These are expected to significantly improve agricultural activity in the country and impact on the demand for agricultural equipment. According to industry trends, demand ratios of new equipment to used is estimated at 9:1, with government as the biggest buyer (about 80%) of new machinery. Private sector farms and individuals are the most important end users of used equipment accounting for over 90%.
New locally fabricated equipment is available and relatively affordable. However, the United States enjoys a significant market share of about 50% for used poultry incubators and hatchery equipment. Italy somewhat dominates the market for new poultry equipment while Europe leads in the supply of refurbished farm equipment for crop production. There are emerging export opportunities for used machinery for food preservation and processing. Quality of equipment is one of the key purchase factors, but that must be highly complemented by low price and where necessary, full after-sales support. There are no barriers to imports but tariff on all categories (new and used) range between 10-20%.
Overview:
Nigeria is blessed with a wide variety of agricultural potentials, ranging from varieties of crops, to animals and plants as well as natural agricultural-supportive factors like forests, water, land, and most of all, human resources that are being under-used. According to the Economist, the country displays (truly) the characteristics of a dual economy - a modern sector heavily dependent on oil earnings that overlays a traditional agricultural and trading economy. At independence in 1960, agriculture accounted for about 60% of GDP, which is typical for developing agrarian nations. However, this share continued to decline over the years from government's neglect of the sector due to the discovery of oil in commercial quantity in 1958.
Despite the rapid growth of Nigeria's oil industry since the 1970's, the nation is still predominantly agrarian, contributing over 35% of GDP, about 5% of total foreign exchange earnings, accounting for over 80% of non-oil exports and employing about 70% of the nation's active labor force. Nigeria's former military rulers failed to diversify the economy away from over-dependence on the capital-intensive oil sector. The largely subsistence agricultural sector has failed to keep up with rapid population growth, and Nigeria, once a large net exporter of food, now must import food. To revert this trend, during the past four years, Nigeria's new democratic government has embarked on several agricultural reform programs to meet its target of raising agricultural exports to US$3 billion by 2007. Some of the programs include ban on the importation of poultry and livestock to rejuvenate the ailing sub-sector and the revolution of cassava production for exports. Some state governments are also providing huge incentives for farmers from South African and Zimbabwe as an attraction for them to invest in large scale mechanized farming in their constituencies. These developments are expected to increase the demand for new and used agricultural equipment. Nigerians are generally very receptive to U.S. products because of their perceived superior quality and durability. Aware of these opportunities, a few American manufacturers are already discussing trade and investment opportunities with Nigerian State and Federal Governments.
Market Trends:
As a result of the insignificant size of mechanized farming in Nigeria, the Federal and State governments have long been the highest net buyers (about 80%) of agricultural machinery, although mostly new. Farm equipment procured by government are either sold at subsidized rates to agricultural cooperatives or provided to farmers on rent. It is reported that most private sector agricultural entities also prefer to buy new farm equipment because the price difference between those and imported used/refurbished ones are often relatively minor. Moreover, majority of farmers largely employ small and cheap farm implements readily available from locally manufactured sources or imported from India and China. Tractors are assembled in Nigeria for the local market.
There is significant demand for used incubators and other hatchery equipment according to industry contacts. In 2002, fear of the Asian bird flu epidemic drove the Nigerian government to ban the importation of day-old chicks. This legislation has created serious challenges for local farmers in the supply of parent stock. The clamor by the poultry industry for government license to big breeder farms to import parent stock has yielded no positive results. To fill this gap, industry experts predict that there is going to be substantial investments in hatchery equipment in the next 5 years, but warn that the major industry players would most likely go for new machinery. Demand for used equipment will probably come from small and medium scale poultry farms. The projected total value of investment is 1-2 million USD with used equipment expected to account for only about 30-40%. Housing and feeding equipment can largely, be locally fabricated while imported new ones are sold at moderate prices.
Post harvest losses have continued to pose serious threats and challenges to private and public sector efforts in food production. It is estimated that annually, over 40% of all Nigerian farm produce especially grains, cereals, and tubers, are lost due to lack of storage facilities. Most Nigerian peasants practice primitive modes of food preservation while a few large-scale farmers employ minimal modern preservation technologies. Presently, storage silos are fabricated locally, but industry sources say that large farms will push the demand for hi-tech equipment (most likely fairly used because of cost). Similarly, promising opportunities exists in food processing industries especially in meat and fish processing as a result of the ban on imported livestock and poultry. It is assumed many will be interested in used equipment because of the capital-intensive requirement of new equipment. Meat processing factories are gradually springing up in the northern part of Nigeria while some livestock farms in various parts of the country are beginning to incorporate meat processing into their operations.
Import Market:
There is generally a lack of trade data in Nigeria. An important part of domestic production is not registered and reliable sector data is almost nonexistent. However, industry sources estimate average market size for both new and used agricultural machinery for Nigeria in 2003 and 2004 at between 20-30 million USD. It is difficult to determine the share of used equipment in this figure but many guess it is about 10%. Total annual local production takes more than 60% of this chunk. Two companies, NTM and Steyr are engaged in the assembly and refurbishment of agricultural tractors and earth moving equipment. These enjoy high government patronage estimated at over 70% of the companies' annual sales.
It is very difficult to get reliable import statistics or estimates for 2003 and 2004. However, for the new and used categories, poultry contacts guess that the U.S. generally leads the export of used incubators and hatchery equipment with a market share of about 50%. Some are of the opinion that Italy controls the supply of new poultry equipment especially for broilers and layers. Though Europe particularly the Netherlands, Germany, and Italy are known to dominate the market for livestock supplements, they also export some amounts of used poultry equipment. India, Israel, China, UK, and Germany constitute the major import countries for farm implements for crop production.
The following table illustrates the growing progression of overall U.S. agricultural machinery exports to Nigeria. Please note that this data is for both new and used agricultural equipment of
HS Code 21200.
| Year | 2000 | 2001 | 2002 | 2003 | 2004 |
| Value | 1,337 | 1,697 | 1,399 | 2,282 | 2,081 |
Source: U.S. Federal Census Bureau
The table shows an increase of 36% from 1.337 million USD in 2000 to 2.081million USD in 2004. There are prospects for sustained growth of exports over coming years given the ongoing reform programs of the Nigerian government for mechanized farming for food-sufficiency and export. In addition, if the weakness of the dollar against the euro and the pound sterling continues, demand will tilt in favor of U.S. imports because of its resultant effect on competitive pricing. However, the low-price of Chinese and Indian imports poses a threat to this prospect.
Competition:
Price and product quality are generally the major determinants of demand in this market. Overall, buyers of used products are driven by the need to get high quality products at low prices. Most Nigerians generally consider U.S. products to be expensive, but of superior quality and durable. Similarly, European exports compete in quality and are expensive, but seem to enjoy the advantage of lower freight costs to Nigeria. For example, Freight on Board (FOB) sea freight for a 20 ft container from Europe to Nigeria costs between 2800-3000 USD while the same goes for 3,600 USD from the U.S.. This factor impacts on the retail price paid by end users. FACCO of Italy has presence in the Nigerian market through a local representative who is both active and very aggressive. There are reports that the company's products though mostly new, are very affordable and come with full after-sales support. CS Nigeria has had an experience in the past where an American supplier was reluctant to visit Nigeria to provide their customer with installation assistance for many units of used poultry incubators bought. Following current trends in the Nigerian agricultural marketplace, sector analysts have predicted the emergence of new farms and increased capacity building by existing ones through farm machinery acquisition. U.S. exporters must be willing to offer competitive packages to Nigerian buyers part of which must be full-scale technical support.
Under the UNIDO country service framework in Nigeria, a program to develop and promote the agricultural machinery industry is being implemented. It also involves technical assistance to formulate a program to strengthen the 22 Industrial Development Centers scattered throughout the country, to provide advisory services and training to develop micro, small, and medium scale enterprises. Also part of the program is training of agro-machinery fabricators to produce good quality equipment and machinery following improved metal fabrication techniques, using Jigs, Templates, Fixtures etc. and complement the ongoing community based cassava development program of the government.
End Users:
As earlier highlighted in this report, individuals and private companies are the major end users of used agricultural equipment imported into Nigeria, accounting for about 90%. Though government is generally the largest buyer of machinery, its patronage of used equipment is insignificant.
Market Access:
There are no barriers to foreign participation in the trade for used machinery. All equipment entering Nigeria must receive the certification of the Standards Organization of Nigeria (SON). SON is statutory body established by the Government of Nigeria with the responsibility for preparing standards for products and processes and for ensuring compliance with the Federal Government policies on Standards and Metrology, Quality Assurance of both locally manufactured and imported products throughout the country. Imported manufactured goods are allowed entry into the country upon issuance of letter of release by the SON upon meeting the required standards. Rules concerning sanitary and phytosanitary standards, testing and labeling are relatively well defined, but bureaucratic hurdles slow the approval process. By law, items entering Nigeria must be labeled exclusively in the metric system. U.S. Exporters are therefore advised to contact SON directly to request more information. Please visit SON's website at www.sononline-ng.org.
Tariff on agricultural equipment is 2.5% and no distinction is made between new and used. However, Nigeria's Ports continue to present major obstacles to trade. Importers face inordinately long clearance procedures, high berthing and unloading costs, erratic application of customs regulations, and corruption. The Nigerian Customs Service (NCS) operates a pre-shipment inspection regime under which contracted inspection companies at ports of origin issue inspection reports that their Nigerian counterparts use to indicate items shipped, their value and applicable customs duties.
Market Entry:
The best way for U.S. manufacturers and suppliers to penetrate the Nigerian market is to combine the benefits of the network services and programs of U.S. Export Assistance Centers (USEAC), visit http://www.export.gov/comm_svc/eac.html.) in association with the U.S. Commercial Service at the U.S. Consulate General in Lagos, Nigeria. Seeking the assistance of the USEACs before exploring an opportunity in this market is highly encouraged. For establishing a presence in Nigeria, we recommend that U.S. firms use an agent/distributor relationship with a locally registered company. Many foreign manufacturers and suppliers appoint one or more agents/distributors to accommodate Nigeria's geographical size and ethnic complexities. In Nigeria's complicated environment, all relevant terms and conditions of such arrangements must be carefully negotiated.
Key Contacts:
Federal Ministry of Agriculture and Rural Development
Block A, FCDA Secretariat Complex, Area 11,
PMB 135, Garki
Abuja, Nigeria
Tel: 234-9-3142622, 3142914, 3143987
Fax:: 234-9-3140347, 3144392, 3141931
Standards Organization of Nigeria
Plot 13/14 Victoria Arobieke Street
Off Admiralty Way
Lekki Peninsula Scheme 1
Lagos, Nigeria
P.M.B. 2102, Yaba
Tel: 234-1-2708230-5
Email: info@sononline-ng.org, sonnis_ng@yahoo.com, sononline@21ctl.com
Website: www.sononline-ng.org
Poultry Association of Nigeria
Chicken House, Plot 472, Ademola Adetokunbo Crescent
Wuse 2, P.O. Box 6553 Garki
Abuja, Nigeria
Tel: 234-9-2900843
Fax: 234-9-5234985
Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA)
15A, Ikorodu Road, Maryland Bye-Pass
P.M.B. 12816, Lagos.
Nigeria.
Tel: 234-01-4710827, 4964727, 4932481
Fax: 234-01-4964737
Email: info@Naccima.com
Nigerian-American Chamber of Commerce & Industry
Marble House (8th floor),
1, Kingsway Road, Falomo, Ikoyi,
P.O. Box 8508, Lagos
Tel: 01-2692088
Fax: 01-2693041
Email: nacc@alpha.linkserve.com
Fisheries Society of Nigeria (FISON)
Wilmot Point Road, Ahmadu Bello Way
Victoria Island, Lagos
Tel: 234-1-7944217
Email: fison@yahoo.com
