December 5, 2022

While global food prices may be falling in Europe and United States, those of Nigeria and the rest of Africa are soaring. Analysts attribute this to inadequate storage capacities and logistical infrastructure for agricultural commodities. DANIEL ESSIET reports.

Food prices worldwide have repeatedly fallen this year, data from the United Nations Food and Agriculture Organisation (FAO) has revealed. But those of Nigeria and the rest of Africa are still soaring. Africa has been hit with spiralling food prices. Across the continent, food inflation has reached record highs, according to the various Bureaus of Statistics.

This and other issues have prompted the FAO to warn of rising food security issues in Africa where agricultural production has fallen.

Indeed, food security has resurfaced to the forefront of global issues as supply chains exacerbate growing hunger and malnutrition.   But worrying for analysts are lack of capacity increases and technological upgrade at the various storage terminals and silos and non-enhancement of intermodal transportation. Against this backdrop, the sector is grappling with bottlenecks in storage capacity and logistical infrastructure for crops storage.

FAO estimates that over 40 per cent of food in sub-Saharan Africa perish before it reaches a consumer.  The organisation’s experts are convinced waste could be as high as 60 per cent for fresh produce, pointing to unmet demand for temperature-controlled cold-storage warehouses and transportation services.

If African agriculture is to play a greater role in supplying local food demand, a study by McKinsey, an international multidiscipline practice group,  posited  that it would be important to improve cost competitiveness for food crops compared with major trading partners.

The report said sub-Saharan Africa needs at least $8 billion of investment in basic storage (not including cold-chain investments for horticulture or animal products) to fulfill its agricultural promise.

According to International Finance Corporation (IFC) and other institutions, sub-Saharan Africa loses an average of 13.5 per cent of harvested grain at the post-harvest phase, which is equivalent to nearly $4 billion yearly.

For the Chairman, AFEX Nigeria, Mr. Deji Balogun, Africa’s agriculture holds great promise, but the continent is hampered by lack of infrastructure. According to him, the poor level of grain storage is one of the key leaking points in the harvested cereal’s supply chain.

Hence, efforts to strengthen the sector have often achieved only limited success because of failure to improve the provision of storage facilities and logistics infrastructure development.

For him and others, what Nigeria and the rest of Africa need is a comprehensive strategy that synthesises diverse approaches to improving growth, harvesting, storing, and distribution of food supply, while prioritising resources for the most-promising areas of improvement.

Bottlenecks in Nigeria’s storage capacity and logistical infrastructure

According to the World Bank, Nigeria’s logistical supply chain will need to be bolstered by increasing storage capacities and road haulage, in addition to infrastructure upgrades if agriculture is to grow.

Chairman, Multimix Academy, Dr. Obiora Madu, believes Nigeria’s logistical competitiveness has deteriorated as a result of ageing infrastructure. In some parts of Nigeria, due to a lack in storage structures, losses have been estimated between 40 and 45 per cent. He noted that storage played a vital role in the food supply chain, and several studies reported that maximum losses happen during harvesting. The hauling industry, he noted, is one of the most critical links in the chain when it comes to reducing food waste and alleviating agro commodities congestion at ports, warehouses and rail terminals.

A consultant, Prof Abel Ogunwale also shares this view. The lack of adequate transportation infrastructure, he noted, results in large spillage and high contamination.

He reiterated that the upgrading of rail and inland waterways was critical in the transportation of crops from cultivation areas to their final destinations.  So far, he said road is extensively used for crop and transportation of other goods.

Trucks, he maintained, play a huge role in long-distance transportation of crops.

The next link in the chain, he believes, is railroads as trucks bring agro commodities to various hubs where the produce are stored and later loaded on trains and taken inland.

Sadly, major railroads have their own issues to contend with, including lack of good storage for transportation of agro commodities.

Higher costs of hauling and storage can lead to higher produce prices and overall inflation.

Ogunwale cited upgrading of rail infrastructure as a priority the government should focus on to undertake transportation of agricultural products, particularly grain.

To reduce grain waste, AFEX is currently upgrading its infrastructure. Increased harvest may well grow trickier in the coming months, with some crops due to be harvested, also putting pressure on domestic storage capacity.

AFEX has opened its newly built multi-grain processing plant in Kaduna, with an annual processing capacity of 100,000 metric tonnes (MT). The new state-of-the-art plant, fashioned with modern grain sorting, cleaning and packaging equipment, also features the state’s largest single unit storage space with a holding capacity of 30,000MT. The plant has the capability of processing a wide array of grains, including maize, soy beans, sorghum, among others, sourced from local farmers in the northern region.

Established in 2013, AFEX commenced operations with just seven storage facilities with an aggregate storage capacity of 12,000MT. Since then, the commodity trader has expanded to 150 storage facilities across the country with a holding capacity of 400,000MT, enhancing access to storage facilities by farmers, minimising post-harvest losses and enabling them to have opportunity to assess the market and sell their produce at the most-favourable time.

Analysts believe the sector needs giant grain storage facilities and distribution centres to help in selling food crops across the country.

After dealing with the fallout from COVID-19, the recent flooding, grain storage and handling suppliers are facing rising prices and supply chain concerns. This follows the impact of insecurity at the farms which makes it difficult for them to store grain.

One challenge operators of storage facilities face is aggregating small quantities of production from widely-dispersed smallholder farmers.

Infrastructure

According to analysts, agricultural infrastructure is significantly underdeveloped. This leads to enormous challenges within the value chain and the agricultural industry. The road networks in rural areas are underdeveloped, which means that majority of the commodities from the farms are brought on small vehicles or motorbikes which is an inefficient way of transportation because there are no centralised aggregation points.

Having inefficient or inadequate systems of transportation, logistics, and trade-related infrastructure, according to Madu, severely impedes a country’s ability to compete on a global scale.

According to him, connectivity encompasses physical facilities, services, and ways to facilitate the movement of food within and across borders.

He is not satisfied with Nigeria’s position on the global Logistics Performance Index (LPI) that measures how well countries connect to international logistics networks.

Federation of Agricultural Commodities Association of Nigeria (FACAN) President Victor Iyama said the dearth of infrastructure logistics and high cost of diesel to transport agricultural commodities had led to further increase in food prices across the country. He noted that Nigeria has capacity to mimimise that increasing costs of transportation and storage of food as freight transport is critical to domestic and international trade.

The Chairman, All Farmers Association of Nigeria (AFAN), South West zone, Dr. Olufemi Oke, said prices of commodities had escalated because of the challenge of infrastructure gap, logistics and high cost of diesel to transport agro commodities.

Stakeholders’ response

Recently, stakeholders at a forum in Lagos called for massive investment in cold chain logistics as the agricultural sector continues to suffer huge losses in food production.

Giving a preview on Nigeria cold chain logistics industry, the Chairman, Governing Council, Nigerian Institute of Transport Technology, NITT, Zaria, Olorogun John Ejovwoke Onojeharho, said: “The development of an effective forum to market cold chain is vital to increasing availability and affordability of safe, nutritious food for low income Nigerians.

“Presently, Nigeria has less than one per cent of the world’s cold storage and mobile refrigerated logistics capacity. We have not started!

“It is estimated that Nigeria can save $9 billion by avoiding spoilage of goods through transportation of the refrigerated products (fish foods, dairy products, fish market, supermarkets) that requires cold chain logistics in day to day operations. Over 100 million metric tonnes perishable produce is transported between elites each year with only less than 10 per cent.

“Implications: Nigeria loses an estimated 1.5 million metric tonnes of perishable farm produce annually; between 40-50 per cent of fresh fruits and vegetables are lost during transportation, storage and processing; tomato produce, for instance, it is estimated that more than 40 per cent of tomato must travel long distances. They are largely grown in the northern part of the country, but mostly consumed in urban centres in the South.”

Private sector responses

Several entrepreneurs and investors have identified the storage and preservation of agricultural produce in Africa as an area with compelling opportunities.

African Infrastructure Investment Managers (AIIM) has set up a pan-African cold chain logistics platform with the acquisition of a cold storage operator from Oceana Group for $46m (€40m).

AIIM has led a group of investors including Bauta Logistics and the Mokobela Shakati consortium to buy Oceana’s CCS Logistics as the first acquisition for the newly launched Commercial Cold Holdings (CCH) platform.

AIIM will hold a 59.2 per cent stake in CCH via its flagship open-ended SADC region infrastructure fund IDEAS and its fourth generation pan-African infrastructure fund, AIIF4. The two vehicles intend to invest up to $150m in CCH to help fund the CCS deal as well as other transactions.

CCS, Southern Africa’s leading cold store operator, has been in existence for over 50 years. The company currently operates about 100,000 pallets of storage across six facilities in Johannesburg, Cape Town and Walvis Bay, Namibia.

AIIM’s Investment Director Damilola Agbaje said the cold chain logistical infrastructure sector is underdeveloped, and in places non-existent, across Sub-Saharan Africa and the investment diversifies AIIM’s current portfolio into a high-growth and high-impact area.

“South Africa, which possesses the continent’s most advanced TCL [temperature-controlled logistics] infrastructure at 13m3 of cold storage per 1,000 residents, lags comparable economies such as Egypt and Brazil, which have 105m3 and 83m3, respectively our research has indicated.

“TCL infrastructure is critical for both improving Sub-Saharan Africa’s food security; allowing domestic producers to meet the standards required to participate in global trade; and creating higher value jobs through more formal food retail and wholesale models,” said Agbaje.

According to Agbaje, CCH would focus on acquiring and developing facilities with strategic physical locations and/or integration with market-leading food producers, wholesalers, and retailers.

“Anchoring CCH’s strategy with such an established player is crucial for the platform’s regional expansion. New market entries will leverage CCS’s technical expertise and operational track record to secure strategic customer relationships,” he said.

The Managing Director and co-head of AIIM, Olusola Lawson, said: “Food security in the current global and African context is a topic of increasing importance, and we believe the CCH platform will play a role in addressing these critical matters. We look forward to further announcements as AIIF4 continues to expand its portfolio.”

The Managing Director, Bauta Logistics, Michael Osekereh, said: “Bauta is pleased to be partnering with AIIM and Mokobela Shakati in establishing this Pan African cold storage platform.

”As we build out a network of temperature-controlled warehouses in key demand hubs and food production regions on the Continent, we are excited about the role that CCH will play in facilitating intercontinental trade.”

After suffering a significant financial loss from transporting chicken in a malfunctioning refrigerated truck, Ope Olanrewaju started Kennie-O Cold Chain Logistics, which provides cold-storage solutions to fresh produce farmers. He said seventy per cent of Africa’s food is supplied by smallholder farmers and they are losing so much money because of the post-harvest losses in our fresh food and vegetables. He said his organisation has been able to bridge that gap by helping the b smallholder farmers transport it to other temperature-controlled environments.

The Mediterranean has been one of the most active food trading areas, supported by a transport network linking Europe and North Africa. Spain, Egypt, and Morocco have achieved tremendous success in promoting the effective integration of the region into an increasingly connected food economy.

Leave a Reply

Your email address will not be published. Required fields are marked *