Report No. 4723-UNI

Nigeria L Fr PP y

Agricultural Sector Memorandum(In Two Volumes) Volume l: Summary, Issues and Recommendations

February 25, 1985

Agriculture Division I

Projects DepartmentWestern Africa Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This report has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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CURRENCY EQUIVALFNTS

Currency Unit = Naira (N)US$1 N 0.75Ni US$1.33Ni = Kobo 100

WEIGHTS AND MEASURES

UInless otherwise stated, all weights and

measures used in this report are metric.

1 metric ton (m ton) 2,205 pounds (Rb)1 hectare (ha) = 2.47 acres (ac)I kilometer (km) = 0.62 mile (mi)1 meter (m) = 3.28 feet (ft)

FISCAL YEAR

January 1 - December 31 (Nigeria)July 1 - June 30 (Bank)

FOR OFFICIAL USE ONLYAbbreviations and Acronyms

ADA Accelerated Development Area ProgramADC Agricultural Development CorporationADP Agricultural Development ProjectAID United States Agency for International DevelopmentAIDS Agro-Industrial Development SchemeAPMEPU Agricultural Projects Monitoring, Evaluation and Planning UnitARMTI Agricultural and Rural Management Training Insti.tuteATAP Agricultural Technical Assistance ProjectBank World BankBSP Basic Services PackageCBN Central Bank of NigeriaCPI Consumer Price IndexFACU Federal Agricultural Coordinating UnitFAO Food and Agriculture Organization of the United NationsFARA Federal Agricultural Recruitment AgencyFASU Federal Agricultural Support UnitFDA Federal Department of AgricultureFDARD Federal Department of Agriculture and Rural DevelopmentFDRD Federal Department of Rural DevelopmentFFB Fresh Fruit Bunches (Oil Palm)FIIRO Federal Institute of Industrial Research, Oshodi

FMA Federal Ministry of AgricultureFMANR Federal Ministry of Agricultural and Natural ResourcesFMAWR Federal Ministry of Agriculture and Water ResourcesFMWR Federal Ministry of Water ResourcesFMAWRRD Federal Ministry of Agriculture, Water Resources and Rural DevelopmentFOS Federal Office of StatisticsFSC Farm Service CenterGMP Guaranteed Minimum PriceGNP Gross National ProductIAR Institute for Agricultural ResearchIITA International Institute of Tropical AgricultureIMF Internati.onal Monetary FundLBA Licensed Buying AgentLDC Less Developed CountryLGA Local Government Authori.tyMEU Monitoring and Evaluati.on UnitNACB National Agri-cultural and Cooperative BankNAFPP National Accelerated Food Production ProjectNGPC Nati.onal Grains Production CompanyNIFOR Nigerian Institute for Oi.l Palm ResearchNISER Nigerian Institute of Social and Economic ResearchNPC National Population CommissionNRCPC National Root Crops Production CompanyNRCRI National Root Crops Research InstituteNSC National Supply CompanyNSPRI National Stored Products Research InstituteNSS National Seeds ServiceOFN Operation Feed the NationPADC Plateau Agricultural Development CorporationPCR Project Completion ReportPEP Publi.c Expenditure Program (Review)PRODA Project Development InstituteRBDA River Basin Development Authori.tyRBRDA River Basin Rural Development AuthoritySAL Structural Adjustment LoanTCPP Technical Committee on Producer PricesT&V Training and Visit Extension System

THU Tractor Hire UnitUSDA United States Department of Agri-culture

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

NIGERIA

AGRICULTURAL SECTOR MEMORANDUM

Volume I - SUMMARY, ISSUES AND RECOMMENDATIONS

Contents

Page

1. INTRODUCTION ............................................... 1

2. SUMMARY DESCRIPTION OF THE SECTOR

A. The Macro-Economic Setting ............................ 2B. Trends in Agriculture ................................. 4C. Incentives to Farming ................................. 10D. Public Investment Programs ............................ 17E. Institutional Development ............................. 23F. Transformation of Traditional Agriculture ............. 25

3. ISSUES .................................................. 28

4. RECOMMENDATIONS

A. Policy Reform . 42B. Outline of an Investment Program ...................... 44C. Agenda for Further Study .47

Annex 1 IBRD Assisted Agricultural Projects in Nigeria ........ 51

Maps

1. Ecological Zones and Research Centers ...................... End2. Population Density and Major Urban Population Centers ......3. IBRD Assisted Agricultural Projects ........................

Volume II - MAIN REPORT

Tables in Text of Volume I

Page

1. Exports of Major Categories of Agricultural Commodities.... 62. Grain Imports 1.971 to 1983 ................... 7.............. 73. Allocation of Development Funds Within the

Agricultural Sector ................... I 19

Tables and Charts in Volume II

1. Production of Major Food Crops, 1961-1983............. 102. Production of Major Cash Crops, 1961-1983 .................. 163. Origin of Commodity Board Purchases, by State .......... 174. Exports of Major Agricultural Commodities,

1968 and 1982. .............. 195. Leading Categories of Imported Agricultural Products ....... 206. Grain Imports 1970-1983. ................... 227. Non-Farming Occupations of Farm Households ................. 528. Federal and World Bank Allocation of Development

Funds Within the Agricultural Sector .................. 619. Allocation of Funds Within the Agricultural

Sector, Capital Account Detail ..................... 62

Chart 1 Trends in Production

A. Sorghum, Millet, Wheat, Rice, Maize .11B. Cassava, Yam ................ 12

I. INTRODUCTION

1. This Sector Memorandum is intended to initiate rather thanconclude a period of review and analysis of the agricultural economy ofNigeria, and of the investment programs in agriculture and ruraldevelopment of government and the World Bank. It is not meant to beencyclopedic and in that respect apologies are extended especially toreaders from the secondary production activities - livestock, forestry andfisheries - who will find few references to the role of these activities inthe larger agricultural enterprise. Calling the period of preparation ofthe Memorandum phase one, the plan is to carry out in phase two a series ofsubsector studies i.n areas where our present understanding is deficient andthen in phase three to bring these pieces together in a comprehensiveinvestment study embodied in a Sector Review, now scheduled for completionin 1986. Two of those subsector studies are project- related and alreadynearing completion - on livestock and forestry - and others will begin in1985 - credit, irrigation and the tree crops are important examples. Thus,one of the principal objectives of the Memorandum was to identify subjectareas needing further work before a comprehensive strategy could be safelyset out.

2. But decisions on the agricultural investment portfolio cannot bedeferred to 1986. Even without the safety of a comprehensive view it isnecessary that this Memorandum offer judgements on the major issues andsome recommendations for policy and project reform where correct solutionsare already fai.rly obvious. That is the other principal objective: tomake suggestions that can guide decisions in the next several years. TheFederal Ministry of National Planning in November 1984 initiated the newfive-year planning exercise leading to agreement on a Fifth NationalDevelopment Plan 1986-1990 later this year. It is hoped that thisMemorandum may be useful to that exercise. A distinction is drawn betweenthe policy environment and specific investment programs. The Memorandumdiscusses, on the one hand, changes i.n policy which are a precondition fora recovery in agriculture, and, on the other hand, priority investmentprograms some of which make sense now but most of which will not work welluntil the policy reforms have taken effect.

3. The discussion is not limited to programs assisted by the Bank.But the study concentrated on them and the recommendations are addressedtherefore as much to the Bank in i.ts review of its activities as to thegovernment's policymakers.

4. Chapter 2 is a summary of the subjects discussed in detail inVolume II, the Main Report. In some places the discussion has beenexpanded to bring out salient points. This provi.des the background for areview of key issues in Chapter 3, and a presentation in Chapter 4 ofpolicy initiatives, a preferred investment program and priority studies.This "Recommendation" chapter can be read as a self-standing statement ofthe whole Memorandum.

5. The Sector Memorandum was prepared in the Western Africa ProjectsDepartment, Agriculture Divisi.on B, by E.B. Rice, following missions toNigeria in January, March, and November 1983, with substantialcontributions from C.H. Walton. The final draft (Green Cover) wasdiscussed with an audience of government officials and privateprofessionals at a Review Meeting sponsored by the Federal Ministry ofAgriculture, Water Resources and Rural Development in November 1984.

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2. SUMMARY DESCRIPTION OF THE SECTOR.

A. The Macro-Economic Setting

6. Agricultural performance in the last decade has been undermined bydisincentives created in the wake of the oil boom. They accelerated theshift of labor, capital and managerial talent out of agriculture, a processalready under way and best illustrated by the rising rate of migration ofyoung men to the cities. The "oil syndrome" i.s common to oil-exportingLDCs and has features more pronounced and easily recognizable i.n Nigeria.During the good years these included: (1) appreciation of the Naira; (2)enhanced profitability of investments in "non-tradeable" commodities andservices; (3) a corresponding downgrading of investor interest in the"tradeable" sectors, especially agriculture and manufacturing; (4)recurring budget and balance of payments deficits, as governmentexpenditures raced ahead of oil revenues i.n periods where then they wereexpanding, and were difficult to reduce in periods when they levelled off;(5) high inflation; and (6) the growing urban bias of publi.c policies.When oil revenues collapsed, as in 1978 and 1982, the deficits worsened andthe other symptoms either persisted or reversed very slowly. These andother effects are elaborated i.n the Volume II, and i.n a series of Bankpapers dealing with the effects of the oil syndrome and pricing policies(Volume II, footnotes I and 4).

7. Government has not ignored the requirements of the sector. Thefederally sponsored irrigation works and fertilizer import are examples ofimportant production-oriented programs. The national trunk road system hashelped integrate the rural areas and facilitate marketin.g. But stategovernments have lagged behind, despite a constitutional responsibility foragriculture. In the aggregate, agricultural investments have taken a smallshare of the public budget (an esti.mated 3% of disbursements in the 1970s)and that seems to match the other indicators of declining importance: adrop in the same decade in the sector's share of the GDP from 45% to 27%and i.n the sector's share of exports from 80% to 2%.

8. These trends are a reflecti.on of the rapid surge of oil productionand exports. By 1980 oil provided 96% of Nigeria's export earnings, whichhad grown in the previous two decades from N330 million to N13,600 millionper annum. Even if agricultural exports were to reach previous peaklevels, they would only contribute another 2% to those total 1980 earnings,such is the dominance of oil. Thus any policies supporting agriculturalrecovery must be framed in terms of the long term goals of diversification,food security and a self-reliant rural economy. In fact, trade andexchange rate policies have been pointed in other directions. On theexport side, Nigeria's cash crop farmers first suffered from heavy taxesand retentions imposed by the marketing boards. Later, starting in thelate 1970s, when farm costs rose above export prices, subsidies wereprovided but at levels which were inadequate to encourage farmers torehabilitate or even to harvest. On the import side, government's policiesin most years since 1970 have favored consumers, by permitting or itselforganizing the import and sale of cheap wheat, rice, maize and vegetableoils at negligible duty. During periods of balance of payments difficulty,quantitative restrictions on imports were applied. But these i.nterventionswere intended primarily to save forei.gn exchange and were relaxed when the

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balance of payments improved. Disadvantages attributed to trading policieswere greatly aggravated by shifts in the exchange rate, starting in theearly 1970s when the Naira began to appreciate following a long establishedparity with the dollar. The overvalued Naira put exports at a furtherdisadvantage, and strengthened the competitive edge already enjoyed byimported grains.

9. Trade and exchange policies have thus been set to support growthof the oil-based sectors: agriculture (and domestic manufacturing) hasbeen the unintended casualty. But the roles must ultimately be reversed.The Bank estimates that Nigeria's supply of oil for export will begin todecline in the mid-1990s. The sooner the shift into a more diversifiedexport base begins, the better. The exchange rate is a key instrument ofthat structural adjustment. If the devaluation of the exchange rate isinadequate, it will have to be supplemented by continuing use of tariffsand export subsidies. Indeed a change in the exchange rate may restoreequilibrium in the balance of payments (i.e., in foreign markets), butleave agriculture at a di.sadvantage with respect to other sectors of theeconomy (i.e., in domestic markets). If so, there i.s a case for continuingprotection and support to agriculture, at least on a temporary basi.s. Themain reason the sector has been put at a disadvantage is because of theescalation in the farm wage bill. And, in turn, the root of this problemis the relatively low level of productivity of rural labor in Nigeria,vis-a-vi.s labor in other countries and other sectors in Nigeria, andvis-a-vis the rural wage rate. In the long run the solution has to be toenhance labor productivi.ty i.n agriculture, while restraining wages. Butactions are to little avail in the absence of supportive price and tradepolicies. We are clearly looking at a most difficult set of structuralweaknesses to put ri.ght.

10. It i.s important to make a di.stinction between crops grown on farmsmostly for home consumption, with a margin expected in most years for sale,and crops grown predominately for domestic markets or export, includinggrain maize and rice. As explained in the next chapter, the former,"subsistence" economy has pretty much kept up with domestic demandthroughout the last several decades. The latter, "commercial" economy hassuffered the most from the hostile macro-economi.c climate described here.The two coexist on many farms: small farms largely subsistence orientedalso have commercial crops, and commercial oriented farms will grow somesubsistence crops. Within the "commercial" economy, the traditional exportcrops have declined dramatically, i.n some cases gi.ving way to commercialfood crops traded domesti.cally (e.g., cotton gi.ving way to mai.ze). Thedistinction is necessary because the effects of the oil syndrome have beenconcentrated in the commercial sector. The subsistence sector, thoughstruggling, has shown signs of enduring strength.

11. Government obviously has been concerned with the dangers of thecollapse of commercial agriculture. Both the military administration whichruled till 1979, and the civilian administration which followed until theend of 1983 voiced strong support for the agricultural recovery programs aspart of a plan to rebuild the absorptive capacity and long term growth ofthe non- oil economy. Thi.s commitment has been tested in two periods ofretrenchment in the last five years. It did badly on the tests. It is

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difficult to identify within the set of austerity measures any specialconsideration for protecting the essential components of a long termrecovery plan, except, perhaps, for maintaining investments in irrigationschemes and, until recently, subsidies on the sale of fertilizer imports.No sustained effort has been made to restore financial profitability tofarming, to induce small and large farmers to expand commercial production.In spite of repeated references to the need to utilize oil export revenuesto effect a transition to sustainable long-term growth, action programshave fallen far behind. Faced with unexpected fiscal and foreign exchangeshortfalls the government has reacted to these crises with a mix of shortterm management instruments that have no fundamental imprint on structuraladjustment. It is important to recognize that under present policies thefarmer is getting some of the support he needs. But it is through anawkward, inefficient and largely ineffective system which mixesinsufficient Commodity Board subsidies and an erratic import licensingprogram, the sum of which has proven to be much less than what anappropriate farm incentives pricing system would require, and in manyinstances has put profits in the hands not of t'he farmers but of tradersand other unintended beneficiaries.

12. In 1981 the nominal appreciation of the Naira was reversed. Theexchange value fell within two years by 27% from the previous peak. Butdue to the continuing high inflation, the real effective rate actuallyappreciated - by about 13% between 1981 and 1983. The new militarygovernment continued discussions initiated by the previous administrationwith the International Monetary Fund and the World Bank on policy reform.It is hoped that some substantial steps in favor of agriculture may betaken in 1985. These could include: further exchange rate adjustments;higher producer prices on cash crops traded by the Commodity Boards;consistent tariff protection against imported cereals and edible oil,combined with equivalent subsidy rates for exports; improved planningfunctions; and better coordination of state and federal field programs.Unless these and similar steps are taken, commercial crop programs andservices such as farm credit fight a nearly impossible battle. That is theeffect of the oil syndrome, which has inflated domestic wages and the Nairaand thereby nearly put progressive agriculture out of business. One waythe problem shows up for government and the Bank is by making itincreasingly difficult to identify viable production projects.

B. Trends in Agriculture

Food Crop Production

13. The data base on food crops is poor, especially for root crops,and trend estimates from domestic, bilateral and international agenciesoften diverge widely. Nevertheless, there is general agreement that percapita food production has at best stagnated since the early 1970s. Ajoint Food Strategies Mission comprising government and Bank experts in1980 calculated that total food production had been increasing by only 1%per year, implying declines in per capita production of from 1% to 2% andan emerging food gap of substantial proportions. The Food StrategiesMission was particularly concerned by the rapid rise in food imports thathad begun around 1975. Referring to the objective of the Green Revoluti-onProgramme to reach self-sufficiency by 1985 or at least within the decade

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of the 1980s, a policy that had been dec:ided in 1979 by the new civilianadministration, the Food Strategies Mission set forth the actions that wererequired if the food gap were to be closed. Official statistics issued bythe Federal Office of Statistics showed an even worse situation, in factFOS root crop estimates for the 1970s suggested losses in per capitadomestic caloric consumption in the southern states of catastrophicproportions. The Food Strategies Mission was aware of the data measurementproblems for root crops and, in the absence of visible evidence of severemalnutrition, set aside this gloomy scenario.

14. For the purposes of the Sector Memorandum, and for theAgricultural Pricing Policy Study which was also carried out by the Bank in1983, an exhaustive review was made of the data base and available evidenceon per capita nutrient consumption. The review suggests that the foodproduction trend may have been somewhat better than previously thought, andthat total production probably just kept up with population growth, Thisgives little cause for satisfaction, since it allows nothing for anincrease in the rate of population growth (which is shown in recent Bankprojections), or for the increase i.n per capita consumption that is usuallyassociated with growth ir. national income. But it does put a differentinterpretation cn food trends. It would appear that Nigeria's producers ofsorghum, millet, cassava and yam have been able to provide basic caloricrequirements, even as the work force shifts proportionally out ofagriculture. The surge in production in the 1984/85 season under thestimulus of drought-induced high prices is a reminder of the potentialresponsiveness of the food crop farmers. But they have not been able tosatisfy the demand from an increasingly urbanized public for wheat and riceand convenient preparations of all starchy foodstuffs, tastes that havebeen greatly enhanced by the very low prices of those imported grains. Itis this combination of factors that explains much of the pressure onimports, rather than the failure of the farmers to keep up with the demandfor traditional staples. The difference in emphasis has a material impacton the design of food production programs.

15., Maize and rice are exceptions amnong the food crops, for theirproduction has shown rapid growth since the mid-1970s. These homegrownproducts up till recently have competed at a disadvantage withhigher-quiality yet cheaper imported substitutes, and still managed toexpand their m arkets. Improvements in variety and processing areanticipated, better protection against imports is likely, and for bothreasons these two cereals are expected to be leading growth crops in thefuture.

Cash Crop Productio'

16. Nigeria established a strong export position with six cash crops:four tree crops from the southern states (cocoa, rubber, palm oil and palmkernel - the last two are separated because of their different roles intrade) and two field crops from the northern states (cotton andgroundnuts). Peak production was reached in the mid-1960s, with theexception of the palm products which then had already started to decline.Palm oil and kernel have recovered to some extent, i.n response to thegrowing domestic market for cooking oils. But production of the other cashcrops has been steadily slipping: between 1970 and 1982 annual production

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of cocoa, rubber, cotton and groundnuts declined by 43%, 29%, 65% and 64%,respectively. The escalation of wages and other financial disincentives toagriculture associated with the oil syndrome, coupled with weak commodityprices in international markets, have induced many of the cash crop farmersgreatly to reduce the area cropped. The trend has been to switch from thetraditional cash crops to marketable food crops such as maize and cassava.However, while food crops have taken priority, recent data suggest that thesteep decline of the premier cash crops may at least have been slowed.

17. All of the major cash crops are predominantly smallholder crops,though rubber and palm products are also produced on estates. The growingareas are rather well defined, for example, rubber and cocoa come fromseparate belts in the south (palm spreads across both), and cotton andgroundnuts, although they overlap widely in the north, have differentcenters of concentration. There is a large number of minor cash crops inalmost all areas, and farmers switch back and forth depending upon relativeprices.

Trade

18. The decline in cash crop production is reflected by bigger lossesin export earnings, si.nce the domestic market for these commodities wasexpanding. Table I shows quantities and values of the major categories ofagricultural exports for 1968 and 1982 (source: Volume II, Table 4). Theaggregate value of these exports falls by 46% in 13 years (and by 61% inreal terms, i.e., at 1968 unit values). Excluding cocoa, of which exportvalues held up well, the aggregate falls from N144 to N22 million, or by85%. Groundnuts and cotton disappear altogether. As mentioned above, as apercentage of total exports the collapse is even more pronounced.

Table 1

Exports of Major Categories of Agricultural Commodities

1968 1982

Quantity Value Quantity Value (Value)(MT '000) (1968 Nm) (MT '000) (1-932Nm) (1968 1/, Nm)

Groundnutsand Products 965 105 0 0 (0)

Palm Produce 161 20 59 7 (8)Cocoa and Products 224 115 140 118 (87)Raw Cotton 14 7 0 0 (0)Natural Rubber 51 13 23 14 (6)

Total 259 1.40 (101)

1/ 1968 Unit Values

19. The import statistics are equally disturbing. For agricultural,forestry and fishery products the total import bill increased 14 timesbetween 1971 and 1981, from $228 million to $3,150 million. That lastfigure can be compared with oil and agriculture export values i.n 1981 of$17,162 million and $344 million, respectively. The comparison shows thatwhat was essentially a balance on the agricultural trade account in 1968has been radically upset. Vegetable oils and fishery products, two othermajor items in current imports, began to enter in significant quantities inthe mid-1970s. The leading import categcries of 1971 - cereals, sugar,milk, live animals, forestry products, etc. - have all expanded rapidly.

20. Whi.le milk and a few other items are not suited for domesticproduction, the majority of these leading imports have invited concernabout the erosion of Nigeria's competitive position. The growth in cerealimports explains much of the present attention given to food policy. Table2 shows the growth path of three leading cereal imports over the lastdecade: rice and maize imports building up from a near zero base and wheatexpanding rapidly from an already imposing level (source: Volume II, Table6). The effects of trade restrictions imposed in 1982 begins to show up inthis table in 1983. The large drop in maize imports was associated with arecord domestic maize crop in 1982.

Table 2

Grain Imports 1971 to 1983(MT '000)

Rice Maize Wheat

1971 0 4 4051976 50 17 7451981 600 293 1,5171982 651 345 1,6051983 700 100 1,498

21. The high political profile of wheat, the dominant cereal import ofwhich only 1% of total consumption is grown domestically, is easilyinferred from the table. Rice and maize imports also have a fairlysignificant share of the marketed totals. Elsewhere we estimate importscomprise 57% of total marketed rice, and 38% of total marketed maize(Volume II, para 2,22),

22. The increase in the value of cereal imports i.n the decade1971-1981 (18 times) was phenomenal, but it was not much faster than theincrease i.n the value of imports of all agricultural, fishery and forestryproducts (14x), or the increase in Nigeria's total merchandise imports(12x). Thus the problem with cereals was part of a much larger shiftoccasioned by the oil boom. Self-sufficiency in cereals i.s not going tomake much of an impact on the total merchandise import bill - reducing itby 2% if rice and maize imports were eliminated altogether. This

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reinforces the point made above about exports (para 8), that correcti.veaction may have a big impact on agriculture but will have a small effect onthe balance of payments.

Supply of Inputs

23. The data base is too thin to tabulate changes in the supply toagriculture of the factors of production - labor, land and capital. Thisis an i.mportant area of analysis, since shifts in resources have had adecisive impact on the agricultural sector and :i t is essential to describeand explain them precisely, In the absence of a becter statistical basethis target escapes us. Ar exception are the physical farm inputs, where acentralized import system for chemical fertilizer has permitted moreaccurate measure or increases in consumption of this key commodity.

24. For labor, there is a presumption fhat the average supply offamily labor per farm household has fallen, especially in the south wherethe incentives for migration and non-farm occupation are strongest. Thisaffects the farm budget to the extent households are forced to replacefamily workers by hired laborers. Through most of the 1960s and 1970srural wage rates were reasonably stable with resnect to the cost of livingand commodity price indices. But about 1978 rural wages started to shiftrapidly upward, in response to wage and productivi-ity increases i.n otherparts of the economy, administered hikes in the statutory minimaumgovernment wage, the eve-n more rapid inflation of wage rates for all groupsat the lower end of the rural wage spectrum, and the departure of childrenfrom the farm work force to free schools. Daily rates for unskilled workin peak periods during the crop season ju 'ped from 92 in 1978 to nearly N7in 1983. We reckon that last figure is from three to five times higherthan the wage in competi.ng LDCs, measured at official exchange rates.Rural wages in the slack cropping periods fall from the peak levels, but tonowhere near the levels familiar a decade ago, Getting cheap labor forfarming is now impossible. Coupling the higher wage rates with thesubstitution of hired labor for famil.ly labor, the increase in the overallwage bill for farm households in the last six years has been unmanageable.Moreover, for some unpopular farm jobs the supply of hired as well asfamily labor is drying up - rubber tapping is often cited as an example.These reasons help explain the influx of nationals from other countries inrecent years.

25. The disproportionate increase in the rural wage bill in the lastsix years is said to be the single most important change in the economicenvironment depressing farming, strongly reinforcing trends that hadalready emerged. The wage hike has not been accompanied by any significantincrease in labor productivity. The rural wage is now well above the laboropportunity cost in agriculture, that is, the marginal productivity of thefarmer on the average subsistence farm. The present recession has alreadycaused a decline in the real wage. But most observers feel that unless theausterity period were to last through the decade, or- there -,ere importantadvances in farm technology, the real wage in agriculture will remain

inflated with respect to productivity, This can have the effect ofconcentrating labor in those types of farming which offer high returns tolabor, in particular i.rri.ga.ted and mechanized farming. There is danger of

misinterpreting the rural wage phenomenon, of taking what might be only afour year abberation (1979-1982) and treating it as the start of a twentyyear trend. Our judgement corresponds to that of most other observers,which is that an important structural shift has occurred i.n theagricultural sector which will influence decisions for decades. If we arewrong on this point, then some of the other positions in this report mustbe vacated.

26. For land, the trends are less certain, The famill.ar assertionthat the size of the cultivated farm is falling under the pressure ofpopulation growth would appear to apply only to high density areas in thesoutheast and parts of the north (as well as around urban centers). Thereland is an absolute constraint in growth of farm income. For the rest ofNigeria, however, land is available to the progressive farmer who wants toexpand and has the capital to do so. The market gets progressively tightercloser to the village center, and in many areas the prospective buyer orleaseholder must jump to the outer perimeter of cultivated land, givinghimself a physical problem that is restrictive but not prohibitive. Butthe process by which occupational rights to land change hand, and the ratesat which sales, rents and reabsorption of rentals are taking place, aresimply not known except in a few case studies of undeterminedrepresentatJveness. Whether the supply of land is relatively elastic andcould accommodate a substantial increase in the number of bids forcultivable property - in the event a farm development program gainedmomentum - is also not known. This is another major gap in information andexplains the wide range of opinion as to whether land is a criticalvariable. Our impression is that, with the area exceptions noted above, itis not. What is presenting itself as a land proolem is the laborconstraint: most farmers cannot expand farm size because they cannot putup family labor or affcrd to recruit,

27. That conclusion must be qualified in recognition of the fact thatthe customary communal tenure systems throughout large parts of Nigeriaprevent outright sale of tribal land to individuals, even mealbers of thesame sub-clan. Thus, acquired land often only confers annual cultivationrights, which ordinarily would prohibit the lessee from making capitalimprovements.

28. For capital there is also no statistical base for drawing trendlines. Nevertheless there is evidence that credit resources for largescale as well as small scale farm investments, and for agro-processingindustries as well, are completely inadequate to support any substantialrecovery and expansion of commercial agriculture should the investmentclimate improve. The case for a large infusion of seasonal credit now tosupport traditional farming systems is not strong, although reduction ofthe fertilizer subsidy will have some effect on credit demand, However,seasonal credit will be just as essentiaL as term credit to the expansionof commercial farming. The Natioonal Agr:i2ultural and Cooperative Bank, thefederal parastatal created tri 1972 to channel funds to farmers andprocessors, made an average of 27 loanis per year in the country, from 1974to 1980, under its direct-lending scheme to individual enterprises, Totalnumbers and amounts of loans by NACB have grown since 1980, but compared tothe total number of potential farmer and agro-industrial investors, the

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NACB portfolio can still be described as tiny. This pattern is repeated bythe commercial banks, which are obliged to place a certain percentage oftheir portfolio in the agricultural sector but have generally sought safei.nvestments with excellent experience, collateral and cash flow - poultryis the outstanding example, or was, until restrictions were placed onimported feed maize in 1983. Venture capital to fi.nance thediversification of agricultural enterprises is practically non-existent.Under a special public program for promotion of small and medium scaleagro- industrial development - the Agro-Industrial Development Scheme -AIDS officers have been repeatedly frustrated by the lack of fundsavailable from banks, reinforced by steep collateral requi.rements, tosupport projects technically prepared in collaboration with localentrepreneurs. That part of the AIDS program has been severely restrictedin 1983, despite an increasingly long list of applicants, due to thecombined effects of the credit restrictions imposed by thLe government'sausterity program and the conservative lending policies of the banks.Those policies should turn around once the climate of incentives improves.

29. The one posi.tive component of resource availabilities has been thespectacular increase in domestic fertilizer consumption in the last decade- from a low base of 30,000 MT imported in 1970 to 763,000 MT imported in1984. It is the result of a deliberate decision by the mil]itary governmentin the mid-1970s, continued by the civilian authorities, to use some of theoil earnings to finance a fertilizer-led development strategy.

C. Incentives to Farming

30. Volume II provides a lengthy discussion of the important factorswhich, in a favorable environment, would encourage rural households to takeup cash cropping. Five factors are discussed: technical strength of thecrop packages, availability of low-cost inputs, profitable prices foroutputs, marketing and processing facilities to absorb the outputs, andcompetition with off-farm employment. Apart from input subsidies, none ofthese offer significant incentives. That explains a large measure of theshift of resources away from agriculture.

New Technologies

31. There is difference in opinion whether crop packages presentlyavailable are profitable enough to sustai.n a vigorous agriculturaldevelopment program. Profitability depends on prices and technology. Theprice factor is discussed in the next two sections. Here the issue iswhether recommended improvements in farming practi.ces, improvements alreadyknown and demonstrated to work in the circumstances of the farm, offeryield increases or cost savings substantial enough to provide higherprofits at existing prices. The proposals of the Food Strategies Missionand the design of the Agricultural Development Projects (ADPs) assume theydo, and emphasize the upgrading of extension services and input deliverysystems to give the farmer access to the new technologies. Other reportson Nigeria, and on dryland crop farming in West Africa in general, say theydo not, and that a major investment in basic and applied research isessential to lift the technical frontier. In Volume II the two schools ofthought are identified as the optimists and pessimists.

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32. One has to look at available technologies not only on a crop bycrop but on an activity by activity basis to determine whether significantimprovements above prevailing practices are possible. There are few if anyeasy strategies based on comprehensive crop packages. The point of attackto restore profitability to cotton may be in developing cheaper sprayingequipment, whereas for yam it may be in reducing the costs of staking - twodifferent, specific routes to address the problems caused by rising wagesin labor-intensive crops. Some advances have been made. It would appearthat the only sensational new package is the one already vigorouslysupported by the extension services of the ADPs and the state governmentsin the north - the combination of nitrogenous inorganic fertilizer with TZBcomposite maize varieties. Since commercial maize is itself relatively newto Nigeria, and the use of inorganic fertilizer on a substantial scale isten years old, this package has all the attributes of a "profitable newtechnology" comparable to the wheat and rice packages that pushed the GreenRevolution in Asia. A technical breakthrough of major potential would be asuccessful breeding of cassava varieties that offer not only better yieldsbut also resistance to both mosaic and mealybug. Chances of building-inlong term resistance are said to be mixed. Cassava technology has beenstagnant for decades, although new releases from the InternationalInstitute of Tropical Agriculture are attracting attention. For othercrops there are changes in practices - methods of fertilizer application,yam mini-sett technology, seed dressings, substitution of tenera for wildoil palm varieties - which will have demonstrable effect. Though not of theorder of magnitude suggested by the Green Revolution slogan, thecombination of them, if properly supported by extension and deliverysystems, can clearly give a boost to the rest of the agricultural program.

33. But the sum of these improvements falls short of the expectationsof the optimists. The shelf of known, farmer acceptable improvements sofar remains relatively bare of innovations for farming of each of the fourmain staple crops - sorghum, millet, yam and cassava - and that is aworrisome situation. The new technologies are usually associated with newcrops; Nigeria needs breakthroughs in the major traditional crops. Thefact that questions have recently been raised (para 37) about the impact offertilizer on these crops, not on research stations but farmer fields,underscores the relative ignorance that prevails in the area of actualfarmer performance. In the absence of knowing what farmers are presentlydoing, and why, there is not much basis to suggest how they should change.A related gap in technology that shows up in the new as well as old cropsis the absence of advice that applies to prevailing mixed croppingpractices, or that helps adjust current practices to rising wages and otherchanges i.n the underlying economic conditions. This gap is identified bythe popular phrase farm systems research. A successful yam package may beone that, instead of aiming at maximum yields: treats yam only as a basecrop in a field that includes cassava and many other i.ntercrops; reducesthe impact of high wages by compromising on staking and mounding for yam;and anticipates planting in increasingly depleted soils, rather than on thebest parts of the best fields that southern farmers have given yam in thepast. The emphasis would be on achieving optimal yields within constrainedbudgets and while respecting traditional rotations.

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34. Finally, where the pessimists are most persuasive is in pointingto the weaknesses of the ongoing research program to provide a continuousseries of key breakthroughs on the major crops, changes that can sustainprogressive cash crop programs. The national network o:f researchinstitutions has a large, competent staff but for years has beenimmobilized by the absence of funds to finance experimental work.

35. One factor tends to be submerged in the discussion of newtechnologies. While the phrase is associated with yield-increasingpackages, other sources of production increases are available, and theseoffer another sort of optimism. The expansion of present technologies tonewly opened land, the development of small scale irrigation facilities andthe introduction of tractors and other forms of mechanization are examples.Even in the absence of research-based varietal improvements, these optionscan be expected over the long run to play a dominant role in development ofNigeria's agricultural potential. But these activi.ties arecapital-intensive, they are aimed mostly at commercial farming, and thatimplies that the rate of expansion depends much more on the investmentclimate than does the take-up of new varieties.

Input Subsidies

36. Government's policy since it accelerated the import of chemicalfertilizers in the mi.d-1970s has been to sell them for practically nothingin order to encourage thei.r use. The subsidy in 1982 amounted to 85% oftotal costs, including costs of transport to the official stores. Otherinputs also have been heavily subsidized. Chemical pesticides di.stributedunder official programs for tree crops and field crops have been sold at50% of cost (food crops, cocoa, oil palm, rubber) or gi.ven free (cotton,groundnuts). Tractor hire servi.ce charges are determined by the individualstates, but it is reckoned that most states recover from 25% to 50% ofoperating costs. Finally, imported tractors themselves are sold to privateindividuals and cooperatives at a generous rate - 50% or 75% of the fullrate. The subsidies appear even larger on imported goods when theovervaluation of the Naira is taken into account.

37. The Federal Government has recently decided to start a progressivereduction of the fertilizer subsidy, aiming to reach about 25% in 1987.The reasons are twofold. Fi-rst, because the subsidy has too many costs:it is a heavy load on the federal budget, it encourages corruption and itdiscourages legitimate private sector trading. Second, because i.t caneasily lead to wastage on the fields. Recent stuidies suggest theferti.lizer i.n some cases may have been selected and applied improperly tocrops to the point where the incremental yields do not justify its use(para 89). The reduct-on of" the fertilizer subsidv may signal a. broadermovement away from the high subsidy rates characteristic of the whole rangeof inputs. To date, however, the policy must rank as one of the mostgenerous anywhere - a determined effort to introduce modern inputs bylowering their costs to the users, regardless of short term economlilosses.

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Crop Prices

38. A distincti.on is made between pricing policies for exportcommodities and for food crops. The first are influenced by fluctuationsin world prices of non-cereal agricultural commodities and by fiscalconsiderations related to the taxing or subsidizing of export cropproducers. The second are influenced by prevailing low prices of importedcereals and political considerations related to the interests of urbanconsumers. The two sets of prices move independently, and in the last fiveyears export prices have lagged behind. For neither group, however, hasgovernment consistently used its price fixing authority and its controls ontrade to offset the disincentives of the oil boom by raising farm prices inorder to encourage farmers to expand production. The unpredictability ofpublic policies is almost as important a disincentive as the low officialprices themselves.

39. Food prices appear to have been relatively stable during the 1970swhen measured against other price indices - rising in the early years andfalling in the later years. There is not complete agreement on this point,although it is clear that at least prices did not rise to anywhere near theextent indicated if the worst scenario of declining domestic productionwere correct (para 13). Since 1979, however, food prices are shown to haveincreased for most crops relative to other consumer prices - the absoluteincrease by an estimated 100% for the four year interval 1979-1983 (andaccelerating late in 1983 due to the drought and new import restrictions).That increase partly reflects several phases of tightening of importcontrols on cereals and cooking oils, actions that were taken, as mentionedabove, to reduce the drain of foreign exchange. During the same four yearperiod rural wages jumped by over 200% (para 24) so that the apparentadvantage to the farmer of rising prices was offset by the steadilyworsening terms of trade with farm inputs, of which we have estimated thatlabor costs comprise about 80%.

40. Farmgate prices of export commodities have been fairly wellinsulated from swings in international prices, but not to the advantage ofthe producers. The marketing boards control farmgate prices and thepractice was to tax the producer when international prices were high andsubsidize him when they were low. In fact, the intervention of the boardshas been lopsided - the taxes were criticized throughout the 1950s, 1960s,and early 1970s as being too high to induce replanting and expansion by theprogressive farmer (total retentions were estimated at over 30% for cocoa,cotton and groundnuts), and the subsi.dies that have been pai.d since thelate 1970s, are criticized as being too low to have the same desirableeffect. A combination in 1982 and 1983 of low international prices forcrop exports, on the one hand, and the budget crisis, on the other, hascreated an impossible position for government - it cannot afford to pay thesubsidy above world prices it wants to pay to encourage the croprehabilitation program. This delimma is a dramati.c feature of the oilsyndrome.

41. Another confusing factor which helps explain government'sambivalent position on pricing policy i.s that crop prices are at the same

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time too high and too low. They are too high in terms of internationalprices, which is what officials dealing with trade and subsidy provisionsare worried about. They are too low in terms of farm costs, which i,s whatofficials concerned with agricultural development and what the farmers areworried about. This dilemma is a dramatic feature of the oil syndrome.

42. Government's pricing policies are weakened by the lack of gooddata and analysis on farm costs, yields and the impact of imported cereals.A Technical Committee on Producer Prices (TCPP) was set up in the 1970s toadvise government on appropriate minimum producer prices, and to administerthe approved prices for scheduled crops through the agency of the CommodityBoards. Gyaranteed minimum grain prices have since then, withoutexception, been set lower than market prices, so that the GuaranteedMinimum Price (GMP) Scheme of the Nigerian Grains Board has beeninoperative. The same is true of official palm oil and groundnut prices,so that the buying campaigns of the Nigeria Pa:Lm Produce Board and NigeriaGroundnut Board have also been ineffective. A:Ll the Boards argue on behalfof the farmer that the scheduled prices are too low; the prevailing view onthe TCPP is that they are high enough. There is urgent need for acomprehensive study of appropriate crop prices. The study wouldincorporate farm costs, international commodity price projections, imports,tariffs and subsidies, and would seek to determine which crops have a longterm comparative advantage, and therefore warrant support during therehabilitation period, and the profit levels needed to induce recovery andgrowth of production.

43. The study would distinguish between the relative recuperativepowers of food and export crops once equilibrium in foreign and domesticmarkets has been reestablished. For the main cash crops there is littledoubt that price reform will boost production substantially. For foodcrops the impact of reform on net profits, and therefore on productionresponse is not so clear. As mentioned, the traditional subsistence cropshave about kept up with demand and further increases wil,l probably be tiedto population growth. Production of the "newer" cereals - rice and grainmaize - has increased also, and would presumably increase even more sharplyonce the competition from cheap imports has been neutralized by exchangerate and tariff reform. But with simultaneous action to reduce fertilizerand other subsidies, of which these two cereals in particular are heavyusers, there will be some offsetting effects on profi.ts. On balance, onewould expect a major surge in production, since imports constitute such alarge percentage of marketed quantities of these two grains (para 21). Butthese issues are much too important to leave to guesswork.

Processing, Marketing and Storage

44. Most food crop production programs in Nigeria practically ignorepost harvest operations. The assumption has been that the private sector

The GMP for maize was set aside in 1983 and a higher price paidunder the Strategic Grain Reserve Scheme.

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would spontaneously expand the processing facilities and marketing channelsby which increases in production were absorbed. That assumption has beentested on the marketing end twice in the north, where unexpectedly largemaize deliveries in 1978 and 1983 have overloaded the private system andexposed its weakness in handling major surpluses efficiently and in amanner to avoid a rapid decline in farmgate prices. The Grains Board wasequally unprepared in 1983, so the implications extend to public as well asprivate agencies. The experience with maize trade is instructive ofdeficiencies elsewhere in the marketing institutions. These failings arereflected also in the surprisingly large inter-city variations in food cropprices, too large to be explained by transport costs and indicative ofimperfections in the flow of information on commodity volumes and marketprices. Nevertheless, most observers agree that marketing institutions arerelatively effective, compared to the weakened position of village leveland industrial processing facilities.

45. Private sector processing activity has failed to keep up withexpanding and changing consumer demands. The phenomenon is explainedpartly by the reluctance of commercial banks to place their money on whatis perceived as the high risks associated with agro-industries in aninhospitable economic environment. Imaginative private schemes are neededfor competing with imports for the growing urban market for cereals andcooking oils, yet with the low import prices the investment community haskept its distance. In the last year a strong private interest has begun tobe revealed in industrial palm oil processing, a result of theextraordinary high market price of edible oils. Progress in othercommodity markets lags behind. Other factors which discourageagro-industrial investments are the difficulty of access to importedcapital goods and spares - a constraint common to all industrial activity -and competition with low-priced village processing activity - a constraintpeculiar to agro-industry. Actually the village and the industrialprocessing sectors have been equally depressed. A combination on the onehand of low cost, imported, prepared foodstuffs and on the other hand ofinefficient domestic processing capacity has turned the terms of tradeagainst processors as well as farmers. Village female cassava and oil palmprocessors are cutting back the time spent in producing gari. and oil forthe market. Their equipment is cheap but the labor requirements are highand increasingly seen as excessive. Processing at both the industrial andvillage levels would be well served by rapid development of low cost, lowlabor technologies.

46. Among the specific examples cited in Volume II where improvementsin technologies and emphases are needed in the processing end are (1) lowcost intermediate technologies to replace labor-intensive operations, suchas small scale mechanical groundnut shellers; (2) equipment for preparingbetter quality grains, especially polished rice; (3) more efficient garipreparation techniques; (4) technologies for producing acceptable floursfrom domesti.c cereals and root crops; (5), more generally, a shift to fastfood preparations; and (6) modern concepts of food processing based onchemical properties.

47. In two respects the situation in processing holds some promise.First, a sizeable infrastructure for processing has been established in the

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years before and after independence, so that there is now excess capacityfor ginning, crushing, and milling the major commercial crops, includingprocessed rubber. Also private flour and feed milling industries have beenbuilt rapidly in the past fifteen years to process the expanded wheat andmaize imports. Second, government has recently accelerated theconstruction of new, large scale processing facilities, responding to theperceived deficiencies discussed here. It has invested in two cocoaplants, to increase domestic value added before export, and in additionalpalm oil extraction plant. Two parastatal food production companies aswell as the Grains Board are also busy expanding milling capacity. Whileone may question the emphasis on public enterpri.se in large scalefacilities, it is clear that government has attached new priority toprocessing activities.

48. The gaps in post harvest facilities extend to storage. Off-farmstorage is inadequate to deal with large cereal surpluses, a pointemphasized by the difficulties the Grains Board had in 1983 in controlledopen storage of the maize and rice bought up in that year's extraordinarybuying campaigns (150,000 MT of maize purchased compared with 92,000 MTowned and rented space). Storage properties of the root crops - yam andcassava - are notoriously poor, and there have been no technicalbreakthroughs to relieve that situation. The deficiency in off-farmstorage throws the problem back on the farmer. If this uncertainty couldbe removed, and the farmer could be sure even in an exceptionally goodharvest season that his surplus would be sold at a profit, one would expecta more vigorous supply response by the farmers to other productionincentives. Fortunately, the problem is less acute in the north, where theclimate is dryer and the bulk of the grains are grown.

Non-Farm Incomes

49. The flow of young men from the farms is stripping the labor supplyfor rural development. One of the objectives of the Green Revolution andsuccessor Programmes is to arrest this movement by enhancing the incomesand quality of life on the farms. There has been little research on thistopic, in fact, the whole subject of rural-urban and rural-rural migrationis poorly documented and described only in case studies and anecdotes.Since the flow to the cities is in response to the perceived amenities ofcity life as much as to cash earning opportunities, it is impossible tocompare family farm incomes, farm wage income and urban wage income anddetermine the levels of each at which the young men would turn away fromthe city and seek work either on a plantation or stay to help theirfathers. One can predict that a recession in the formal economy would notonly throw labor out of work but force some of the men back on the ruralareas, a process that must now be under way. How great this reversemigration will be is impossible to assess. One can more easily predict adecline in the real urban wage than its consequences: the rate of movementof people back to the farms, or the numbers of rural students who stay homewho otherwise would have packed up and left for the cities aftergraduation. The informal sector of urban employment is little understoodbut apparently it is a robust community that has an absorptive capacityeven in bad times and can sustain some workers released f:rom the formalsector almost indefinitely. It pays the farm family to maintain the

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non-working migrant in the city in the hopes he can eventually reacquire apaying job and keep the opening for the family in the "modern" world. Inshort, the direction of migration is probably irreversible, though themovement will be slowed to some degree by continuing recession in urbanemployment. Also, some migrants can be turned around by promising cashcrop programs and improvements in the amenities of the smaller towns andvillages.

50. The choice facing individuals is a piece of a larger decisionabout the allocation of family labor. Migration is a dramatic example ofthe trend in rural households to turn from full-time to part-time farming.Some data is available showing the percentage of households withsubstantial off-farm or on-farm incomes from non-farming activities, andthe percentage of heads of households reporting non-farm activity as aprimary or secondary source. A weighted average of samples drawn fromeleven project areas in the north and south shows 60% of adult malesavailable for work have either primary or secondary non-farm occupations.Of the eleven, two areas in the south showed about 60% reporting these asprimary sources. The northern areas show lower percentages, but otherevidence indicates the same trend exists there though moderated by thestrong Moslem family lifestyle. One of the features of part time farmingis that the role of women and the crops traditionally grown by women areassuming greater importance in the farming profile. Again, that is lessevident in the Moslem areas. This subject is picked up again in Section Fbelow.

51. The importance to agricultural development programs of migrationand part-time farming is obvious. It means that rural housholds are makingconscious decisions to adopt new packages and other components of anagricultural program in the light of its effects on the options for otherwork as well as for leisure. In the absence of results from a formalinvestigation of the comparative economics of migration, we must fall backon scattered empirical evidence that farming incentives have for the lastseveral decades been inferior to those presented by those otheropportunities. There are signs that that movement is slowing down due tothe recession. Much more study of these and related labor issues isneeded. It is essential that rural development programs take thesenon-farm options into account. Crop packages should be tailored to thecircumstances of part-time farming families. We can expect that the higherthe proportion of non-farm earnings in total family income, the morelimited the rural household's response will be to agricultural incentives,especially the relatively small incremental cash profits offered in thetypical small farm, dryland program.

D. Public Investment Programs

Evolution of Sector Strategies

52. An important shift in the sector strategy of both the governmentand its major donors is discernible from committee reports and investmentdecisions within the last four years. The shift has three major elements.(1) Food crops have taken a commanding lead over tree and other cash

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crops, and this despite emphasis given to tree crops in agricultural sectorstudies of the 1960s and 1970s and despite apparently equal treatment inthe objectives of the Green Revolution Programme. (2) Resources have beenconcentrated on delivery systems, including extension advice, inputs andinput services, on the assumption that the technical packages and cropmarketing systems were adequate to support substantial productionincreases. As discussed in Volume II, earlier sector work was lessoptimistic about the profitability of the packages. (3) Increasedpriority is given to policies favoring small farms, vis-a-vis mechanizedstate farms. Federal and state support for large farms and for tractorimports persists, although those programs now focus more on partnershipwith private companies or cooperatives. Nevertheless, there is freshinterest i.n harnessing the potential of the small farmer sector.

53. Several strategies providing alternative routes to increased cropproduction have received less attention throughout this period. Exampleswhich have already been alluded to or which fi.gure i.n subsequentdiscussions in this paper are (1) market oriented development strategies,emphasizing appropriate pricing and favorable trade policies, along withinvestments in the infrastructure of processing, storage, markets, andtransport; (2) mechanization of small and intermediate scale land clearing,tillage, harvest and post harvest operations; (3) expansion of credit; inconjunction with (4) rescue and improvement of the cooperatives; and (5)improvements in agricultural education and technical training.

Priorities of the Federal Budget

54. Table 3 shows a summary breakdown of federal capital investmentsproposed for agriculture and related sectors in the Fourth NationalDevelopment Plan 1981-85 and in the revised annual Budget Estimates for1983, and compares these with actual and proposed Bank commitments for theperiod 1980-85. State and local government investments are excluded, whichweakens the analytical function of the table with respecit to the publi.csector as a whole. The table is drawn from a detailed account in Volume II(Table 8), where explanations of the row headings are given (and where

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Table 3

Allocation of Development Funds Withinthe Agricultural Sector

(Percentages)

Federal Allocations World Bank CommitmentsFourth Plan Budget Estimates Actual and Proposed1980-851/ 1983 1980-85

Small farm -field crops 28 17 91

Large farms, tractors,tree crops, marketing,credit, etc. 22 16 0

Livestock, fisheries, forestry 8 6 8Irrigation (formal) 35 57 0Research 7 5 0Agric. Education .. .. 1

Total 100 100 100

Less than 1.

1/ Excludes investments by the states and local government authorities.Together these equalled 62% of federal allocations in the Fourth Plan.

some state and local government figures are given). The "large farm...,etc." category is an artificial group that tries to isolate from thepredominantly small farm programs those which support large scaleoperations or are neutral with respect to size of farm. There i.s overlap,but the table nevertheless is a basis for some strong conclusions. Thesecomments do not necessarily reflect priorities of the new government, whichhas yet to articulate a comprehensive plan for agriculture. Thatopportunity will appear in the Fifth National Development Plan, 1986-1990,which is now in preparation.

55. Irrigation dominates the table. Not only do federal allocationsexceed those to any other category, but the share increases from an average35% i.n the Plan to 57% in the 1983 Estimates. When virtually all otherallocations were being cut to meet the 1983 budget constraints, irrigation,and this means federal commi.tments to the River Basi.n DevelopmentAuthorities, were increased from N562 million in 1982 to N775 million in1983. Much of that was expected to be drawn from foreign sources, whi.chultimately were not available. Thus the actual expenditure shares would bedifferent, with irrigation taking a more modest role. But as budgetedfi.gures the shift presumably signaled an intention by the federalgovernment to orient the further development of Nigeria's agriculturearound its water resources, and specifi.cally to put the majori.ty of those

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funds in the hands of the RBDAs. It is not yet: clear whether theseemphases will shift under the new military government. The Budgetallocation for RBDAs was cut severely in 1984, and the percentage share hasdropped below 40% in 1985. But at the same time the RBRDAs have assumednew responsibilities in rural development (they have also had a name changeto River Basin Rural Development Authorities (RBRDA) - see para 66).

56. Apart from irrigation, the split of federal funds is about even in1983 between what the table identifies as small farm activities and otherfield programs. This contrasts with the Bank's allocations, which not onlybypass the RBDAs altogether but concentrate on the small farm activities,in particular the ADPs. The comparison between the Bank and federalprofile implies no criticism of either, the Bank can concentrate itslimited resources whereas the government has a wide range of obligationsand opportunities. Nevertheless, it is clear that at the federal level therural development program oriented around the ADPs has suffered some lossin funding priority - in absolute and relative terms - vis-a-vis the RBDAs.With the details presented in Volume II, it is shown that the tree cropactivities absorbed the largest proportional losses in the budget cuts,affected both by a decline in allocations to the Commodity Boards formarketing, processing and storage, and by cuts in allocations directly tosmall farm tree crop activities. This last category almost disappears,falling from N44 million per year proposed in the Plan to N6 million in the1983 Estimates (and in 1984). Our attention is also attracted to the lowlevel of federal finance for agricultural education - less than 1% of the1983 appropriations.

57. One point of clarification needs to be made at this juncture.While the Memorandum underscores many elements of public policy which helpexplain the decline of the agricultural sector, it must be understood thatwithin the bounds set by the oil boom, the old military and civiliangovernments did promote an agricultural program that in some importantrespects worked. The subsidized fertilizer campaign was unparalleled inSub-Saharan Africa. So was the rush into construction of new reservoircapacity. The reform of the marketing board system in 1977 had a similarpurpose. Criticism can be made of the efficiency with which these programswere executed. But, to repeat another point made earlier, the main reasonwhy agriculture has fallen behind is, not because government ignored it butbecause government did not try to control the impact on the sector of majorforces originating elsewhere in and outside the economy, a difficult taskthat cannot be put off much longer.

Special Programs

58. The more important development programs of the federal governmentare described in Volume II and summarized below. Si.nce the Constitutiongave primary responsibility for agriculture to the state governments, thefederal programs generally have been designed to support activities run bythe state ministries of agriculture. Exceptions are the federally-owned orcontrolled large scale farms and plantations, and the programs of the RBDAs(RBRDAs).

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59. Research and Demonstration. There are 19 research institutesdealing wholly or partly with agriculture and related subsectors. Since1977 they have been administered by the Ministry of Science and Technology(now Ministry of Education, Science and Technology). Three of them playimportant roles in the National Accelerated Food Production Project(NAFPP), a ten-year old, countrywide, research-based promotional campaignfor the seven key food crops. NAFPP is funded through the FederalDepartment of Agriculture, which coordinates with state-run field offices(again, see para 66 concerning recent changes in names and structure).NAFPP also incorporates a program for constructing agro-service centers.Both the demonstration and agro-service center components have been starvedof funds in recent years and the program apparently will be phased out in1985. Though NAFPP and ADP share the same goals, the institutionalstructure is completely different and there has been little coordination.Another key component in the research network is the InternationalInstitute of Tropical Agriculture, at Ibadan. IITA has done some excellentwork on cropping systems of the humid tropics, much of which is relevant toNigeria. But the work IITA has done specifically in Nigeria has attractedcriticism from the national research establishment, which sees its own roleovershadowed. IITA's relationships with the national research institutesneed to be improved.

60. Fertilizer Distribution. The massive fertilizer program thatgained momentum in the mid-1970s was triggered by the optimism generated bythe new oil earnings and was designed to exploit the successes of NAFPP.Due to funding shortfalls and mounting financial problems of NAFPP, theadvent of the ADPs proved a crucial factor in carrying the fertilizerprogram forward.

61. Agricultural Development Projects. These constitute a specialclass of integrated rural development project which, under the authority ofa semi- autonomous state management unit, concentrates resources on a fewkey activities in direct support of small farm production. The threecomponents of the Basic Services Package are extension, input deliverysystems based on commercially-oriented farm service centers, andconstruction, repair and maintenance of rural roads. Seed farms are acommon feature also. The ADP network now spreads out to cover much of themiddle and northern belts, either in enclaves or in statewide programs.Plans are being finalized for extending the ADP program to cover most ofthe south. The ADP design has been criticized for its high expatriateprofile and poor linkages and continuity with indigenous institutions (i.e.NAFPP and local research institutions). But the simple fertilizer-cerealstrategy has worked well in the northernmost states under thesemi-autonomous management system, and the attempt now is to find equallypromising strategies for the south and its root crops.

62. Tree Crop Programs. Commencing in the early 1970s, and with thesupport of the three major research institutes devoted to cocoa, oil palmand rubber, the federal and state governments have been promotingrehabilitation programs mostly for smallholders growing these three crops.But new plantings and replantings under the program are both small comparedwith areas under traditional harvest. With the exception of a few of theoil palm estates, none of these programs have done well. Government

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concern remains strong, yet federal contributions have fallen precipitouslyfrom Plan levels. The case for renewed support i.s the sum of the cases foreach crop, since the economic potential and labor requirements varysubstantially. Many farmers in the tree crop belts refuse to harvest, letalone replant, because of the cost price squeeze.

63. State Farms. Large scale mechanized farming has an appeal tofederal and state authorities, despite poor performance on almost allstate-run farms in the past. There are plans to develop many additionalfarms, with private partners to manage them. All but a few of the farmsare owned by states rather than the federal government, and there is noconsolidated record of their achievements. The two federally-ownedproduction companies that began operations at the end of the 1970s, forgrain and root crops, own a mix of farm and processing facilities. Neitherhas achieved profits yet. If these state and federal farms can be made towork, they would offer a significant contribution to the supply of food tothe cities. However, the record gives little cause for optimism, unless,that is, there is a major change in management systems.

64. Tractor Programs. The volume of tractor imports into Nigeriaincreased rapidly in the early 1970s, from a total figure of 480 importedin 1968 to 4,980 in 1976. Growth continued through 1981 (import figuresavailable to the Sector Memorandum Mission are incommensurate with theearlier figures), though import controls after 1981 have brought that trendto a temporary halt. Most of the tactors imported in the period 1981-1983arrived under large batch orders by state governments (Sokoto State orderedabout 650 in 1982/83), which sold at subsidy or gave them away toindividuals, cooperatives, tractor hire units and other state programs.Tractor power is part of the self-image of a modernizing Nigeria, and theiruse on private farms is beginning to assume some importance although thetotal number of units in the country is still relatively small. Each stateruns tractor hire units (THU), which are notoriously inefficient. In theabsence of reform of trade and price policies favoring agriculture, theprofitability of tractorization will remain low. With reform, the domesticprice of tractors and fuel will increase, especially as subsi.dies arereduced. But the profitability of crop enterprises is also expected toincrease (para 43), and consequently the demand for tractor power. Withoutfurther analysis it is not possible to predict the balance of theseeffects. Nevertheless, the use of mechanical power on small as well aslarge farms is an essential feature of development - especially in view ofthe labor shortage and high wage rate. Thus, assuming improvements are madeon the policy side it would appear the expansion of the tractor fleet willparallel the expected growth of commercial farming. However, a formulamust be found to make the THU work, and this almost certai.nly implies atransfer to the private sector.

65. River Basin Development. Since 1984 the RBDAs report to the newlyreconstituted Federal Ministry of Agriculture, Water Resources and RuralDevelopment. Thei.r programs are based on large scale formal irrigationschemes, though in anti.cipation of future expansion of irrigationfacili.ties some of the newer RBDAs have engaged in dryland development andfarming. From 1977 to 1984 there were 11 RBDAs, and the whole of Nigeriawas divided into 11 areas of operation. In 1984 new government ordered an

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expansion to 18 authorities, each to cover one state (Lagos and Ogun arecombined). The distinction between what RBDAs do in dryland areas andwhat, for example, ADPs do has been blurred in the middle and southernRBDAs which are newer (the northern RBDA dams and irrigation works werestarted in the early 1970s), have not built many structures yet, have lesswater already under command of reservoirs and other major works to provideirrigation, and yet were expected to participate in delivering food for theGreen Revolution Programme from rainfed production sites that areultimately expected to be irrigated. The focus of all the RBDAs is oncereal production, wheat i.n the north and rice and maize i.n the middle andsouth. Thus they are trying to be responsive to the urgent need to replaceimported grains, though the low efficiency levels reveal some disregard foreconomic considerations. The operational irrigated area is growing rapidlyas more water comes under command and downstream facilities are completed.By early 1983, 66,000 ha had been cleared, 80% of that by the threenorthern RBDAs. Projections of rates of growth of RBDA investments,irrigated area, participating farmers (control of farming operations isintended to pass back to local farmers), and expected production wereextraordinarily ambitious. Those projections have been severely reduced in1984 and 1985 in response to the deep budget cuts. The program has beencriticized for inadquate planning, slow progress and waste. Though some ofthat criticism may be premature, i.t would seem that the whole of thisimmense investment program needs to be brought under better control. Thatreform has already begun. The Federal Department of Water Resources andthe RBDAs have started concentrating on means to make better use of wateralready impounded, rather than to build new head works. There is a shiftin priorities also toward smaller, formal schemes. Yet another importantcriticism of the RBDA program i.s that this far it has completely ignoredthe really small scale, village level, traditional irrigation schemes,which most reports on the sector claim offer a more cost-effective means toharness the country's irrigation potential. In fact, where these informalschemes predated RBDA investments elsewhere on the same river, they haveoccasionally been severely hurt by the new program (either by being floodedor by losing the seasonal flood).

E. Institutional Development

Federal and State Ministries of Agriculture

66. The Federal Ministry of Agriculture, integrated with the FederalMinistry of Water Resources i.n early 1984 and subsequently renamed theFederal Ministry of Agriculture, Water Resources and Rural Development,over time has acquired responsibilities which were not assigned in theoriginal 1960 Constitution. In the process FMA gave up authority over thefederal programs in research and water development (the latter function isnow back). Till the end of 1983 there were twelve separate departments andstaffs in FMA, of which the two most important for the Bank's programs werethe Federal Department of Agriculture (FDA) and the Federal Department ofRural Development (FDRD). FDA was the main line agency from which FDRD andother line agencies have evolved. The most recent reorgani.zation broughtthese two units together again in the reconstituted Federal Department ofAgriculture and Rural Development. Other important changes have also beenannounced, including transfer of all operational responsibilities of FDA

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and FDRD to the RBDAs, which have been renamed (River Basin RuralDevelopment Authorities). Many of the changes in assignments and staffinghave yet to be worked out. The ADPs are state development agencies, butfederal finance and supervision was provided by FDRD. Most other federalfarm programs and Bank agricultural projects, for example, those for oilpalm and rice, were controlled by FDA. Again, the state usually has finalauthority for project management. Each state has a ministry ofagriculture, by that or another name, and it carries out the traditionalfunctions with a large extension staff comprising the bulk of the technicalcadre. The only large federal extension staffs are those of the RBRDAs,which give the federal government direct access to farm communities.Institutional relationships have not received enough attention in thedesign of ADPs, especially in the enclave projects. There, FDRD, FDA, ADPand the state ministry staff may have all been working in parallel withoutadequate coordination, and an RBDA would have further complicated thescene.

67. The series of reorganizations involving FMA in early 1984 areintended to eliminate most of those coordination problems, at least thosefor which the federal authorities are responsible. The government has theopportunity now to rationalize the functions of these units. It has thechallenge of drawing out the best of each. In particular the isolation ofthe ADPs from the traditional FDA services, and of both the ADPs and FDAfrom the RBDAs can now be ended. So can the proliferation of agencies andcommissions with special but often overlapping tasks. Perhaps the mostimportant task is to find an agreed formula for coordinating state andfederal operational activities in agriculture.

Commodity Boards

68. Up until the latest reorganization the six Boards established in1977 received technical supervision from FDA, and the Federal Ministry ofAgriculture was the channel for rehabilitation and development grants. Thecosts of crop buying campaigns and other items on the trading account,however, are funded by the Central Bank of Nigeria. Thus the Boards mustrespond to two sources of finance and financial control. Because ofdistinctive developments in each major corp, the trading roles of theBoards differ substantially: the Groundnut, Palm Produce and Grains Boardshave been buying a very small share of the total marketed crops ofgroundnuts, palm oil and food grain, which are almost entirely consumeddomestically; the Cotton Board buys 100% of the seed cotton crop, alsoconsumed domestically; the Cocoa and Palm Produce Boards buy nearly 100% ofthe cocoa and palm kernel crops, for export; and the Rubber Board buys 60%of the rubber crop, the share that is exported. The Boards also administercomponents of the government's rehabilitation programs.

69. The Boards have been criticized for inefficiency, and forunnecessary intervention in a marketing system where privrate traders arealleged to offer better service. The legitimacy of that criticism differsfrom Board to Board, usually depending not so much on its competence but onthe nature of the crop. The Bank has proposed a study of the role andperformance of the Boards to determine which services should continue to besupported.

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Other Institutions

70. Volume II briefly discusses the credit institutions, which weredescribed in para 28 above as doing an inadequate job in financingprogressive agriculture. Mention is also made of several researchinstitutions specializing in post harvest industrial activities, ofuniversities with agricultural research and teaching programs, of theAgro-Industrial Development Scheme (AIDS), and of the cooperative movement.This study has not done justice to the huge network of cooperativeinstitutions, most of them organized at the state level and supervised bystate governments. The cooperatives have a poor reputation in Nigeria, buta well-functioning movement can strengthen the smallholder programs.

F. Transformation of Traditional Agriculture

71. One of the distinguishing features of Nigerian agriculture is thelow level of mechanization of farming and commodity processing. Nigeriaranks about the same as most other West African states in terms of thepoorly-developed nature of rural blacksmithing, welding, tooling andfoundry facilities, the rudimentary use of improved instruments ofproduction, and the slow rate of introduction of animal and machine sourcesof power. The disparity only shows up in comparison with the advance inproductivity in the industrial and service sectors of the economy. Lowlevels of on-farm productivity help explai.n the disincentive for farmfamily members of farm work vis-a-vis off- farm employment. And theyunderline the problems posed by the rising rural wage, which, at themargin, has moved well above labor's value in farm operations. But thesesame comparisons reveal an opportunity for substantial improvement incropping and processing systems provided profitability can be restored.

72. The low level of mechanization is surprising, given the fact thatmechanization has been encouraged by the overvalued exchange rate (whichmade imported equipment cheaper); subsidized fuel; subsidized credit andtractor services, and the rising real wage rate. It is a reflection of theabsence or failure of a wide range of complementary policies and programsthat encourage the capitalization of agriculture; and also of the fact thatespeci.ally in the south, some of Nigeria's farming systems are notwell-suited to mechanized land clearing or cultivation. Thi.s includes notonly equipment but investments in land improvement - irrigation, terracing,etc. The familiar criticism that Nigeria has neglected her farmers duringthe recent decades of industrial growth has three aspects: a failure toensure stable remunerative prices and marketing channels that would inducefarmers to produce a surplus; a failure to create a viable credit systemthat has the capabili.ty to finance capital formation in profitable farming,farm services and processing enterprises for more than a small number ofloan applicants; and a failure to create the infrastructure and environmentto support private services in machinery maintenance, repair, spares andtraining.

73. The modernization of farming, especially in southern Nigeria inthe next decades, will be accompani.ed by a gradual differentiation amonglabor and managerial forces comparable to the process of specializationwhich is the basis for growth in the other sectors. Programs that do notallow for distinctions among farmers, and that treat them as a homogeneousgroup of small-scale full-time farmers each searching for ways to expandcash cropping without breaki.ng far from traditional husbandry systems, will

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miss one of the important dynamics of the sector. The typical smallholderwill make a substantial contribution for many years, and he must continueto attract the preponderance of official support. But in time his rolewill be overshadowed by the emerging modern entrepreneurs, whose operationsare increasingly based on wage labor and machinery. The requirements ofboth groups must be met.

74. These distinctions also bring out the probable role not only oftractors but of term and seasonal credit, and other capital services. Itis doubtful whether the typical small farm will either be able to generatea sufficient inducement to attract the school leaver to family farm workwith the cutlass and hoe, or to produce market surpluses sufficient to meetgrowing and shifting urban demands. However, there is evidence of theopportunities which a small group of enterprising emergent farmers aretaking to fill the gap. With improved economic incentives this group shouldplay an increasingly important role - but not without the capital servicesthat are an essential part of any modern agricultural economy. This i.s notan argument for subsidy, only for establishing a basic network of servi.ceswhich now are distinguished in Nigeria by their almost complete absence.

75. In short, cash incomes on Nigerian farns can only compete withreal or prospective off-farm incomes if the level of on-farm capitalizationis raised significantly: on one subset of farms - small, medium or largeto begi.n with - that are likely to be growing in size; and another subsetof farms that remai.n small but elect to intensify the production system.For many of the small farms, however, priorities are likely to shift towardthe off-farm earnings. The holdings of these part-time farmers wi.ll beretained as a home base, a source of the family food supply, an insurancepolicy for old age or for periods of recession. However, apart from pettytrading by the wife of vegetables from the home compound, the trend in thefamily financial strategy will be to seek its cash income elsewhere. Thetraditional roles of men and women on the farms, especially theirassociation wi.th specific crops, are also going to give way. The importantpoint is that rural development programs have to anticipiate these changes,and not get waylaid by too romanti.c a notion of traditional peasantry.

76. The speed with which the transformation of the rural economy willoccur depends in part on the rate of job creation i.n other sectors and onthe rate of growth of the rural labor force. Migration and off-farmemployment are vital statistics in this respect, and can be expected inNigeria to be very sensitive to activi.ty in the oil-based sectors. Thecurrent recession has eliminated many industrial jobs, s:Lowed the migrationstream and reversed the rise in real rural wages. The demographic fact isthat the work force is certain to continue to expand. Together with anincrease in food prices attributable to stiffer quotas OnI imported grainand to recent drought, the profitability of smallholder production has beenpartly restored.

77. A lengthy chapter in Volume II di.scusses features of the processof change, including:

- farm size: the huge number of small farms that average2 1/2 ha, the few really large farms, and the reasons why itis necessary to develop a more instructive typology whichallows government to identify progressive elements that are

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emerging from both the small and large farm categories, and,in particular, from the important group of medium sizedfarms that is hidden in the simple small/large distinction;

mechanization, and the importance of developing productionpackages that include land clearing, cultivation, processingand other forms of mechanization appropriate to the humidtropics and other ecological, social and economic conditionsprevailing in Nigeria: an element that the packages nowmiss almost altogether;

mixed and sole croppi.ng, and the arguments why mixedcroppi.ng has advantages in both subsistence and cashcropping but, nevertheless, why with the commercializationof agriculture the balance will gradually shift towards solecrop systems; and

male and female farmers, and the fact that genderdistinctions will continue to make an impact on householddecisions about labor supply and crop priorities, forexample, how to respond in an eastern state to a projectthrusting towards both yam (a man's crop) and cassava (awoman's crop).

78. All of these processes will be enhanced or retarded according tochanges in the macro-economic setting. The availability of underutilizedcultivable land gives Nigeria an important option, partly compensating forthe decline in opportuni.ties in urban employment. But the land frontier isa disappearing resource, much as is the oil revenue. That is the dilemma -the potential conflict between, on the one hand, the present path oftransformation away from subsistence agriculture and the use of hand laborand the hoe, and, on the other hand, the need to lay the basis for areasonably equitable but rising rural incomes policy, based on increases i.nlabor productivity, when the frontier is closed and most of rural Nigeriais crowded. By intelligent regulation of mechanization, and perhaps withceilings on the size of land holdings, government should be able to harnessthe transformation process and still accommodate substantial increases i.nthe agri.cultural labor force. Long-run plans that support to the exclusionof the other either of the two extremes--large scale mechanized farming orcheap hand labor are formulas for social unrest or despair.

Part of the answer to problems posed by the the rural populationexplosion i.n any case does not Hl.e i.n agriculture, but in the growth ofjobs in allied industries and services and in other formal and informalrural occupations. That is a process about which much more must belearned, especially about institutions, services, incentives, and othermeasures to encourage i.t.

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3. ISSUES

Production Incentives

78. The most important policy measure for improving the success ofproduction oriented projects is to correct the unfavorable terms of tradethat the oil syndrome has forced upon marketable crops. The impact will beuneven over the sector - almost certainly substantially boosting thetraditional export cash crops while having a positive but variable effecton food crops. More research is needed to determine the relative strengthsof higher input and output prices on the crop budgets. As a starting pointfor analyzing price incentives one would assume that an equilibriumexchange rate is the objective, or a mixture of an exchange rate adjustmentand a tariff and export subsidy schedule which accomplishes the sameeffects. Whether additional support in the way of protective tariffs andexport subsidies are required to get the crop rehabilitation programsmoving - without conferring long-term privileges that cannot be justifiedin economic terms - would be determined on a crop by crop basis. Theimproved package must also provide for constancy in pricing policies, sothe farmer can make confident calculations during the planting period.Without these improvements in the policy environment, any productionoriented project over the long run is likely to be frustrated. Policyreforms that help some crops but not others in a cropping pattern may notwork either - witness the shift of resources from cotton to maize in thenorthern "success" story of the late 1970s. It is the aggregate supplyresponse that is decisive. What is needed is a broad attack on themacro-economic front simultaneous with project investments. The effect ofthe oil syndrome on Nigeria's agricultural sector is such that a projectportfolio unsupported by policy reform cannot have a significant impact onsmall, medium or large farmers. They will continue to shift resources outof the sector, and venture capital will stay away as well.

Self-Sufficiency in Food

79. The question arises as to why the government should support theagricultural sector when the potential for foreign exchange earnings andsavings through the recovery of export crops and substitution for foodimports is small compared to the overall foreign exchange account, nowdominanted by oil. The answer is found, on the one hand, in the need tobegin to build a diversified base for exports to replace oil when oilexports start their projected decline a decade hence, and, on the otherhand, in the goals government holds for a prosperous, self-reliant, ruraleconomy. Nigeria's capability to produce most of its own foodrequirements, and to help feed its neighbors, is unquestioned. The drynorthern and middle belt states can vastly expand their grain production,and it would appear they are strengthening their position in root cropproduction as well. The southern states have a comparative disadvantage infood crops, due to technical as well as social factors. Nevertheless,there is still a large, underexploited capacity in the south for producingcassava and palm oil and those two commodities when combined - palm oilsauces bringing protein to a starchy cassava dish - provide a nourishingand adequate base for any diet. Yet one hears of impending deficits andstarvation, and these concerns are amplified in years of drought.

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Governments's response is appropriately to push toward foodself-sufficiency, an objective that is reinforced by securityconsiderations. The real issue is whether 100% self-sufficiency is to berecommended as an immediate priority, the position taken in the GreenRevolution Programmme, the Food Strategies Mission Report and other recentpolicy statements. The answer is probably the same that most othercountries with a large resource base have discovered: yes,self-sufficiency is a powerful goal around which to organize foodproduction programs and ought to enter the short list of the nation'shighest order objectives. But no, it cannot be allowed to distortsector-wide resource allocation decisions i.n quest of a hopeless near termtarget, as the 1985 self-sufficiency target year surely was, or ofself-sufficiency in each popular foodstuff irregardless of unfavorablegrowing conditions, as in the case of wheat. Fortunately, Nigeria has thecapacity to be self-sufficient in economic terms in all the other majorfoodstuffs, given proper resource management (with a few exceptions likemilk and maybe sugar). Self-sufficiency in rice, clearly a growth crop forthe future, has been questioned. But recent study would suggest that thattoo makes economic sense as a long term target and the prospects lookpromising enough to encourage us to recommend a detailed review of riceprospects by state.

Root Crops

80. Concern has been expressed about projects promoting root crops -yam and cassava - as the leading edge of a small farmer development programin southern Nigeria. Root crops are known from empirical evidence in othercountries to be inferior consumer crops, in the sense that householdsreduce the amount of them consumed and shift to other basic foodstuffs astheir income position improves. Also the increasing import bill for foodhas been for cereals. It is not at all clear that increased supply of yamand cassava will have much of an effect on the rate of increase of wheatand rice imports, unless they are banned and consumers are forced tosubstitute pounded yam, gari, foo-foo, and flour made with roots. For bothreasons one can anticipate that surplus root crops face uncertain marketsbeyond the short term, and that is a troublesome prescription for any smallfarm strategy that depended exclusively on big and expanding root cropmarkets to succeed.

81. The outlook is brighter than that, however. First, the argumentabout consumer preferences needs to be refined. Yam and cassavapreparations offer a heavy starch meal, and that meal when complemented bystews and relishes is satisfying and sufficiently nutritious for what isapparently a large majority of men who work in the fields or in hardconstruction jobs. Yam has been giving ground in the daily menu because ofits increasing costs, although the recent surge of lower-cost production inthe north, and experimental work with mini-setts, offer new hope. Butcassava would appear to be going from strength to strength (in this respectthe differences in agronomic features and cost structures between yam andcassava are remarkable). Many middle belt and southern Nigerians arededicated to yam as well as cassava, after all Nigeria is the world'sbiggest consumer of yam and one of the biggest of cassava. Wheat, breadand rice play a somewhat different role in the menu - bread more of a snack

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and rice for lighter meals and special ceremonies - and although all thesecarbohydrates are ultimately substitutable to some degree, and the growinguse of convenient flour preparations increases the competition, the notionthat grains will replace yam and cassava in the foreseeable future isclaimed by our Nigerian contacts to be much mistaken. In short, we believeboth yam and cassava have markets that have yet to be exhausted, at leastin the near future. Expansionary forces in that market, due to growth inthe use of cassava for livestock feed, starch and other industrialproducts, will probably outweigh the contractionary forces due to gradualupgrading of the urban palate. Exports, unfortunately, are precluded.Nigeria cannot compete with Thailand in exporting sundried cassava chips.

82. The real issue is what types of policies and projects are requiredto stimulate root crop production. Technical breakthroughs are needed inboth yam and cassava varietal material and its multiplication. Also, yamcultivation is much higher cost, at least i.n the south where both moundingand staking are necessary. So cost cutting improvements in thoseactivities are important. Both crops are proven to be responsive tofertilizer. But that does not appear to imply economic profitability,equally and in all areas and especi.ally in the south. Results offertilization of yam in the Lafia and Ayangba ADPs were good. Doubts havebeen raised, however, about the vi.ability of fertilizing cassava, andfarmers rarely do i.t. But even in the absence of any of these technicaladvances supply response to higher pri.ces or reduced costs should bestrong. The issue boils down to what should government do to encourageproduction up to but not beyond market requirements.

Tree Crops

83. The decline i.n funding of the tree crop programs is common to thegovernment and the Bank. For government it i.s partly explained by thereduction in the budget, which has cut deeply into the rehabilitationprograms. This explanation is not enough, however, since tree crops havesuffered from the cuts much worse than food crops. For the Bank, thedecline is explained by several factors mentioned elsewhere in thisMemorandum: unfavorable exchange rate and trade policies, failure of statesto contribute their share of finance, weak management, poor smallholderresponse in many areas, and procurement violations. That is a formidablelist of problems. In the absence of simultaneous action on improvingmanagement and eliminating the other constraints affecting the tree cropprograms, a financial solution would be inadequate.

84. The core issue is the economic one - whether Nigeria still has acomparative advantage in producing oil palm products, cocoa and rubber evenwith the recommended changes i.n exchange rate, trade and pricing policies.These reforms cannot simply be pushed to the point where profitability isrestored to all three commodities. Casual reference to Nigeria'shistorical advantage in tree crops is no longer helpful in defining a rolefor tree crops in the future.

85. Nevertheless, there are irreducible physical facts supporting astrong tree crop initiative. These crops are part of the ecological climaxof the humid tropics and therefore a stable component of the environment

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and suitable to continuous cultivation. That gives them an advantage overannual field crops, which under continuous cultivation face a progressivelyhostile natural environment and require increasing amounts of added inputsto establish stability. Further, the tree crops are an integral part of atraditional cropping system and require no fundamental changes in farmbehavior. For physical reasons the south cannot compete with the north insurplus grain production, so there i.s a good case for tree crops assumi.ngin the south the position of the anchor crops, provided, of course, thereare markets. Also, because all three tree crops have historicallydeveloped, and two even originated (oil palm, cocoa), largely in the handsof smallholders (unlike some other West African countries), tree cropstrategies have the possibility of providing widely dispersed benefits.Root crops enjoy many of these advantages too, but they suffer bycomparison from having no markets overseas or imports to replace.

86. Much additional analysis is needed however to define where thepresent comparative advantages lie and what the appropriate tree croppackages should be. Ongoing work at Nigerian universities on costs ofproduction, and recent work at the Bank on effective rates of protection,provides a basis for that analysis. The arguments in favor of promotingestate production of oil palm are persuasive, given the large andincreasing import requirements. Rate of return analysis has shown thateven at the present exchange rate (Ni = $1.33), new plantings of palm atwell chosen and location-specific sites are viable. Whether the argumentfor cocoa is also strong is unclear. Present cocoa price projections arenot encouraging for new plantings. But replanting in established areas cantake advantage of existing skills. Whether rubber is vi.able i.s also notcertain, though most observers say it is not given Nigeria's wage levels.Many southern farmers will not have a choice of one or the other. Therubber belt i.s largely i.ncorporated inside the broader oil palm zone. Butthe cocoa belt is rather distinct. Also the economics of planting orreplanting trees differ substantially from those of rehabilitati.ng existingplantations or those of harvesting producing trees already in place. Forcocoa and rubber, rehabilitation is a vanishing option, because theprincipal planting periods were several decades ago and the trees arereaching the limits of their productive life. Thus replanting is required.There is strong evidence also that bottlenecks i.n the processing endexplai.n much of the poor suppliers' response in palm oil, and thatinvestments in collection and milling systems are required. Governmentneeds to review the profitability of all these alternatives.

87. Instead, and despite vigorous activi.ty of the three relevantCommodity Boards to salvage what is possible within a reduced budget,government and the Bank have in the last several years shifted prioritiesaway from tree crops. An aggressive position with respect to themodernization of the tree crop sector is what i.s required, whilerecognizing the distinctions and allowing for the possibility that at leastone of the three main crops may not warrant replanting and will ultimatelydisappear. It should be added that several minor tree crops, especiallyfruit trees commonly found in family compounds, are thought to offer verypromising growth potential too.

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88. Whether tree crops should be included in ADP design, or dealt withby a separate set of activities, is another issue. Whether estates aresuperior to smallholdings, or whether nucleus plantations with outgrowersis better than either alone, in offering a viable system for tree cropexploitation under present labor conditions is a related issue that alsoneeds discussion. The large majority of persons interviewed inside andoutside government stated that rubber and oil palm estates could succeedwhere smallholdings could not. The sons of smallholders might prefer towork for estates if the amenities offered in the estate villages werebetter than those in the home villages. They might in any case prefer tobe employees. Smallholder components could more easily be designed to fitunder the ADP umbrella; estates probably could not.

Fertilizer Imports and Subsidies

89. With the unusually high level of subsidy prevailing through 1983,one would expect farmers to be tempted to use fertilizer as if it were afree good. That implies inefficiency. Rates of fertilizer application byfarmers that use it are low, which rather implies that wastage is probablynot a significant factor. Nevertheless, recent information on fertilizerresponse in the north, in tables published by the Agricultural ProjectsMonitoring, Evaluation and Planning Unit (APMEPU), suggest that yields arenot increasing in response to fertilizer application at the rates projectedand that if fertilizer were to be charged at full cost its use would not beeconomic for some crops. Part of this disappointing result does seem to beattributable to at least some farmers in the APMEPU sample surveys who havenot yet learned to use these inorganic chemicals well and are applying themin a careless or otherwise wasteful manner. The fact that the rapidexpansion in fertilizer imports since the mid-1970s (para 29) has not shownup in the aggregate production data (para 14), is also suggestive thatfertilizer is not having its optimal effect. Since evidence from controlledexperiments clearly shows that high response levels are possible, it wouldappear the low actual figures are not an expression of physical potentialbut of poor agronomic practices. This in turn suggests that fertilizer usemay not be uneconomic except as it is badly applied. The solution isprobably not less fertilizer but better practices. An important task forthe extension services is clearly indicated.

90. In the short term there could be a problem as the subsidy isprogressively reduced. A report of the Agricultural Pricing Policy Studyfinds from a review of fertilizer usage in two northern and one middle beltADP projects that the yield response for the two growth crops maize andrice was strong enough to warrant the use of imported fertilizer withoutany subsidy at all. However, average response rates of traditionalvarieties of the two principal food crops in these areas - sorghum andmillet - are much lower. The report concludes that they too could absorb areduction in the subsidy, though not its elimination and perhaps not even adrop below 50%, the level recently put into effect. These results arebased on existing exchange rates. Further devaluation of the Naira wouldexacerbate the position by raising prices of imported fertilizer. If cropprices are not improved, and subsidies are removed, the farmer would be putin a worse position than he already is in. Without simultaneous action toimprove the way he applies fertilizer and the practices that are associated

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with it, the farmer may realize losses on fertilizer, recognize this, andstop using it. In short, the schedule for the progressive elimination ofthe subsidy below 50% ought to be set in relation to changes in the priceof the fertilized crops and to the expected yield response. At the least,if the subsidy is to be removed for budgetary reasons or for otherobjectives unrelated to agriculture, the disincentive effects on fertilizeruse ought to be anticipated.

91. Recommendations on fertilizer use must be qualified with respectto its use on the major root crops, or on green maize, in the humid south.In each case the economic effect is a subject of debate among agronomists.Yam, cassava and green maize all respond to fertilizer in the more humidareas, but the required set of associated practices of planting, weeding,treatment of pests, harvesting, drying and storage are more complex than inthe north and warrant a more intense extension effort. It is uncertainwhether in these root-based cultivation systems a fertilizer-leddevelopment strategy makes as much sense as it does for the dryland cerealsystem. Since only a small share of the fertilizer imports in the nextfive years will be aimed at the southern states, these doubts do notdiminish the case for the main fertilizer import program. They do affectthe ADP design for the south, where the fertilizer campaign must becombined with many other promotional activities to get agriculture moving.

Small Farms and Large Farms

92. The Green Revolution focuses on small farmers, since they compriseall but a tiny percentage of farm enterprises and deliver a great majorityof the marketable surplus of food crops and most of the exported tree cropsas well. A strategy based on farms of larger or growing size also needs tobe designed, since Nigeria is poised on the threshold of what may be aperiod of accelerated expansion of mechanized, commercial agricultural,provided of course the price and trade policy reforms are achieved, andprovided of course competent management comes forward. A need is seen fora balance of both programs: overemphasis on small farms per se will miss amajor dynamic of the transformation of agriculture to a full-timecommercial basis; overemphasis on large farms will have little short termimpact and sacrifice a potentially robust response from millions ofsmallholder families. As already mentioned, this dichotomy is potentiallymisleading because most of the "true" farmers of the future would probablyidentify with neither the small nor the large farm classification but witha medium class in between..

93. There are two issues in this formula to be resolved. One is whatto do about large "state" farms. This is a separate component of the largefarm subsector (state farms are planned in the 1,000 to 4,000 hectare size,few "large" private farms reach 1,000 hectares and the average wouldprobably be defined as closer to 100 hectares). The production record ofthe state farms is almost uniformly poor but the few exceptions suggestthat if vigorous and sustainable management can be introduced this form ofenterprise may offer some prospects. The exceptions invariably haveinvolved private management contracts. The question i.s whether federal andstate governments are willing to pursue this model. To pursue it, butlater to fail to sign the contract and to continue anyway using seconded

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ministry staff, i.s the outcome that has to be avoided. The other issuerefers to the acceptability of crop production programs that lean towardprogressive smallholders as a distinct subgroup within a small farmstrategy. This has an "elitist" bias, and is not consistent with thedemocratic spirit of the Green Revolution Programme or of the popularextension strategies like the Training and Visit System. Progressivefarmers are found at all farm sizes, though resource constraints knock outreally small farms from any viable full time family farming enterprise.Progressive, cash crop farmers include large holdings as well. Sometimesthe small and large candidates are lumped together in the phrase "emergent"farmers. The issue is whether a Green Revolution or successor Programmeshould concentrate on emergent farmers, and not try to service all ruralhouseholds. The former approach offers a sense of economy. The latterapproach has social and poli.tical benefits. Moreover, the balanced programrecommended in the previous paragraph has the advantage of not prejudgingwho the emergent farmers of the future are. Too often a shortlisting offavored farmers pushes the project toward political patrons rather thandedicated cultivators. The preferred policy is to establishinfrastructure, services and incentives that provide encouragement to allfarmers without prejudice. That could include special activities tosupport small farmers, and other services aimed at larger, mechanizedfarmers. This would create an environment in which the progressive farmerswould select themselves.

Management and Other Institutional Issues

94. There are a range of institutional issues brouglht out i.n theanalysis of the ADP experience. Most of these present conceptuallydistinct choices that have received little direct attention by either thegovernment or the Bank. Choices rather have often been made according torural development doctrine, sometimes imported from experiences elsewherein Africa, or in an ad hoc fashion as circumstances arise. Yet the choiceshave effects that continue to intrude on efficient project implementation.Since poor management is seen by most observers i.n and otut of government asthe key bottleneck to progress of these schemes, it is important that theissues be identified and dealt with on a conceptual basis.

95. Autonomy. The ADPs are established as autonomous developmentauthorities under the jurisdi.ction of the state ministry of agricultureand/or a committee representing several ministries. The argument forautonomy is that administrative procedures, bureaucratic routi.nes,disbursement rules, low pay scales and general ministerial malaise combineto defeat any action-oriented field program based squarely within the stateministry. Autonomy is thought to break through those bonds, and indeed theearly years of almost all the ADPs show that it does just that. Autonomyalso offers better coordination among activities which otherwise might havebeen scattered in different ministries. Autonomy is recognized to havefundamental implications for the functions of the mi.nistry that i.s leftbehind. But that is a choice that all countries face, and in fact they alldo move some operations out of ministries and into parastatals precisely toget the benefits of autonomy. Nigeria has spun off many public authoritiesfrom its federal and state ministries, so the position of the ADPs, on thesurface at least, i.s not unique.

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96. What is unusual about the statewide ADPs is that the whole of theextension service moves over as well. Extension is the heartland ofprofessional services of any ministry of agriculture, and moving it over tothe authority of an ADP has a profound impact on ministerial processes.Large field services of this sort are typically not shifted - teachers outof a ministry of education or rural medical staff out of a ministry ofhealth. There are exceptions in agriculture elsewhere in Africa, usuallyfound where the classical rural development program model is implemented,though Kenya provides an example of a country that tried to implement sucha program from inside the ministry (and did not succeed]). The point isthat the decision to move must be taken with the long term institutionalobjectives in mi.nd and after an analysis of alternatives.

97. The ADP formula is widely supported, especially by officials instate ministries during periods of austerity when they see the ADP offeringbetter budgetary flexibility. It faces problems when the time comes forreintegration into the ministry. Conceivably, the extension service neverneed reintegrate. The ADP-type parastatal could run parallel to theministry forever, with the latter retaining a policymaking role and only afew regulatory functions. But the government and Bank seem to seereintegration as inevitable and desirable so the fact that the process ofreintegration has not been anticipated and planned i.s a major drawback tothe present program. Another drawback i.s that the alternatives were notgiven much thought: the assumption was that working an action program fromwithin the ministry was hopeless. There are programs that have been runthrough the ministries, at least for short periods of time. NAFPP and thelivestock project are examples. These use a different format: theextensionists stay in the ministry but program management and funds areinserted into the state mi.nistries by separate federal institutions(research stations, the federal livestock unit).

98. In the background is the more fundamental question whether thebest route in the long run is to reform a ministry slowly from within, orto get out and achieve quick success, using that example to force changesin the ministry later. The first solution is attractive to most"institution builders," who are disturbed by the free-wheeling aspects andisolation of the ADPs. The second solution, however, may be the onlypractical choice. It is said that at present the ministries are controlledby rules and procedures which are suited to regulatory functions but not todevelopment projects in which initiative, feedback and flexibility areimportant. Unless and until the ministry turns as a whole in thisdirection, autonomy i.s the preferred solution. Also, it may not bepossible to reform a single ministry without making comparable adjustmentsin other ministries, given the common civil service and budgeting controls.The best solution of all may be to establish autonomy but to use that as asecure base to work through existing operational agencie s wherever that isfeasible. These and other issues concerning autonomy, including whetherautonomy should be made permanent, have to be better thought through.Administration and management are not peripheral elements in successfulrural development programs.

99. Coordination. One of the advantages of the ADPs is that bygathering separate services under a single management, important linkages

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that otherwise are blocked by bureaucratic distinctions can instead bereinforced. There are several qualifications to this position, which havespecial significance for the ADPs designed for the southern states. First,as extra services are added, project design and management becomesincreasingly complex. This is inevitable. The relatively simpleintegrated package for the north - a disciplined extension service,fertilizer distribution and rural roads - will have to be extended. Ouranalysis of the major economic crops of the south, including cassava, riceand palm oil, suggests that the main constraints to increased productionare more often identified under other subheadings - seed supply, credit,mechanization, collection of raw crops, processing and marketing. Theseactivities will have to be covered, either directly by the project orindirectly through support to other agencies. And the priorities may shiftas well. Certainly, effective extension is essential to implementing asmallholder oil palm planting and maintenance program. But markets aremore important. It may be safer to try to organize extension within amarket-oriented project, than to organize markets within anextension-oriented project. The emphasis in design will determi.ne theemphasis in management's priorities. As services are added and emphaseschange, the advantages of integration under single management areincreasingly offset by the complexity factor.

100. Historically many governments and donors have opted for a schemedesign other than the "integrated rural development program" in order topackage together seed, fertilizer, processing and markets for one or twoleading crops. The "vertical crop campaign" such as the National RiceProduction Scheme is an example. It has an advantage in offering a focalpoint for management. The ADPs traditionally have scattered their shotsand shifted without embarrassment from one crop to another depending uponwhat works. That is the advantage of ADPs in an area where one is not surewhich crop packages ought to be promoted but the emphasis on extension andi.nput delivery seems safe no matter which way you go. This strategyrequires a highly sophisticated management, supported by a well functioningmonitoring program that tells it what is not working and where to shiftresources. The task now is to find a way to introduce the concentratedmanagement efficiency associated with the crop campaign, into the complexmanagement system common to the newer ADPs. The framework is alreadyinstalled, since not only rice but now also cassava have been establishedas National Production Schemes, the promotion of both of whi.ch are assignedto FMAWRRD.

101. Second, the southern states present a formi.dable challenge to theADP concept of creating new services under the single management umbrellabecause there are so many long established institutions already in thefield, performing the same services. ADP functions are often undertakensimply because existing institutions, including but not limi.ted to theministry (Commodity Boards, private fertilizer dealers, local governmentroad repair squads, etc.) are not doing their job well or with due regardto the interests of all clients. Trying to reform some existing agenciesor systems may be hopeless. But that should not be used as an excuse toavoid imaginative thinking of how to use the ADP to reactivate rather thanreplace the older agency. The ADP organizational formula in principle isflexible and these assignments could be added. Alternatively, management

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could draw into the ADP orbit an existing set of institutions with whichthe ADP divisions would have to develop relations. Each has a counterpartin the state ministries, usually but not always in the ministry ofagriculture. ADP sponsored cooperative activities, for example, shouldinvolve the responsible state ministry, which in some states is not theministry of agriculture. There is precedent for these new associations.Adaptive research is already assigned a much bigger role in the proposedsouthern ADP program and will involve closely the national researchcenters. But the network must expand. For example, the Commodity Boardsplay a vital role in the tree crop subsector, and to the extent southernADPs eventually get involved in these crops a relation with the Boards isunavoidable. Also, with indigenous institutions like NACB and thecooperatives in the field, one must wonder if it is appropriate for creditneeds to be handled by an ADP simply by adding a new, self-sufficientcredit di.vi.sion. The large number of southern Nigerians trained in thesefields already in the institutional system gives promise that wellengineered linkages will enhance rather than constrain ADP success. Itwould seem that the ADPs to be made to work in the south will have to bemade to fit into and reinforce rather than duplicate systems already inplace.

102. In short, coordination is essential but that does not necessarilyimply a development agency must engage in all activities to ensure success.The traditional ADP approach of creating new operational units must beweighed in the light of new issues that are beginning to surface. Theseinclude (a) the problems brought on with increasing complexity of theintegrated project; (b) the need to take advantage of managementefficiencies associated with single crop compaigns and vertically (ratherthan horizontally) integrated projects; (c) difficulties of introducing,within the ADP, activities such as tree crop estates and/or semi-industrialprocessing which usually call for self-contained mangement units; (d) thespecial requirements of a viable credit program; and (e) the clear need toavoid duplication with existing services where these have the staff andpotential to perform well.

103. Expatriates. The use of expatriates in rural development projectsis a complicated subject which is not discussed in full here. Two issuesshould be raised, however. One relates to autonomy. The question i.swhether the apparent advantages of autonomy associated with rural projectmanagement units at state or federal level are mostly attributable toexpatriate management. That expatriates can "get away" with breakingthrough "red tape" i.s a small truth that is common to almost all Africancountries. It carries both advantages and disadvantages that arerecognized and presumably accepted by Nigerians. Replace the expatriateswith Nigerians and those freedoms will be reduced - by residual ministerialprivileges, by politics, social relations, etc. At the same time, theNigerian-style management can undo knots which resisted expatriates. Thedifficulty is to assess the extent to which the freedoms will be limited,and the net impact on the effectivenes of the nominally autonomous agency.The other issue is whether and in which position expatriates are needed.That a qualified expatriate will be useful in a position for which thereare no equally qualified Nigerians is obvious. For engineers and othertechnical positions, even in management posts in technical offices, that is

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generally accepted. Whether it is appropriate for project managers is adifferent question. To say a complex integrated rural development projectneeds the special expertise of persons who have run integrated projectsbefore is a strong argument. But an alternative argument is that projectcomplexity should be scaled to the management capabilities of Nigeriansavailable for the job. That appears to pose a trade-off between speed ofthe development effort and Nigerianization, a trade-off that may matterless wi.th a twenty-year rather than a five-year horizon. The only certainconclusions are that for the long run the jobs have to fit thequalifications of the Nigerians who will run them, and that in the shortrun sound technical leadership based on wide international experience canhave an important role to play. Concrete ways must be developed to balancegovernment's desire to indigenize and the Bank's concern to achieve thisobjective without jeopardizing project performance unduly. This is a toughset of issues. It is simply raised here, because, as with autonomy, it hastended to be ignored at the design level.

104. Other Issues. A number of other questions of an institutionalnature can be raised, although under the new government it appears that maysoon be answered. One is the role of the newly established RuralDevelopment Division, the successor of FDRD, in the consolidated FederalDepartment of Agriculture and Rural Development. By maintaining a separateportfolio in the organization for Bank projects, and associating them with"rural development,t' they may be isolated from the crop specialist staffsin other divisi.ons whose support is crucial to effective functioning of theADPs. This was a problem faced by FDRD, and it is not clear thatreorganization has solved it adequately. A second is the mechanics forensuring that agreed state contributions to projects signed by the federalgovernment are made in a timely fashion, or, i.f not, that the federalgovernment has the authority to make these deposits on behalf of thestates. This issue has been of major importance in recent discussionsbetween federal and state authorities and the Bank. It will not beelaborated here.

Irrigation

105. The Mission intended to postpone the study of irrigationinvestments until the larger Sector Review proposed within the next severalyears. Apart from a quick look at River Basin Development Authorities,conducted under the aegis of the Public Expenditure Program (PEP) Review,later amplified in the processing of the proposed Structural AdjustmentLoan, that plan was followed. However, it is important to note that of allthe subsectors we had deliberately deferred (including li.vestock, forestry,fisheries, credit and cooperatives), the omission of i.rrigation made usincreasingly uncomfortable as the sector study progressed. With theresults of the PEP Review revealing the extraordinary size of the RBDAclaim on the federal budgt (para 4.16 of Volume II), that nervousness seemsall the more justified, particularly si.nce the RBDAs are not investing anyof those funds in the small scale irrigation subsector to which the PEPReview and earlier reports by the Bank and FAO have all attached toppriority.

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106. There is no doubt that irrigation will play an increasinglyimportant role in the development of Nigeria's agricultural potential, arole in which the Bank may participate. But with the present budgetconstraints, the RBDA investment program has had to be cut back.Investments in the next few years should be concentrated on exploiting theproductive capacity of the reservoirs and other large structures alreadybuilt: on downstream programs including tertiaries, on-farm structures,and farm management for both perennial and supplemental irrigation.However, a number of important issues have to be addressed. First, thereis the choice between large and small scale schemes. While outsideobservers have recommended a shift towards smaller, village, schemes, theyare talking of informal schemes, managed by the farmers, wi.th littleinvestment in engineering structure. They are usually not talking of smallscale, formal, engineering schemes, which have had a mixed historyelsewhere in West Africa. However, the RBDAs' priorities have begun toswing toward these smaller formal schemes, and many of the proposals haveat least a superficial attractiveness. Second, schemes featuring low liftpumping are progressing rapidly in the northern states, but increases infuel costs, especially if the subsidy on fuel is removed, raise questionsabout the economics of the operation. Pumping for vegetable crops payswell; pumping for cereals may not. As more pumps are placed, the croppingpattern will have to shift from the first to the second. Third, theupstream and downstream effects have to be better anticipated. The bigreservoirs built in the north may prove in the long run to have put morecultivated land out of production than the schemes brought in, though theland i.s now under better water control. Fourth, the role of the RBDAs indryland schemes has to be clarified, though the recent reorganization isaimed at doing just that. And fifth, looming in back is perhaps the mostimportant issue facing policymakers, what are the relative priorities ofrainfed and irrigated agriculture in the long term development of Nigeria?

Research

107. The whole range of agricultural research, including commodityspecific as well as farm-systems research, basic as well as applied andadaptive research, on-station as well as on-farm reseach, needs substantialsupport. The last two years of budgetary stringency have accelerated theerosion of research activity that at least for the cash crops was onceworld famous. Among the reasons for lack of finance in a field which isoften well supported by external resources are, first, the absence of thebilateral donors that elsewhere in Africa play an i.mportant role inresearch finance, and second, the sometimes strained relationships thathave developed between the national research institutes and the center ofexcellence that has been created at IITA at Ibadan as part of a network ofspeciali.zed international stations. The latter issue has to be resolved.In principle, IITA is not supposed to engage in country specific research.But proximity invites it anyway, and the ADPs have taken advantage of it.That relationship should not be blocked, but local research agencies haveto be incorporated too.

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Tractorization

108. With improved incentives one anticipates an accelerating shiftinto mechanization of land clearing, cultivation and, later, harvesting.This is a debated subject in the south, given the threat posed to thefragile, tropical soils. Nevertheless, the expectation among Nigerians isthat the shift is desirable and our judgement is that it is alsoinevitable. Despite higher prices on i.mported equipment after devaluation,we expect the enhanced profitability of certain field crops is likely tojustify in economic terms the expansion of the fleet. The question then ishow to develop a technology to reduce and control the damage. Theengineers and agronomists have yet to make theiLr full contribution to thisissue, since there has been very little study of appropriate tractortechnology for land clearing and cultivation in the humid zone, of methodsfor mechanized planting, tillage and harvest of southern crops, or of theappropriate crop rotations and fallow crops to conserve the soils.Further, there has not been enough promotional work on smaller 4-wheeltractors. A second subject of concern is how to organize cost-effectivetractor hi.re services, or, better, how to provide the incentives to inducegrowth of private services. The state tractor hire units have not worked.Effective tractor hire services whether by private, public or cooperativeagency, bring divisibility to tractor power and open the way for small farmuse. In their absence, progressive small farming will remain partlyblocked. It is mostly a problem of management. A third subject is theabsence of maintenance and spare parts services which have to be developedto support land clearing, land preparation and tillage by private agency.

Marketing

109. Private marketing systems for food crops are reasonably efficient,There are arguments for introducing some measure of government support andregulation in the markets for industrial crops, especially for the exportcrops. Many observers say the Commodity Board system tries to do too much,without the requisite resources to do a reasonable job on anything. Thisquestion of the proper scope for public intervention in private markets i.sraised in many LDCs. There are no easy answers. It does seem essential,however, to improve upon the present Commodity Board performance. Asdiscussed in Volume II, the principal problem identified in the postharvest period is not deficiencies in the marketing system but high costsand low quality technology in processing activities.

Rural Development

110. This Memorandum skates around a subject which is seen to be ofincreasing importance in explaining differences between government and theBank on the eligibili.ty of certain components in the ADP design. State andfederal authorities see the ADPs and RBRDAs as vehicles for improving thequality of rural life as well as increasing agricultural production. Thus,rural roads and village water supplies are given priority in governmentproposals. There is an obvious political basis for this emphasis, but

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government's intent to improve all aspects of rural welfare is genuine.The Bank, on the other hand, believes the productive capacity of the ruralareas must get primary attention, especially in periods of budgetausterity. Some of the roads and most of the water, while offering someimprovement to production, are thought by the Bank to be not central to theproduction process and ought to be deferred - except for essentialmaintenance and clearly deprived circumstances. We raise this issue, butlet it go for discussion in other forums.

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4. RECOMMENDATIONS

111. There follow three series of recommendations that are based onthe previous discussion and the analysis in Volume II. The first groupdeals with initiatives at the policy level, including the provision ofbetter information for the policy-making exercise. The second group formsan outline of an investment strategy for the next few years that makessense even in the absence of rapid reform or thie conclusive evidenceexpected from further study. The third group proposes a set of studies.One must discriminate between projects which have immediate justificationand those which make sense only if other actions are taken first, inparticular the increase in farmer incentives based on reforms in themacro-arena. Repeated reference in this report to the lack of incentivesand to the paucity of data on key decision issues can have the effect ofparalyzing policy advice, which is not our intent. A common characteristicof all three groups is that the overall program does not require largeexpenditures of public funds. We do not believe the main emphasis of anaggressive public agriculture strategy should be on substantially expandingthe ministries' budgets, even if fiscal constraints were relaxed. That isimportant over the long run. For now the emphasis should rather be onimprovements in managing the agricultural program. The order of listing inthe first two groups roughly follows the previous series of issues and doesnot indicate a ranking, except for the initial recommendation which belongsin that position.

A. Policy Reform

112. Improved Prices and Other Incentives. That there be a reform ofpricing and trade policies so as substantially to improve the incentivesfor agricultural producers. Progress of all of the specific agriculturalinvestment programs depends on the reestablishment of a favorable macro-economic environment. Without it, continuing stagnation of food crops anddecline of the traditional cash crops are inevitable. Policy reform mustlead to better terms of trade for the farmers. This means eliminating thebiases in the economy which for at least a decade have discriminatedagainst the agricultural entrepreneurs. The key component is theadjustment of the rate of exchange of the Naira. It is possible to reachthe same position simply by adjusting tariffs, subsidies and other policyinstruments. But in the present situation where the overvaluation is solarge as practically to eliminate incentives to commercial agriculture areform program that tries to succeed without exchange rate adjustment willbe almost impossible to administer. To the extent exchange rate reformdoes not accomplish the whole job, the other policy instruments are broughtinto play. For food crops this means controlling cereal and edible oilimports through tariffs and quantitative restrictions so that farmers cananticipate reasonable and reliable profits. For export crops this meanspaying the farmer Producer Prices set at levels above costs which providesimilar inducements - not for all crops but those for which Nigeria has ademonstrable comparative advantage. The linking of price and trade policyis a key component of this reform process. After reviewing the impact ofreforms on price relationships, it wi.ll be possible to determine wheher inthe medium term additional protection and support are warranted to boost

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commercial agriculture to its potential. Infant industry arguments do notstrictly apply, since the first job is largely one of rehabilitating olderenterprises. Nevertheless, to refocus investor interest in agriculture,especially for replantings of tree crops with their long gestation periods,extraordinary action may be needed. Also, equilibrium exchange rates andtariffs appropriate for the economy in the 1980s will not adequatelyreflect needs of the 1990s, by which time the agricultural sector will haveto assume a much greater role. In discussions over the proposed StructuralAdjustment Loan, government and the Bank have considered the institutionalmechanisms needed to develop, implement and give permanence to a reformprogram. Suggestions include absorbing of the Technical Committee onProducer Prices into an Agricultural Pri.ces and Tariffs Group responsiblefor the analysis of terms of trade and comparative advantage of the majorcrops, for recommending appropriate Producer and Guaranteed Minimum Pricesfor crops and what, if any, subsidy levels for fertilizer and other inputsshould be preserved, and for determining tariff and quota levels consistentwith that pricing framwork. It is the comprehensive nature of the reformprogram which is essential to success. Changes limited to one policyinstrument can be undermined by contrary incentives set by otherinstruments.

113. Food Production Strategy. That there be a review of assumptionsunderlying assessments of present and potential food availabilities. Aprior step is to make sense of existing crop data records, which varywidely among reporting agencies. Assumptions that need further scrutinyare: that root crop production has been falling; that shortages reportedin the north and south of subsistence crops are due to physical supplyconstraints rather than shifts in demand to imported wheat and rice; thatincreased supplies of subsistence crops can dislodge imported cereals; thatdomestic rice, wheat and maize have the potential to replace imports; andthat programs for food production should be pressed in the south asvigorously as in the north, despite the latter's alleged comparativeadvantage. Government promotional programs, including seed multiplication,have to be concentrated on the crops and areas where public investments andservices make most sense. Though there is evidence of stagnation in thefood subsector, the problem seems to be more closely associated with thedecline in commercial farming. Subsistence farms have continued to supplya marketed surplus to the cities. Thus, an uninformed thrust on all foodcrops runs the risk of oversupply in particular markets. Food policy mustdiscriminate between tastes and regions. That does not now seem to be thecase.

114. Improved Statistics and Planning. That a major effort be made toimprove the agricultural statistical services supporting policy decisions,and the planning agencies themselves. As implied in each of the last twoparagraphs, trade and food objectives are undermined by the extremely weakdata base, and also by the low level of resources allocated in the budgetof FMAWRRD to planning of national and crop specific programs. In bothrespects Nigeria is behind countries of comparable income levels. Obviouscandidates for support are FOS, FDAP and FACU/FASU. The strengthened TCPP(the proposed Agricultural Prices and Tariffs Group) can only accomplishits objective if it is provided with better data and a capability for goodanalysi.s.

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115. ADP Institutional Design. That the conventional ADPinstitutional set-up, based on a semi-autonomous management structure withor without a large expatriate input, be oriented to promote rather thansubstitute for existing institutions. In particular, to play the roleimplied by other sections of this report, the ADP would have to coordinatewith and service Commodity Boards, the National Seeds Service, otheroperational units of the Federal Department of Agriculture and RuralDevelopment, and the national research institutes, among other agencieswith which it has had little contact in the past.

B. Outline of an Investment Program

116. The food thrust of programs in the middle and northern regions,including derived savannah zones of the "southern" states (such as OyoNorth), make sense and should be pursued with vigor. The earlier emphasison cereal crops is appropriate, although more flexibility is required infood program designs to allow them to capitalize on other unexpectedsuccesses, like the rapid, spontaneous shift northward of yam cultivation.The technical basis of these programs will remain fertilizer andfertilizer-responsive seed, though no "package" will survive long withoutproper defense against pests. The priority growth crops are those definedby the import bill - wheat, maize, and rice - though it is only the lasttwo which so far have demonstrated a comparative advantage for Nigeria.There is some room for optimism on domestic wheat as well, although it islinked to irrigation (see next paragraph) and in any case can never beexpected wholly to displace wheat imports. The difficult part of this foodstrategy is to succeed while simultaneously inducing recovery of cotton andgroundnuts. Attractive technical packages for these two traditionallylabor-intensive crops have not yet emerged.

117. Expansion of the irrigation sector makes sense as a long termstrategy, though priorities ought to shift at least in the short term. Inthe large scale irrigation sector associated with the RBRDAs furtherinvestments must concentrate on exploiting the reservoir capacity alreadybuilt, rather than construction of new headworks. Critics have said thatsome recently completed structures ought not to have been built at thisstage in Nigeria's development; however, it is wrong now not to make themwork. In the small scale irrigation sector there is mounting evidence ofsubstantial opportunities for informal schemes based on private operations,mostly for supplemental irrigation on fadamas using river pumps and shallowboreholes but including also deep bores for groundwater in dryland areas.Recent developments in Kano, Bauchi, and Sokoto are encouraging. TheRBRDAs have not been involved in these small scale works, but withreorganization and integration with rural development authori.ties thatinvolvement now becomes a real and welcome possibility. The RBRDAs havebegun to emphasize small scale formal schemes, whose role at thi.s stageneeds to be carefully assessed.

118. Government should continue to promote the increased use ofchemical fertilizers, but the formulas and application must besubstantially improved. Nigerian farmers are nowhere near the economicoptimum of fertilizer application even of traditional varieties. However,reports from the northern ADPs give disturbing evidence that formulas,

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methods, and timing of fertilizer application are being abused. The valueof some of the fertilizer now imported is being wasted. This meansgovernment must complement the fertilizer import program with improvementsin distribution and extension systems to get this program working right.The subsidy issue must also be handled with care. It was appropriate toreduce the extremely high subsidy rate that prevailed from about 1979 to1982. Further reduction of the subsidy below the present level of about50% should be carefully appraised and if necessary timed to fit withcorresponding improvements in crop prices brought about by the structuralreforms.

119. The strategy for the southern states should depart from thetested formula for the north. The emphasis should be on a food crop - treecrop mix, as has historically prevailed and as reflects underlyingcomparative advantages. Cereal grains should not take precedent, as theydo in the north, except for fadama rice. Root crops have priority. Herethe lead crop will be cassava rather than yam because the south has anatural edge over the middle and northern states in cassava that it doesnot have in yam. But any food crop initiatives should be paralleled bysimultaneous investments in the rehabilitation of smallholder tree crops,particularly oil palm (which of course is also a food crop). Any majorprograms in cocoa and rubber should be deferred pending studi,es of theirlong term economic potential, as called for in para 128. Whether the foodcrops and tree crops ought to be combined in the same program is an issuecurrently under investigation in preparation of the southern ADP series ofprojects. One other difference with programs in the north is that foodprocessing must be incorporated as an integral part of production programsin the south. This is because the main crops - cassava, rice, palm oil -require multiple stages of processing before they appear as a qualityproduct. Traditional village techniques are proving to be increasinglyunpopular, inefficient and incapable of meeting improved consumer tastes.This is less of a problem with the main cereal crops of the north (exceptrice).

120. There is a clear requirement for investment in research, bothbiological research and socioeconomi,c studies. On the biological side acadre of trained scientists already exists along with an aging but stilloutstanding physical infrastructure, which puts Nigeria at an advantageover most Sub- Saharan countries. However, the operational budget has beenmuch reduced in the last five years. What is needed is a financial boostto put scientists back to work, with some adjustments in the work programto tune it closer to the dominant farming systems. Emphasis should begiven to farming systems and to on-farm diagnostic and demonstration work.This implies access to the farmers themselves, which in turn means a closerrelationship with ADPs and RBRDAs (a relationship which has been too weakin the last decade). NAFPP provides a partial model. This also implies aswing to the development of technical packages which fit current conditionsof farming, in particular which address the problems posed by laborscarcity, reduced fallow and natural fertility, etc. On the socioeconomicside there is need for an expansion of the small but high quality base thatexists at five research centers, and, as with the biological sciences, aninfusion of operational funds. There is an evident need for investigatingthe seemingly limitless number of questions about rural behavior that

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affects success of rural programs but about which next to nothing is knownwith any confidence. A role for Bank support may be evident in both theseresearch assignments.

121. Ways have to be found to assist and control the uptake ofmechanical equipment and power. This includes land clearing equipment andtractors, but also irrigation equipment, animal-powered equipment, andimproved harvesting, threshing and processi.ng equipment. The trend islikely to accelerate, but will need to be guided, especially in the south,where fragile lands easily can be damaged by mechanized land-clearing andover-cultivation. However, it is equally apparent that previous types ofintervention have not worked - large scale land clearing programs ongovernment and RBRDA properties, state-run large scale cereal farms, andstate-run tractor hire services. The latter have a vital role to play, buttheir consistently poor record points toward an inherent flaw in runningsuch programs through the civil service. What is needed is a progam fortransferring these services to private ownership or private control.Government needs to develop methods to involve private enterprise in allthese activities, while the public sector withdraws from operations andserves rather to create an infrastructure that supports mechanicalservices, to facilitate acquisition of new units and spare parts, to trainmechanics and to control the use of machinery in fragile ecologies. Thelast point is vital. Land clearing and tractorization should be seen as acomponent of land use and conservation programs. In these areas the stateministries of agriculture will have to substantially strengthen theirrather badly funded programs. In the past they have left land use andconservation activities to federal authorities.

122. On the processing side improvements are required in villagetechnologies to reduce the tedious labor requirements, mostly by women.The AIDS program has made a commendable start in this area. New incentivesare required as well in larger scale, industrial processing plants,although low profit margins and unpredictable crop supplies are commoncomplaints that will not be easily eliminated, even with macro policyreform. Programs need to be developed for supporting - with technicalassistance, credit, public incentives and other services - the expansion atboth levels of agro-processing facilities. Nevertheless, success in bothsectors is dependent on actions to restore profitability to cropenterprises, as mentioned here more than once. The ADPs have givenattention to the problem of crop production, but not enough to the problemsof processing those crops for consumption. The RBRDAs have paid moreattention to processing, but have a record of inefficiency.

123. There is need for managerial and technical training facilities.The shortfall in qualified Nigerians to run an expanding commercialagricultural sector is pervasive in all positions: tractor mechanics, bulkseed growers, rural survey supervisors, managers of integrated projects,etc. In some areas existing apprenticeship facilities are medieval -mechnical workshops for instance. In others excellent training programsare available but cannot cope with demand - the management traininginstitutions at ARMTI and Badagri are the two main examples. To someextent the shortfall i.s explained by low rates of remuneration ingovernment technical services. Trained Nigerians are attracted to privaterather than public employment. But the size of the total manpower pool ismuch too low to satisfy requirements.

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124. The above proposals do not support any particular institutionalframework. In the southern states, for example, we felt it best not toprejudge the institutional issues now under review for the new ADPs,including the appropriate division of labor between the ADPs, the stateministries and the old line federal agencies. For one thing, the recentfederal reorganization has still to work itself out at the fieldoperational level. Nor do these proposals assi,gn priorities to small farmand large farm strategies, or to the role of private enterprise,cooperative ventures and state farms. Other parts of the Memorandum havedescribed the advantages and disadvantages of these various managementforms.

C. Agenda for Further Study

125. As mentioned in the Introduction, a major Agricultural SectorReview has been planned by the Bank for completion in the next two years.Important subjects that could not be dealt with adequately in theMemorandum would be handled by focused subsector studies, the results ofwhich would be available to the Sector Review team. These includelivestock, forestry, fisheries, irrigation, and agricultural education andtraining, all of them largely bypassed in this document but covered in BankLending Program studies already under way (except fisheries). Thedevelopment of the Bank's agricultural sector work program for Nigeria isin part propelled by the proposed Structural Adjustment Loan (SAL) and thePublic Expenditure Program Review (PEP). Agricultural policies have a highprofile i.n the SAL and the PEP, and the sector studies essential to bothoverlap the agenda of the Review. Moreover, the latest five-year planningexercise has just begun, aiming to produce a document for the FifthNational Development Plan by end of 1985. We intend to make any earlierwork done for the Review available to the Plan teams.

126. Listed below are ten other studies which in the process ofdeveloping this report were suggested as being i,mportant building blocks inthe effort to evaluate sector-wide issues and to have a broader backgroundagainst which to assess matters of detail. There is a ranking of sorts -the first five have already been discussed with government and i.t is hopedthey can be started in the near future.

127. One thing is clear. It is imperative that ad hoc studies of thissort, along with the findings from permanent research centers, putgovernment in a better position to make key policy decisions and put theBank in a better position to give advice. A feature of this Memorandum isthe frequency with which it claims ignorance on matters of what appear tobe vital interests. Much is known about the rural sector. But anastonishing amount is not known for a country of this size and demonstrableintellectual resource. There ought to be a commitment on all parts tomaking sure that five years hence the area of ignorance on policy issueshas been substantially reduced.

128. Crop Priorities and Pricing. An analysis of the comparativeadvantages and resource costs of the major crops, especially to determinethe appropriate role of cocoa, rubber, palm oil (for export as well asdomestic markets), palm kernel, cassava, yam, rice and mai,ze in the

- 48 -

southern states, and cotton, groundnuts, sorghum, millet, cowpeas, rice andmaize (and perhaps soya and yam) i.n the northern states. Special emphasison the rice subsector would appear worthwhile, for reasons given elsewherein the Memorandum. The study should make a definitive determination onwhich of these crops are not worth supporting against imports, and theeconomic levels of protective tariffs and export subsidies for the cropsthat merit support. It is not the intention to encourage the expansion ofgovernment intervention in the market. Rather the study would recognizegovernment is already and probably intends to remain heavily involved, andwould seek therefore to advise on a more sensible set of actions. Thestudy will be an essential product of or input to the upgraded TCPPactivities, and to the policy reform package discussed in para 112.Special care is needed in identi.fying the appropriate role for subsidy.The objective is to try to identify and encourage only those crops thathave a demonstrable role in a strong agriculturial economy of the future.

129. Commodity Boards. A review of economic, technical, financial andadministrative features of the Commodity Board system, to determine whetherthese forms of public intervention in agricultural markets are warranted.A distinction should be made between domestic grains markets, export cashcrops and special situations like cotton and the edible oils. The use ofCommodity Boards to execute the government's cash crop rehabilitationprograms should also be evaluated. Commodity Boards may be able to make animportant contribution to effective implementation of several of therecommendations set out in the previous section, given the Boards' role inadministering the Producer Price and GMR programs (para 112), in datacollection (para 114), in collaboration with the ADPs (para 115), and inimproving processing services (para 122), as well as their direct role inrehabilitation.

130. Formal Sector Modeling. A continuation of worlk started in 1983,with Bank consultant support, to develop an optimization programming modelof the agricultural sector. Modeling in a sector with a poor data base isdifficult; nevertheless enough information is thought to be available toput into a formal framework to provide useful policy guidelines. Types ofissues which have already been investigated in a preliminary fashion arethe effects of increased tariffs, the demand relationships between cassavaand other food crops, the implications of rising labor costs, and theprofitability of using fertilizer, all of which impinge upon the subjectshighlighted in the Recommendations. The intention is further to developthis model, and to use the model in collaboration with government.

131. River Basin Rural Development Authority Program and otherIrrigtion. A major follow-up to the study proposals made during the PEPand SAL preparation missions, which would analyze in depth the formalbudget implications of present RBRDA investment proposals, rates of returnfor representative schemes, priorities for investment, and alternatives, ifany, for harnessing Ni.geria's water resources for agricultural purposes.The initial phases of this series of studies would provide the basis forthe rationalization and further development of the RBRDA schemes as well assmaller scale works mentioned in para 117.

- 49 -

132. Credit. An historical review of formal rural credit agencies:credit flows, collection procedures, delinquency patterns, penalties,sources of funds, staffing, etc. An overlap with the cooperative studymentioned below is recognized. Both are building blocks for improvementsin rural services. With the policy reforms discussed in para 112, theshortage of term credit is likely to emerge as a serious constraint on farmdevelopment. The requirements of farmers for seasonal credit will expandalso, although apparent shortages here often reflect the lack of some otherincentive. The credit review will include public programs, cooperatives,private banks, etc. (Funds will be provided for a credit study fromgovernment and the ATAP Loan. Terms of Reference have been agreed. TheBank is collaborating.)

133. Cooperatives. An historical and analytical r eview of thecooperative movement and its problems in Nigeria, read broadly to includecredit unions, rotating credit societies (where they serve agriculturalpurposes) and other informal farmers associations, as well as conventionalcooperatives. The study should aim at designing an arrangement whereby oneor more of these farmer associations could play a role either inside oroutside ADPs in promoting their agricultural objectives. The poor recordof cooperatives in most other countries, and in Nigeria itself, is not anexcuse for neglect. Nigeria is committed to having cooperatives play animportant role in rural development, and it is encumbent therefore thattraining and management systems be developed to maximize the cooperativepotential. (The credit study is to incorporate a review of cooperativesfor a comprehensive evaluation further work may be required.)

134. Farm Typologies and Sources of Surplus. An analysis of farms, inthe first instance broken down by farm size and other measures of resourceavailability, for the purpose of determining the relative roles of large,medium and small farmers in delivering surplus food crops to the market.The study would try to determine the characteristics of the progressivecommercial farmers that are emerging, or that may emerge given the rightincentives. The study would propose adjustments in extension and otherservices that would maximize assistance to this group without underminingother ongoing small farm programs. The results will have influence on foodstrategy and mechanization plans (paras 113 and 121).

135. Rural Wages, Migration and Other Labor Issues. A study toinvestigate the changes in real farm wages, rates of migration and theirimpact on choice of farm technology. The short run effects of the presentrecession on rural labor supply would be measured, as would the longer termbenefits and losses due to out-migration (including remittances and returnmigrants). Another emphasis would be on the impact on migration of ADPsand other development projects, to see whether successful, farm-orientedprojects and improved rural infrastructure can induce the migrant to stayon the farm or return to it. There are a number of other studies fallingunder the general title of labor supply which need attention, insofar aslabor behavior has such a pervasive impact on all agricultural performance.These subjects include distinctions between male and female roles in cashcropping, seasonal rural-rural migration patterns, reservation and shadowwage rates, etc. (Programs Office is initiating a study of Labor Markets.

- 50 -

Labor issues will be one of the focal points of the upcoming AgriculturalSector Review.)

136. Land Tenure. An analysis of the impact of tenure on farminvestment decisions, and on choices of cropping patterns. Usufruct andtribal cultivation rights do not confer the security of tenure thatownership does, and this factor is alleged to interfere with thecapitalization of farm technology. But some observers say those barriersare crumbling in practice, especially in the south. It is important alsoto devise legal alternatives if possible, to protect both the community andthe potential investors. (A comparative study of tenure issues in Africahas been proposed for i.nclusion in the Bank's Research Program.)

137. State Farms. A canvas of existing farms belonging to state andfederal authorities (excluding tree crop plantations), a technical inquiryinto production potential, and an analysis of successes and failure. Thestudy would aim at preparing a proposal for the transfer of management ofthe properties with highest potential to autonomous authorities or private,including expatriate, companies, possibly offering tractor hire services.If the record of the state farms can in these and other ways be improved,they could offer an important new route to generating food surplus.

- 51 -

Annex 1

IBRD ASSISTED AGRICULTURAL PROJECTS IN NIGERIA

Loan Loan ScheduleProject Name Number Amount Agreement Cancelled Closed

($millions) (FY-July/June)

Western State(First) Cocoa 764 7.2 1971 0 1979

Second Cocoa 1045 20.0 1975 0 1983Funtua ADP 1092 29.0 1975 0.6 1983(First) LivestockDevelopment 1091 21.0 1975 0 1984Rice 1103 17.5 1975 0 1983Gusau ADP 1099 19.0 1975 0.1 1983Gombe ADP 1164 21.0 1976 .. 1983Bendel State Oil Palm 1183 29.5 1976 16.5 1982Imo State Oil Palm 1191 19.0 1976 0 1986*Ondo State Oil Palm 1192 17.0 1977 10.1 1982Lafia ADP 1454 27.0 1977 0 1984Ayangba ADP 1455 35.0 1977 0 1984Rivers State Oil Palm 1591 30.0 1979 0 1985*Agric. & Rural Mgmt.Training Institute 1719 9.0 1980 0 1986*Bida ADP 1667 23.0 1980 0 1985*Ilorin ADP 1668 27.0 1980 0 1985*Forestry Plantation 1679 31.0 1980 0 1986*Oyo North ADP 1838 28.0 1981 0 1987*Ekiti-Akoko ADP 1854 32.5 1981 0 1987*Bauchi State ADP 1981 132.0 1982 0 1987*Kano State ADP 1982 142.0 1982 0 1987*Agric. Techn. Assist. 2029 47.0 1982 0 1987*Sokoto State ADP 2185 147.0 1983 0 1987*Fertilizer Import 2345 250.0 1984 0 1986*Kaduna State ADP 2436 122.0 1985 0 1990*Southern Borno ADP

Less than $0.1 million* Projected# Not yet agreed

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N p G E R -IBRD ASSISTED

-rml _ o -A >AGRICULTURAL PROJECTS

Agroculwrdal Deveoperent Proleh

CO MPLETED

111,Loo- 9(92- 414)_ Cititso (toy~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L 10994 L,NII

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BKASoo Store (Loan 2185 SUNiK.n. Srole`loo- 1982 -UtitI

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w ~~~~~~~~~~~~~~~-APPRAISEDOJANS IA Pk \Y it 5i1~

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ci op. ~~~~ I Lio~bestock Developeelrldit .11 cs~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~itr~~~~~~~~~~~~~~ F Loon 09I-UNI)

PO 1~~~~~~~~~ - - - - -~~~~~~~~~~~~~~~ -it k~ SiLiAN EXISTING:

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1 80 1t1

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