Financing Rubber to Catalyse Growth

James Emejo writes that maximising the potentials of the rubber sector could strengthen current efforts to diversify the base of the economy, boost employment opportunities and enhance foreign exchange inflows

The vast potential of rubber for economic sustainability especially in the areas of job creation and foreign exchange accruals to the country cannot be over-empasised. Before the discovery oil, the sector played a major role in stimulating non-oil exports as well as providing raw materials for agro-based industries.

The use of rubber is almost invaluable, and evidenced in virtually every aspect of human endeavour, especially in the automobile sub-sector, providing the critical ingredients for the production automobile tyres, dashboard, engine parts, seals and paddings and a variety of other parts.

In fact, it is argued that Nigeria’s efforts to reposition its automobile sector would be limited except attention is equally given towards the revival of the rubber sector due to the enormous raw material input the latter provides for the former.

Rubber also provides critical raw material input in aviation, maritime, fashion and health sectors, particularly in the production of Personal Protective Equipment (PPEs) including gloves, shoe covers, overalls, gowns among others. The commodity is reportedly used in over 40,000 commercial products.
Natural rubber was domesticated in 1876 and gained global awareness in 1913. Currently, Thailand, Indonesia, and Malaysia are the leading producers of natural rubber in the world.

While global demand growth for the commodity is estimated at about 3.4 per cent annually, the global rubber market was worth over $40 billion in 2020 and further projected to increase to over $68.5 billion by 2026.
Natural rubber is a vital agricultural commodity in Nigeria.

According to records, the Federal Department of Agriculture first planted its rubber plot in 1906. Between 1909 and 1917 about 2,160 ha of rubber trees were planted in the country. From 1960s to the early 1970s rubber used to be the fourth most valuable Nigerian agricultural export commodity after cocoa, groundnuts and palm kernels.
But it has suffered a significant decline from its pre-eminent position in the seventies due to the emergence of the petroleum industry as a major contributor of the national economy.

Sector Neglect
Like several others sectors, the rubber segment has also suffered neglect and diminished capacity following the discovery of oil in the country in the 1970s. A once vibrant sector appeared to be in a shadow of its own currently struggling to meet local demand talk of exporting to other countries of the world and thereby losing revenue opportunities.

The United States of America in March 2021 alone, imported rubber from Thailand worth $140 million. 85% of that rubber came from the smallholder farmers farmed with within 1 to 2 hectares of land. This is to draw the attention of Government at the sub-national level to support rubber plantations and processing of the plant. The FMITI has recognized rubber as a critical raw material input majorly used in the auto industry, aviation industry, marine/ship industry, fashion industry, health sector such as in the production of Personal Protective Equipment (PPEs) i.e. gloves, shoe covers, overalls, gowns and more. Rubber as is known today is used in over 40,000 commercial products.

Stakeholders lament
Earlier in 2014, stakeholders had raised the alarm that the capacity of the country’s rubber industry had declined to about 65,000 metric tonnes per annum (tpa) from about 130,000 tpa. The decrease was largely blamed on the inability to replenish old plantations and establish new ones. In addition, global rubber prices which were above $4,000 per tonne had also fallen to about $1,970 per tonne at the time. Analysts had also blamed the dwindling fortunes of the commodity on lower yield in plantations, dwindling supply of rubber from rubber trees and the declining prices of cars internationally.

In 2019, rubber farmers alleged the federal government’s neglect of the cash crop as rubber was not listed a beneficiary of government’s intervention through the Bankers’ Committee to provide loan facilities to boost the production of five crops particularly cocoa, palm oil, sesame seeds, cashew and shea butter- all of which had qualified for a single digit interest loan of nine per cent with a moratorium of 10 years for the five crops listed with the exclusion of rubber.

This was despite the fact that rubber produced Edo, Delta, Cross River, Akwa Ibom, Imo, Rivers, Ondo and Abia, provided employment opportunities to over 5,000 workers across these states.
It is further believed that the country losses about $160 billion in annual revenues from rubber due to the neglect of the sub-sector

FG vows sector resuscitation
Given the potential of the rubber industry and the number of job opportunities and economic prosperity being lost, stakeholders have recently intensified efforts to draw attention of the federal government to the industry.
Funding remains a challenge in the industry and stakeholders believed the commodity should also benefit from the Central Bank of Nigeria (CBN)’s Anchor Borrower Programme (ABP).

The Minister of Industry, Trade and Investment, Mr, Niyi Adebayo, at a recent conference on industrialisation of the rubber sub-sector in Nigeria, said Africa produces about 408,000 tonnes annually, out of which Nigeria accounted for over 90,000 tonnes, but now only about 66,500 tonnes annually, representing about a 26.1 per cent decrease in natural rubber production from Nigeria.

The minister blamed the dwindling fortune on lack or poor commitment in the sector.
According to the him, the rubber sub-sector provides three key supports to the national economy –providing raw materials that are needed for agriculturally based firm as well as income as the country is a net exporter of rubber, and also provides numerous employment opportunities.

He said, “However, the sub-sector is faced with numerous challenges such as poor investments in rubber farming, high production cost, inadequate database for policy formulation and programme planning, low levels of mechanization for yield improvement, aging rubber trees among others.”

Adebayo, however, said to address this, the federal government through the ministry was repositioning its economic policy to diversifying the economy especially towards agriculture, solid minerals and manufacturing, noting that the rubber industry is related to the automotive industry in terms of production of tyres and other rubber products needed in vehicle manufacturing and assembling.

In this regard, he said the ministry is currently reviewing the National Automotive Industry Development Plan (NAIDP) in conjunction with the National Automotive Design and Development Council (NADDC) and is articulating more policies and programmes that would transform Nigeria into a modern industrialised nation and making the rubber sub-sector as a major contributor to the nation’s GDP through the Nigeria Industrial Revolution Plan (NIRP).

He explained that the NIRP is a plan designed to accelerate the build-up of industrial capacity in the country, and to significantly raise manufacturing contribution to GDP, based on sectors where Nigeria has comparative advantages particularly in agro-allied, metals and solid minerals, oil & gas, construction, light manufacturing and services.
He said, “It is also designed to attract investment into the development of several sectors with comparative advantage such as the rubber sub-sector to enable forward and backward linkages between the primary sectors (agriculture) and the manufacturing sector.”

Operators proffer Solution
The President, National Rubber Producers, Processors and Marketers Association of Nigeria (NARPPMAN), Prince Peter Igbinosun, at the three-day conference said urged the federal government to take up the responsibility to measure out modalities to assist in rubber production technology to further enhance the promotion and sustainability of rubber sub-sector.

The operators further tasked the government to create avenues for giving out agricultural subsidies to rubber farmers adding that Private Public Partnerships (PPPs) should be evolved to develop the sub-sector as well as provide other assistance including processing machines, free construction of smokehouses in clusters for effective storage facilities, basic infrastructural facilities, agrochemicals and fertilizers to boost rubber production.

Igbinosun, further called for regular training and workshops for rubber farmers, and provision of soft loans at single-digit interest rate for rubber farmers, calling on the CBN to incorporate the development of rubber by creating a special development package for long gestation crops such as rubber.

The farmers also called on the Bank of Agriculture, Bank of Industry and NEXIM Bank to be fully involved in the development of the rubber sub-sector by making funds available for rubber development at friendly interest rate for small and industrial rubber farmers.

The NARPPMAN president said, “For generations that were not born in an era where the economy of Nigeria began and ended with Petroleum, a mention of cash crops like cocoa, oil palm, cashew, and rubber among others bring back the memories of opportunity lost.

“Nigeria was built and developed with money from these sectors. The records are that until 1967, the Benin native Authority was Nigeria’s second richest tier of government; deriving its wealth from the natural resources of available rubber extracts, processing and export. Unfortunately 95 per cent of available rubber plantations, apart from being over 40 years old, are being abandoned with trees fell and used as firewood or furniture.

“Consequently, Nigeria has been losing attendant huge employment and income to new comer countries like Malaysia, Thailand, Vietnam and India that are together currently generating over 400 million employment and the annual income of $160 billion.”

Continuing, he said,”Nigeria is in a period in her economic life where her major focus on crude oil is failing to sustain the economy. The unstable price of the product as well as its attendant crises has left the country with no other option than to focus on developing the Agricultural sector, which at a time in our history was the main stay of the economy.

“The fact that such a critical sub-sector as the rubber value chain underscores how we have for too long abandoned this critical sector of the economy in the name of crude oil. Rubber as an internationally traded Agricultural commodity that is in high demand all over the world, played a major role as a foreign exchange earner and contributor to the growth of our National economy.

“If given the proper attention, rubber alone can transform the economy of Nigeria and employ millions of people as it is proven to have some of the largest value-chains. With over 50 by-products, in over 400,000 applications, rubber is rated among the most profitable agro-industrial ventures. It is in fact considered the world’s fourth most important natural resource after air, water and petroleum. That is why our slogan is no rubber, no nation.”