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Cablegate: Favorable Rains Show Promise for Nigeria's

VZCZCXRO4710
PP RUEHMA RUEHPA
DE RUEHUJA #1846/01 2801805
ZNR UUUUU ZZH
P 071805Z OCT 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7172
INFO RUEHOS/AMCONSUL LAGOS 2059
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 001846

SIPDIS

DEPARTMENT FOR EE/TPP/ABT/ATP SPECK
DEPT PASS TO USTR-AGAMA
TREASURY FOR PETERS AND HALL
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ ANESA/DHARRIS
USDA/FAS FOR MAURICE HOUSE, DOROTHY ADAMS

E.O. 12958: N/A
TAGS: EAGR ECON ETRD EAID EFIN PREL NI
SUBJECT: FAVORABLE RAINS SHOW PROMISE FOR NIGERIA'S
2009 GRAIN HARVEST

REF: A. 08 ABUJA 2169
B. 08 ABUJA 2126

1. SUMMARY: Favorable rains show promise for a good 2009 grain
harvest. Most grain crops were planted in June and farmers hope the
rainy season will extend well into October. The visiting Nigeria
Desk Officer and accompanying Economic and USAID MARKETS Officers
visited farmers in Northern Nigeria to discuss challenges they face
this year. These include access to credit and fertilizers, crop
price setting, and buy-back arrangements. END SUMMARY.

Favorable Rain Patterns
-----------------------

2. The visiting Nigeria Desk Officer and accompanying Economic and
USAID MARKETS Officers visited Dawanau Grain Market in Kano, the
largest grain market in West Africa, on September 17. They asked
market officials about day-to-day operations as the 2009 trading
season is expected to be busy due to an abundant harvest. The peak
trading season for the market is during the months of March, April,
and May.

3. The farmers planted crops in June, the rain pattern stabilized
in mid-July, and heavier rain occurred in August. Rains continued
in September and farmers are hopeful they will extend into October.
This is the second year in a row that rain patterns have been
beneficial for grain crops. The combination of good rain patterns
and expanded areas under cultivation resulted in a bountiful 2008
grain harvest (Reftel B).


Farmers' Challenges
-------------------

4. The Embassy delegation also visited sorghum farmers in Northern
Nigeria. Sorghum is one of the targeted crops in the USAID MARKETS
program. Nigeria is the world's largest producer of sorghum,
followed by the United States. It is becoming an important
commodity in the local food and beverage industry and is
increasingly being used as a substitute for more expensive and
imported raw materials. Sorghum farmers conveyed that their biggest
challenges in 2009 were access to credit and fertilizers, price
setting for the sale of their crop, and buy-back arrangements.

Accessing Credit Is a Slow Process
----------------------------------

5. Sorghum farmers expressed frustration with the slow process to
obtain loans. Loans are usually not available on time, as the
process for applying for credit is long and rigid. Nigerian
Agricultural Cooperative and Rural Development Bank (NACRDB)
officials explained the loan process when the Embassy delegation
visited their headquarters in Kaduna on September 16. NACRDB is a
government bank and works closely with the USAID MARKETS program to
access farmers and provide financial assistance to them. USAID also
works closely with PHB and Skye banks through a development credit
authority (DCA), which provides guarantees to banks for agricultural
loans given to farmers.

6. The NACRDB bank works with both small and large farmers. Small
or micro farmers are those with up to four hectares of land.
Applying for financial assistance can take up to four months. The
farmers must first visit NACRDB rural offices which, for the farmers
visited, are 17 kilometers (10.6 miles) away. The farmer must first
open an account with the bank in order to establish a repayment
record before applying for the loan. The banker then visits the
farm, inspects it, and recommends a loan to the headquarters office,
Qfarm, inspects it, and recommends a loan to the headquarters office,
which must then approve or disapprove the loan. Providing loans to
a group of farmers, or cooperatives, is a more common practice than
providing loans to individual farmers as the repayment rate is
higher if loans are given to cooperatives than to individuals. The
repayment loan rate among small farmers is about 85 percent.

Access to Fertilizers Remains a Problem
---------------------------------------

7. Access to fertilizers has been a challenge for farmers in 2008
and 2009. Fertilizers are too expensive for a farmer to buy on the
market, so most fertilizers are subsidized by the government.
Unfortunately, the subsidized fertilizer usually does not arrive on
time, if at all, as it usually ends up in the hands of
politically-connected middlemen (Reftel A).

ABUJA 00001846 002 OF 002

Price Setting and Buy-Back Arrangements
---------------------------------------

8. Farmers are unable to store grain for long periods of time, so
they are usually obligated to sell their product at the end of the
harvest season when the price is low. Since 2005, the USAID MARKETS
program has been critical to moving crops through the value chain,
and linking farmers with buyers through buy-back arrangements. This
approach considers production costs and existing market prices to
fix prices for the buy-back. The buy-back price also serves as a
price for other actors in the value chain, such as suppliers who buy
the produce and transport it to the buyer's warehouse. This way, a
farmer is guaranteed that he will not be forced to sell below the
production cost.

9. Alheri Seeds is one of the agro-business companies that MARKETS
linked with the farmers that the delegation visited in Zaria on
September 16. Alheri Seeds buys crops directly from individual
farmers and cooperatives. The company acts as an extension agent
providing advice on farming, demonstrating proper seeding, and
collecting crops from farmers.

10. Alheri Seeds concentrates on three different types of crops:
sorghum; rice; and sesame. The company sells sorghum for malting,
rice to processors, and sesame to exporters. Sorghum is grown for
food, feed and industrial uses. Rice is sold to local processors,
but a substantial amount of the rice consumed in Nigeria is imported
due to high demand and low production. Local rice farmers have
relatively low yields, averaging just 1.7 tons per hectare. Sesame
is an export crop valued at $20 million per year and is mostly
exported to Japan.

11. This message was coordinated with ConGen Lagos.

MCCULLOUGH

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