Okay

Bede2u:
Nonsense analysis... the problem is simple...every region was blessed with something. Every region left their resources and got fixated on ND resources.

Go back reread what the OP wrote and tell me the difference between what he wrote and what you have stated now....he merely explained how the federal government lead by the military for their selfish reasons enforced laws that encouraged dependency on oil,so I don't get why ur criticizing the write up...learn to read and comprehend.

IBBG:
What went wrong in the agriculture sector in Nigeria?
In the year 2013 , Indonesia made $19b from exporting palm oil, this is more than the entire 2014 budgets of the South East, South South and Ondo (crude oil states) combined
(South South N1,981trn, South East N619bn, Ondo N162bn)
How is this even possible?
In 1832, 75% of the global palm oil export came from Nigeria. Between 1961 and 1965 world oil palm production was 1.5 million tons, with Nigeria accounting for 43% of that production. Today, Nigeria, ranks behind Malaysia and Indonesia accounting for only 7% of world palm oil production. It’s important to add that Malaysia and Indonesia are also oil producing nations, yes they have crude oil.
By 1960, Nigeria was the World’s largest exporter of shelled groundnuts, with a 40% global market share, today we have 0% market share. Groundnuts were special to Nigeria, between 1956 and 1967, Groundnuts was one of Nigeria’s most valuable export crop, and there were groundnut pyramids in Kano, now all gone. To be specific, groundnut exports fell from 502,000 tons in 1961 to 291,000 tons in 1970 to zero by 1980….
So why did the groundnut pyramid disappear from Nigeria? Sure there was Aflatoxin contamination that affected the groundnut exports. So why did the Northern region not just fumigate and fix the contamination? Why did it just allow exports cease?
Why has agriculture collapsed? Well everyone says crude oil, but it’s not just crude oil, it’s the way we have structured our fiscal federalism.
I explain .
Below is the progression of fiscal allocation formula.
1953 Sir Louis Chick: The penultimate revenue allocation formula for Nigeria was done by Sir Louis Chick. His formula was presented and unanimously agreed at the 1953 constitutional conference in London. It was basic, it read “all mining taxes will be collected federally, distributed based on derivation, same for income taxes ”.
To be clear, it was income tax, mining rent & royalty to be collected and shared 100% to states based on derivation. Federal government got 0%. The minerals at this time was Tin, Columbite and Coal.
Export duties was 50% to state of origin of export, 50% to federal government….
1958 Raisman; Commissioner Raisman amended Sir Chick formula. He slashed the 100% derivation to states to 50%…thus Mining rights was now 50% to state of origin by derivation. Of the other 50%…20% was given to the Federal Government and 30% was again pooled into the “Distributable Pool ” and shared by all four regions again, in this formula… North 40%, East 31%, West 24%, and Southern Cameroon 5%.
Export duties was 100% to state of origin
1963 constitution ….this followed the 1958 Raisman allocation, in summary it remained, mining rights for oil producing regions 67.4%, Federal Government 20%, non-oil regions 12.6%
Export duties maintained at 100% of state of origin
1970 Decree no 13, the Military steps in, the states lose fiscal autonomy, maintain derivation. The Distributable pool was gone, the Oil producing states lost 5% of their derivation percentage. The new formula was now…mining rights for oil producing states, 45%, Federal Government 55%
1975, Decree 6: the military further reduced derivation to 20%, thus mining rights to oil producing states….20%, Federal Government 80%
1977, Aboyade Commission . The Military created the Federation Account. Derivation abolished. Thus mineral rights to oil producing states 0%, Federal Government 100%.
Export duties now 0% to state of origin
Thus in 13 years, Nigeria went from state share of mineral rights at 67% to 0%, and took states share of export proceeds from 100% to 0%
There remains NO incentive for State Government to encourage agriculture. States own the land, Where the land is commercially farmed, the companies pay incomes taxes to the FGN, when the cash crops are exported, export duty is paid to the FGN. The states were left with nothing. The States receive a share of these taxes via Consolidated Revenue Fund, but not according to derivation). It was during this period when the States lost the right of fiscal federalism that commercial agriculture crashed in Nigeria.
When the Federal Government took the crude oil and non oil export proceeds revenues what did they do with it? The FGN shared it back to the States and Local Government according to a formula. States got on average 32%, Federal 47%, LGAs 15% (*note there are statutory transfers to Ecology, Agric development etc )
Export taxes remains 0% to States as derivation, Company income taxes remain 0% accrued to states as derivation…..This means states do not retain as revenue to their budgets the export duties on cash crops produced in their States.
But that is not the whole story….
That 31% the FGN shares to states, is it shared equally? NO how is it shared? That’s called the horizontal revenue allocation formula. The key sharing heads are
1. Equality 45%,
2. Population 25%
3. Land mass 5%
Lets pause here
What this means is that just being a State in the Federation with a high population guarantees any State 65% of the allocation to States from the Federation purse ….
The FGN took the mineral and non-oil export earning to an central account, retained 47% of that account, then returned 51% to the States and LGAs but determined it will be shared out based on“equality” and “population”… not derivation, ie where the income was generated.
Thus all States now focused on their population figure, not agriculture. Any attempt by the National Population Commission to discuss population shifts is met with stiff resistance and with good reason too, population and “equality” not exports or derivation determine how states receive revenues from the 51% allocation. That is why a state can violate the constitution and conduct her own census…it’s that serious.
Palm Oil for instance can be farmed in 24 states in Nigeria including Southern Kaduna specifically in Abia, Akwa Ibom, Cross River, Rivers, Bayelsa, Imo, Anambra, Ebonyi, Enugu, Delta, Edo, Ondo, Ogun, Osun, Oyo, Ekiti, Benue Kwara, Kogi, Nasarawa, Plateau, Taraba, Adamawa and Kaduna…….but why bother planting palm oil? It’s much easier to lobby the National Population Commission for a high population count.
As States in Nigeria started to receive a greater percentage of their income from the federal government, they stopped farming. And you can’t blame them. If groundnuts export revenues still went to Kano State 100% via derivation, there would still be groundnut pyramids in Kano today, but Kano lost the export proceeds funds to FAAC, thus no incentive to plant groundnuts.
Same for Abia State, as they lost the oil palm export proceeds to FAAC, they then put their eyes squarely on “Abuja ”
Is there a suggestion that we unhook states from crude oil funded FAAC and push them to farming? By giving them 100% of their export proceeds from their agriculture cash crops? YES
To fix agriculture we must fix the incentive process. If States retained even 13% derivation on income taxes and export duties on agricultural produce, they would see the incentive to attract companies to come to their States and push non oil exports. If we had left the derivation to states at 100%, then every state today would be viable.
The problem with agriculture in Nigeria is not crude oil, but our faulty fiscal federalism (FAAC)….
So what should Nigeria do?
We reward what you want to improve, if you want safer drivers you reward drivers with zero car scratches. Return back to the States the fiscal principle of derivation on agricultural exports. That will mean states can see a direct relationship between farming and IGR and this will spur investment in agriculture. Governors will seek out agriculture investors the same way and vigor they seek out Shoprite Malls.
Derivation on agriculture is also fair. All states have land, all states can farm, agriculture is still a major contributor to our GDP growth, and it still employs millions of Nigerians in every state. A fiscal amendment to give states 100% export earning can have two massive impacts
In the short term, it makes agriculture attractive in the long term it makes all states fiscally viable.
So agree to increase derivation on agricultural exports from state of origin back to 100%.
It’s our problem, we can fix it.
http://www.businessdayonline.com/whats-problem-agriculture/

last I checked
States don't farm
Farmers do
Or am I missing something

Meajor:
Wonderful writeup.... But my problem is that some unreasonable nairalanders will soon come an bring a different issue here...
Well I've started planting my palm trees.... But thus is five years now, and I've not started harvesting... Its frustrating guys... There was a time I almost cut down all the palm trees...
I am thinking of getting good nursery again, so I can plant about 150or 200 more during the rainy season... I lived around Abuja... Karu precisely... If you you where I can get too nursery please help a brother

5 years

Wetin happen

All of you better enter farm and stop waiting for gwament

if the govt wants to truly see massive improvement and growth in the agricultural sector, it has to institute back agricultural policies that was obtainable in the colonial era. anything other than that may not yield the desired or expected result in the agricultural sector.

The problems of Nigeria has never been hidden...

I read all the write up and it makes sense but not absolutely.

The write up stressed about the sharing formula that discouraged state interest in agriculture but the issue i see is the timeline.

Most of what the op refered to happened much later, from 1970's, while the real backdrop in agriculture was between 1960-70 which is also the same as the timeline for oil boom. Its not a coincidence that the oilboom happened at the same time as backdrop in agriculture.

I think what the op is referring to was actually what hit the nail in the agricultural coffin.

From what I gather of the OP's argument, the allocation formula disincentives agricultural production/exports. This is insufficient as a primary explanation of the relative erosion of our agricultural sector as it is premised on governmental initiative/endeavour comandeering growth in agriculture.

The reason for the relative decline in agriculture lies mainly in the impact of forex inflow from oil exports on the competitiveness/viability of non-oil exports (including agriculture).

Forex flowing in from oil increased domestic money supply and domestic inflation. As Nigeria had a fixed exchange rate regime in the 1970s, I stand corrected, the return on exports did not adjust to offset the depreciation in the exchange rate.

Thought experiment: supposing you export palm oil and earn $1m which you convert to N1m in 1973 (not using actual exchange rates in this analysis). If you have domestic annual inflation of 20% but the exchange rate is stable, your N1m income in 1974 cannot buy the same things it bought in 1973 (you need the CBN to allow the Naira to fall to N1.2 to $1). If this keeps happening each year, you find there is no need to keep exporting your agricultural goods as your purchasing power is being eroded by inflation and the Naira's strength.

In summary, what is described above is the impact of real exchange rate appreciation on export competitiveness. This is the main channel via which the oil boom of the 1970s eroded our strength in agriculture.

Great article, it explains why the state governments offer no incentives to commercial farmers, whats in it for them if all the proceeds go to the Federal Government. Its truly unbelieavable .

In the EU to reduce price distortion, the connection between payments and specific crops was removed; instead, a "Single Farm Payment", which subsidised farmers on a per-hectare basis, is practiced
The Single Farm Payment is a large proportion of income for many farmers,[8] who say they could not profit without subsidies.[9][10] However, farm subsidies in developed countries push down food prices and impoverish third-world farmers. Taxpayers in the EU get more than most in return for their money.[11][12]

In 2010, the EU spent €57 billion on agricultural development, of which €39 billion was spent on direct subsidies to farmers

USA
In 1933, with many farmers losing money because of the Great Depression, President Franklin D. Roosevelt signed the Agricultural Adjustment Act, which created the Agricultural Adjustment Administration (AAA). It makes sense for society to support farming. Everybody needs to eat, and most would prefer to do so without devastating the environment or exploiting labor.

Well, no one can accuse the United States of failing to commit significant resources to agriculture. Between 1995 and 2005, the Environmental Working Group calculates, the government paid farmers $164.7 billion. That averages to about $16 billion per year —


Now what do farmers in Nigeria get? How can we compete on the world stage if we do not even have the basics, forget the subsidies, give farmers the basics, bad roads make the cost of moving farm inputs like feed, machinery, staff unprofitable, farm outputs such as harvests and moving livestock are so high too , makes doing business prohibitive expensive.

commercial farming requires power be it from electricity, diesel or petrol. what incentives do FG give farmers to reduce the cost of this critical component. Google THE UKs RED DIESEL - In the United Kingdom, "red diesel" is dyed gas oil for registered agricultural or construction vehicles such as tractors, excavators, cranes and some other non-road applications such as boats. Red diesel carries a significantly reduced tax levy compared to un-dyed diesel fuel used in ordinary road vehicles. Knowing Nigerians this system will be rife with corruption red fuel will be diverted elsewhere

Nigeria is not taking agriculture seriously one iota........... I ASK MYSELF WHY OOO WHY....... Are we lazy, dumb, stupid, ignorant, lack vision... we all agree we live in the midst of VERY MANY TOTALLY corrupt liars. it has to be one of the above that is stopping us from growing an industry that can generate serious revenue, provide employment, reduce food costs for the average Nigerian, bring in foreign revenue, educate and provide a respectful and well paid trade for the rural masses, diversify the economy.

Anyways for the those that bothered to read up too here, We are Jessam Cattle Ranch & Farms based in Emene, Enugu . For serious enquiries contact me on jessamfarms@hotmail.com

An important expose is shared on the largest forum in 9ja and it only gets 2 pages of comments, 70% of which are unintelligent gibberish. And Nigerians are "praying" for the country to get better. Alright.

-Lord

MIKOLOWISKA:
5 years

Wetin happen

... Like seriously I don't know oh...

MIKOLOWISKA:
last I checked
States don't farm
Farmers do
Or am I missing something

State owned the land which is no 1 factor in agriculture,and don't forget even in developed world agric can't be privatised hence govt subsidy

kudosamass:
Agriculture is the way to go. It is the largest & most profitable industry today in the world and it will continue to be.

To acquire Agricultural Farmland in Abuja, visit: https://abujafarmland..com.ng/

OR check my signature here to contact me

Agriculture is profitable there isn't a single doubt but technology is the most profitable.

dbynonetwork:
That is why BUHARI is a curse to Nigeria...
His killer herdsmen and hungry cows has made it impossible for farmers to sow and reap bountifully.....

Did you read the post?

Ademat7:

State owned the land which is no 1 factor in agriculture,and don't forget even in developed world agric can't be privatised hence govt subsidy

Shebi state collect money for land not tax
Govt subsidy is still private farming.
How many subsidy our farmers de collet sef

Meajor:
... Like seriously I don't know oh...

have you asked other farmers or agric institute

IBBG:
What went wrong in the agriculture sector in Nigeria?
In the year 2013 , Indonesia made $19b from exporting palm oil, this is more than the entire 2014 budgets of the South East, South South and Ondo (crude oil states) combined
(South South N1,981trn, South East N619bn, Ondo N162bn)
How is this even possible?
In 1832, 75% of the global palm oil export came from Nigeria. Between 1961 and 1965 world oil palm production was 1.5 million tons, with Nigeria accounting for 43% of that production. Today, Nigeria, ranks behind Malaysia and Indonesia accounting for only 7% of world palm oil production. It’s important to add that Malaysia and Indonesia are also oil producing nations, yes they have crude oil.
By 1960, Nigeria was the World’s largest exporter of shelled groundnuts, with a 40% global market share, today we have 0% market share. Groundnuts were special to Nigeria, between 1956 and 1967, Groundnuts was one of Nigeria’s most valuable export crop, and there were groundnut pyramids in Kano, now all gone. To be specific, groundnut exports fell from 502,000 tons in 1961 to 291,000 tons in 1970 to zero by 1980….
So why did the groundnut pyramid disappear from Nigeria? Sure there was Aflatoxin contamination that affected the groundnut exports. So why did the Northern region not just fumigate and fix the contamination? Why did it just allow exports cease?
Why has agriculture collapsed? Well everyone says crude oil, but it’s not just crude oil, it’s the way we have structured our fiscal federalism.
I explain .
Below is the progression of fiscal allocation formula.
1953 Sir Louis Chick: The penultimate revenue allocation formula for Nigeria was done by Sir Louis Chick. His formula was presented and unanimously agreed at the 1953 constitutional conference in London. It was basic, it read “all mining taxes will be collected federally, distributed based on derivation, same for income taxes ”.
To be clear, it was income tax, mining rent & royalty to be collected and shared 100% to states based on derivation. Federal government got 0%. The minerals at this time was Tin, Columbite and Coal.
Export duties was 50% to state of origin of export, 50% to federal government….
1958 Raisman; Commissioner Raisman amended Sir Chick formula. He slashed the 100% derivation to states to 50%…thus Mining rights was now 50% to state of origin by derivation. Of the other 50%…20% was given to the Federal Government and 30% was again pooled into the “Distributable Pool ” and shared by all four regions again, in this formula… North 40%, East 31%, West 24%, and Southern Cameroon 5%.
Export duties was 100% to state of origin
1963 constitution ….this followed the 1958 Raisman allocation, in summary it remained, mining rights for oil producing regions 67.4%, Federal Government 20%, non-oil regions 12.6%
Export duties maintained at 100% of state of origin
1970 Decree no 13, the Military steps in, the states lose fiscal autonomy, maintain derivation. The Distributable pool was gone, the Oil producing states lost 5% of their derivation percentage. The new formula was now…mining rights for oil producing states, 45%, Federal Government 55%
1975, Decree 6: the military further reduced derivation to 20%, thus mining rights to oil producing states….20%, Federal Government 80%
1977, Aboyade Commission . The Military created the Federation Account. Derivation abolished. Thus mineral rights to oil producing states 0%, Federal Government 100%.
Export duties now 0% to state of origin
Thus in 13 years, Nigeria went from state share of mineral rights at 67% to 0%, and took states share of export proceeds from 100% to 0%
There remains NO incentive for State Government to encourage agriculture. States own the land, Where the land is commercially farmed, the companies pay incomes taxes to the FGN, when the cash crops are exported, export duty is paid to the FGN. The states were left with nothing. The States receive a share of these taxes via Consolidated Revenue Fund, but not according to derivation). It was during this period when the States lost the right of fiscal federalism that commercial agriculture crashed in Nigeria.
When the Federal Government took the crude oil and non oil export proceeds revenues what did they do with it? The FGN shared it back to the States and Local Government according to a formula. States got on average 32%, Federal 47%, LGAs 15% (*note there are statutory transfers to Ecology, Agric development etc )
Export taxes remains 0% to States as derivation, Company income taxes remain 0% accrued to states as derivation…..This means states do not retain as revenue to their budgets the export duties on cash crops produced in their States.
But that is not the whole story….
That 31% the FGN shares to states, is it shared equally? NO how is it shared? That’s called the horizontal revenue allocation formula. The key sharing heads are
1. Equality 45%,
2. Population 25%
3. Land mass 5%
Lets pause here
What this means is that just being a State in the Federation with a high population guarantees any State 65% of the allocation to States from the Federation purse ….
The FGN took the mineral and non-oil export earning to an central account, retained 47% of that account, then returned 51% to the States and LGAs but determined it will be shared out based on“equality” and “population”… not derivation, ie where the income was generated.
Thus all States now focused on their population figure, not agriculture. Any attempt by the National Population Commission to discuss population shifts is met with stiff resistance and with good reason too, population and “equality” not exports or derivation determine how states receive revenues from the 51% allocation. That is why a state can violate the constitution and conduct her own census…it’s that serious.
Palm Oil for instance can be farmed in 24 states in Nigeria including Southern Kaduna specifically in Abia, Akwa Ibom, Cross River, Rivers, Bayelsa, Imo, Anambra, Ebonyi, Enugu, Delta, Edo, Ondo, Ogun, Osun, Oyo, Ekiti, Benue Kwara, Kogi, Nasarawa, Plateau, Taraba, Adamawa and Kaduna…….but why bother planting palm oil? It’s much easier to lobby the National Population Commission for a high population count.
As States in Nigeria started to receive a greater percentage of their income from the federal government, they stopped farming. And you can’t blame them. If groundnuts export revenues still went to Kano State 100% via derivation, there would still be groundnut pyramids in Kano today, but Kano lost the export proceeds funds to FAAC, thus no incentive to plant groundnuts.
Same for Abia State, as they lost the oil palm export proceeds to FAAC, they then put their eyes squarely on “Abuja ”
Is there a suggestion that we unhook states from crude oil funded FAAC and push them to farming? By giving them 100% of their export proceeds from their agriculture cash crops? YES
To fix agriculture we must fix the incentive process. If States retained even 13% derivation on income taxes and export duties on agricultural produce, they would see the incentive to attract companies to come to their States and push non oil exports. If we had left the derivation to states at 100%, then every state today would be viable.
The problem with agriculture in Nigeria is not crude oil, but our faulty fiscal federalism (FAAC)….
So what should Nigeria do?
We reward what you want to improve, if you want safer drivers you reward drivers with zero car scratches. Return back to the States the fiscal principle of derivation on agricultural exports. That will mean states can see a direct relationship between farming and IGR and this will spur investment in agriculture. Governors will seek out agriculture investors the same way and vigor they seek out Shoprite Malls.
Derivation on agriculture is also fair. All states have land, all states can farm, agriculture is still a major contributor to our GDP growth, and it still employs millions of Nigerians in every state. A fiscal amendment to give states 100% export earning can have two massive impacts
In the short term, it makes agriculture attractive in the long term it makes all states fiscally viable.
So agree to increase derivation on agricultural exports from state of origin back to 100%.
It’s our problem, we can fix it.
http://www.businessdayonline.com/whats-problem-agriculture/

God (or whatever seun believes in) bless him.
If not for NairaLand, how would we be knowing/learning this much?