Nigeria’s fertile lands and abundant natural resources have long been the backbone of the country’s economy, sustaining generations of farmers and nurturing a diverse array of crops (1). As the nation embraces the challenges of a rapidly growing population (2,3) and the need for sustainable agricultural practices becomes apparent, one groundbreaking concept is quietly transforming the agri-ecosystem: Contract Farming.
This article delves into the captivating world of contract farming and its profound impact on Nigeria’s agricultural landscape. We’ll uncover the intricate web of collaboration between farmers, agribusinesses, and processors, fostering a harmonious cycle of growth and prosperity. Let’s journey together into the heart of this innovative practice redefining the future of farming in Nigeria.
Contract farming is a beacon of hope and a catalyst for change, positively affecting the lives of farmers.
We’ll explore its far-reaching benefits, how it enhances the livelihood of farmers, bolsters food security, and nurtures sustainable farming practices for a better tomorrow.
According to the PwC report on the current state of Nigeria’s agriculture and agribusiness sector, more than 80% of Nigeria’s farmers are smallholder farmers (SHFs). These numbers account for 90% of Nigeria’s agricultural produce (4). Hence the need to provide a win-win solution where farmers can meet their economic responsibilities, gain easy access to the market, and complement processing needs and demands.
Contract farming is a complementary strategy to enhance farm production and foster backward integration (5). This approach is predominantly utilized in livestock production, especially in dairy farms and milk processing, and crop production to meet processing demands.
Examples of companies working with contract farmers #
For instance, multinational dairy company Danone has implemented backward integration by partnering with farmers to produce high-quality milk through long-term contracts in several countries, including France, Spain, and New Zealand (6). Similarly, India’s Amul, a dairy cooperative, has established a network of over 18,000 village-level dairy cooperatives, partnering with farmers to produce high-quality milk for its processing facilities (7). Major agribusiness farms in Nigeria have also engaged in this practice to complement their productivity. One such is Psaltry International, which sources from rural smallholders’ cassava farmers to complement their processing needs for their various ranges of cassava derivatives products (8). 
The advantages of contract farming for smallholder farmers #
This innovative approach aims to create a constant source of high-quality raw materials for processing industries while simultaneously empowering farmers and boosting their economic status. Contract farming has been found to improve farmers’ productivity by increasing their farm size, net returns, and welfare levels, with factors such as age, educational status, farm size, farming experience, and labor cost influencing farmers’ participation and interest (9).
However, the contract farming model’s successful implementation comes with challenges, such as poor technical assistance, input support, and unfavorable terms and conditions (10).
Contract farming is a visionary concept that bridges the gap between farmers and industries by establishing mutually beneficial partnerships (11). Through this model, farmers enter into contractual agreements with agribusinesses or processing companies to cultivate specific crops or raise livestock as required by the industry’s demands. This symbiotic relationship brings many advantages, creating a win-win scenario for all stakeholders.
Key benefits of contract farming in Nigeria include:
- Constant Source of Raw Material: Contract farming ensures a reliable and steady supply of raw materials for processing industries, reducing dependency on fluctuating market conditions and imports. This promotes a more robust and self-sufficient agricultural ecosystem in Nigeria.
- Market Access for Farmers: By collaborating with established processing companies, farmers gain direct access to a broader market. This eliminates intermediaries, enabling fair pricing and transparent trade, thus securing a stable income for farmers and reducing post-harvest losses.
- Enhanced Farmer Capacity: Training and technical backstopping are integral to contract farming agreements. Farmers receive specialized training in modern farming techniques, best agricultural practices, and sustainable methods, boosting their skills and efficiency.
- Access to Improved Planting Materials and GAP: Contract farming facilitates the dissemination of improved planting materials and Good Agricultural Practices (GAP) to farmers. This results in higher yields, improved product quality, and environmentally responsible farming practices.
- Improved Economic Status and Livelihood of Farmers: With consistent earnings and access to professional guidance, contract farming empowers farmers to invest in better equipment, healthcare, and education, leading to an overall improvement in their standard of living.
- Risk Mitigation: Through well-structured agreements, farmers and agribusinesses collaborate to eliminate the uncertainty and inefficiency of raw material sourcing. Additionally, contract farming offers farmers essential technical and financial support, strengthening their resilience against market volatility.
- Stimulating Rural Development: Contract farming contributes significantly to rural development by bolstering the agricultural sector. It creates employment opportunities, attracts investments, and fosters infrastructure development in rural areas.
- Promoting Food Security: A thriving agricultural sector through contract farming plays a vital role in ensuring food security for the nation. As production and processing improve, so does the availability of nutritious food for the population.
- Scalability of impact: While contract farming is already known for providing a constant source of raw materials and enhancing market access, another remarkable advantage is often overlooked: scalability of impact. The dynamic relationship between contract farming, farmer training, and Good Agricultural Practices (GAP) indirectly bestows a profound and enduring effect on Nigeria’s agri ecosystem. Beyond the immediate collaboration, the training and GAP offered through contract farming empower farmers to replicate cutting-edge technologies and practices on their farms. As a result, yields soar, and the scalability of technology impacts opens a gateway to a future of agricultural abundance.
Contract farming has the potential to revolutionize Nigeria’s agricultural landscape and empower farmers to embrace sustainable practices, and unveils a world of endless possibilities for both the industry and the nation and for improving rural livelihoods.
References:
1.Why contract farming is necessary in Nigeria (financialnigeria.com)
2.Nigeria Faces a Crippling Population Boom (cfr.org)
3.Nigeria Overview: Development news, research, data | World Bank
4. pwc.com/ng/en/assets/pdf/
5. Agricultural Value Chains, Contract Farming, and Rural Development (cornell.edu)
6. Northeast Organic Dairy Farmers May Get Squeezed Out of Business – Modern Farmer
7. A note on the achievements of the dairy cooperatives :: Amul – The Taste of India
9. Obasi, I., (2014). Effect of Contract Farming on Productivity and Welfare of Cassava- Based Farmers in South Eastern Nigeria. European Journal of Business and Management 6 (7), 334-339.
10. Obi-Egbedi, Ogheneruemu, Osanyinlusi, Oladele Ige and Adekunle, Olatunde Bilikisu. “Does contract farming really matter in cassava farms productivity in Iseyin Local Government Area, Oyo State, Nigeria?” Agricultura Tropica et Subtropica, vol.55, no.1, 3922, pp.65-73. https://doi.org/10.2478/ats-
11. FAO – News Article: Helping farmers and buyers build mutually beneficial partnerships
