, far too much of African cashew production is exported outside of the continent. As cashew processing is a capital intensive and technology sensitive industry, better access to finance and increased incentives for investment is essential for local value addition through processing.

    Processing of cashew would ensure the country and cashew stakeholders enjoy the impact of the value chain in cashew, what policy framework should be put in place by government to drive this?

    ACA applauds the Cashew Sector Development Strategy prepared by the Nigerian cashew stakeholders with the support of the USAID NEXTT and NEPC. This strategy includes the following holistic policy framework: Farm-Level Support: Quality support at the farm-level is necessary, particularly to ensure the proper procedure for drying and packing, which will ensure the highest quality and price, as farmer-processor-exporter meetings help to clarify quality standards required.

    Quality and Technical Capacity Building: Provide capacity building for processing companies on food safety, quality assurance and other technical issues through ACA Seal approval and trainings; Market Development and Promotion: Provide linkages for exporters with overseas markets through RCN buyer-supplier meetings, trade shows, and strategic alliances with buyer associations.

    Processing-Export Incentives: Incentive support for the cashew industry through advocacy, best policy practices, and a public-private sector working group and Market Information: Trade information and statistic generation and production of relevant market intelligence reports, including market information and statistical materials for relevant stakeholders. ACA has been providing market information system to its members and other stakeholders through its weekly and monthly market reports to give a better understanding of the industry.

    The current Investment incentives are tax breaks from Nigerian Investment Promotion Centre; Export development fund from NEPC and Export Expansion Grant under review. Yet, Nigerian processors still struggle with many issues, including: the high average cost of processing cashew owing to issues with electricity supply, high cost of diesel, and costs of running generators, and inadequate tax rates, including multiple taxation, low incentives for processing, and high rates on bank facilities. The government should aim at strengthening existing cashew investment incentives and create new policies that will deliberately reduce the cost of processing and help attract more investment in the sector. Nigeria can learn a lot from the experience of Cote d’Ivoire, the largest cashew producer in Africa, which has recently undertaken far reaching reforms and incentives to promote the cashew industry.

    Does Nigeria have the potential to be the highest supplier of cashew in the world and how can that be achieved?

    Yes – Africa grows approximately 57 per cent of the world’s cashew and Nigeria is the third largest producer in Africa with an estimated output of about 170,000 MT annually. A 2001 survey of cashew producing areas in Nigeria revealed that less than 20 per cent of available lands are under cultivation. By increasing land area with high yielding and good quality cashew trees, Nigeria has the potential to become the world’s largest producer of RCN. NCAN is implementing a program for rejuvenating cashew plantations and increasing the area of land under cashew production in Nigeria, particularly as Nigerian cashew trees are aging. It costs N10billion to plant 350 million new trees, which would yield N100million and millions of new jobs. This could provide much needed jobs and economic activity.