Pa Audu Ogbe’s Nigerian Yam Export: A Wrong Step, In the Right Direction

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I hate to be the one to burst your bubble if you have been grinning from molar to molar, celebrating Pa Audu’s “incredible feat” of exporting 72 tonnes of yam to the US and UK. I watched the report on AIT. Nicely packaged yam, in lovely cartons. I was tempted to celebrate Pa Audu for this achievement. Then I ran the numbers.

According to the May 2017 report by the Nigeria Bureau of Statistics, 1kg of yam goes for N256. This means that 72 tonnes of yam would have a street value of N18 million. Do the math. Forget that this is less than 50% of the volume of trade on a good day in Katsina-Ala yam market every week. Anyway, the yam was well packed, and then freighted to the US and UK. Lets us assume then the packaging and freighting cost N3 million (and it might be a lot more, given that yam is heavy). So we have about N15 million net worth of yam (18 – 3 = 15). Assuming we sell it at twice the price, we would make a profit of N15 million. Again, let us assume that we did not incur additional cost in the transaction. So, here is the summary: we exported 72 tonnes of yam, and made N15 million. Good business, good profit.

Now, this is where I am going with this: if 72 tonnes of yam is processed to pharmaceutical grade starch, (PGS) (that is the major component of tablets and capsules), we will get about 9.7 tonnes of pure PGS. I am a pharmacist, I know. Depending on your source, pharmaceutical grade starch goes for anywhere from $20 – 40/kg in the international market. And you can google this up. Pa Audu’s 72 tonnes of yam is therefore worth a princely N102 million if it was processed to PGS (assuming it is sold for $30/kg, just to be conservative). So, N18 million worth of yam, processed to N102 million, profit of about 84 million.

The question is, has Audu made N15 million or lost N84 million?

Imagine, for instance, that Benue State was interested in setting up a starch production plant in Katsina-Ala. Would we need to export 72 tonnes of starch to make N15 million, instead of making 84 million? And this is a state that makes a pitiable IGR of N250 million per month. The same Benue produces arguably half of the oranges in the country but there is no single fruit juice making industry in the state. This is not about Benue.

Nigeria produces 50 million metric tonnes of cassava annually, 20% of world production according to FAO, but what do we do with it? We convert it to fufu and eat. Zero percent is processed to PGS or other value-added products. If only half of it is processed to PGS, we would be making N35 billion per annum in sales. Again, open Excel and do the math.

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So we have Audu exporting yam, exporting jobs, losing revenue and feeling cool. And we have Gov. Ortom in the background, loving the spotlight of this new enterprise, waiting for applause. He cannot see opportunities and waste. He cannot understand why IGR is only N250m/month. Then we have the federal government exporting crude, exporting jobs, messing us all up.

We have us, eating 50 million metric tonnes of cassava, converting it to pooh when we can convert it to cash.

And we want to be called a developing country.

The fact that Pa’ Audu Ogbe meant well naturally to the extent of his knowledge. However, superior arguments show that what Nigeria needs is for Government to provide Tax Holidays & other Fiscal & Non-Fiscal incentives for Local & Foreign Investors to Invest in the mis-gaps, which Value addition to Processing, Parking, Storage, Standardization of Exportable Cash Crops/Agricultural produce…

 

Shared view by Kunle Kola Olubiyo, President, Nigeria Consumer Protection Network.