THE GINGER PROJECT

Summary

The Octopus Ginger Project is a farmer group driven project facilitated by Octopus VC with the objective of achieving increased livelihood, income generation and productivity for ginger farmers in Northern Nigeria. The Smallholder farmers of the Nigerian ginger industry are major components of the Southern Kaduna economy, accounting for a significant percentage of the employment across the rural communities. However, as applicable to most developing-country commodity market, several voids are inherent in the industry, which are products of the nature of interactions between market actors and other institutional arrangements. These voids lead to market inefficiencies and in certain cases, market failure with the attendant impact on the welfare of market players and the broader local economy.

The Octopus Ginger Project aims to explore value chain governance opportunities in the Kaduna ginger market, identify the current gaps in the industry so as to implement appropriate interventions to strengthen the position of small holder farmers within the value chain.

Background

Nigeria is currently one of the main producers of ginger in the world and the major producer in Africa. With its annual world production surpassing 1.5 million tons; Nigeria is currently the sixth largest exporter of ginger in the world. The quality of the Nigeria Ginger is reportedly among the best in the world. A large percentage of the Nigerian-grown ginger is exported to China, United Kingdom, Germany, Spain, Netherlands, France, United States of America, Russia, Saudi Arabia Chad, Sudan and Ghana, among others.

Ginger is produced in six states of the Federation namely, Kaduna, Nasarawa, Benue, Niger and Gombe with Kaduna as the major producer accounting for over 70% of the total market share.

In the International Market, the Nigerian ginger is well known and on high demand due to the economic and health benefits of the product as well as its quality. But despite its potentials, our findings show that the export trade of ginger has declined due to relatively low returns on investment for the farmers in Nigeria. Small holder farmers are yet to hit goldmine, due to a myriad of challenges, which have made it difficult to maximize the potentials in the value chain. The major challenges garnered from our research points to the lack of developed marketing channels; competitive modern storage facilities and limited access to finance. The domineering influences of middle-men marketers who essentially decide the price is also a significant challenge.

Octopus Ginger Project

Octopus Venture Capital is a social venture capital firm dedicated to the development of sustainable businesses that create value and enhanced productivity in critical areas of the African economy. We create and partner with excellent management teams to develop profitable businesses that improve the way we live, interact and work.

Our vision for the Nigerian ginger value chain is simple, to provide critical measures and interventions that improve the productivity, quality and wealth generation capacity of ginger farmers – organized in cooperatives, the impact of this would contribute to an economic buffer to halt Nigeria’s spiraling rise in insecurity, especially the increasing rates of kidnapping and banditry in Kaduna state.

Our Approach

Our goal is to leverage our expertise as a venture advisory and finance firm to create a scalable model aimed at providing value-chain governance across the ginger value-chain to harmonize the efforts of smallholder ginger farmers to improve their competitiveness, productivity and linkages to both local and international markets.

The Nigerian ginger is rated one of the best in the world because of its pungency and high oil content and therefore very suitable for the production of spices, essential oil and ginger oleoresin. The raw ginger is processed into split dried ginger from which further products can be produced such as Ginger powder/spice, essential oil, oleoresin, tonic, ginger tea and juice. The main final markets for these products are international.

The processing of ginger into final products is done mainly outside Nigeria by firms located in the countries where most of the final products are consumed. Though a number of small processing activities are conducted within Kaduna State, including production of ginger essence and the mixing of ginger with other spices to create spices for the Nigerian market, these secondary processors have not yet been able to break into international markets on a significant scale.

Our vision is to mitigate these factors by identifying the gaps and leveraging our innovative model to impact ginger farmers in the following ways:

1. Access to financial Services
2. Innovative agricultural input services
3. Training and Development
4. Marketing Services

The Nigerian Ginger Value Chain

The ginger value chain consists of stakeholders including input suppliers, farmers, mild processors, aggregators, wholesalers, international distributors, international processors, domestic processors, domestic distributors’ retailers and the final consumers.

Profile of Stakeholders Across the Ginger Value Chain

• Input suppliers: Amongst other problems faced by ginger producers, inadequate supply of inputs poses a significant challenge to the ginger farmers. This influences the quality of their products and profitability. Other input mobilization challenges the farmers face are inadequate supply of fertilizer and other additives, poor state of mechanization of farm equipment, and financing.

• Farmers: The farmers (primary producers) are generally organized into farming clusters and cooperatives that help spread knowledge and skills related to ginger farming and processing, but they do not appear to have the degree of organization, resources or power to organize around price negotiation. By gaining more understanding of the ginger market, the producers are more likely to get better pricing for their products. The majority of the producers are experienced but unlearned. This suggests the need for training and development for both primary and secondary processors who transform fresh ginger to dehydrated ginger, ginger candy, ginger powder, ginger oil and oleoresins and so on. Ginger cultivation is largely traditional in practice with farmers employing inputs that are locally available in terms of rhizome as seed, farmyard manure and human labor. The farmers struggle to maintain price balance between their input suppliers and ginger buyers in which case compromise or low productivity becomes inevitable.
• Mild processors: These are primary processors who do the basic processing of fresh ginger into dry ginger by hand washing the roots, slicing them into chip-sized shapes and sun-drying. Cleaning and drying procedures are done as fast as possible after harvest to ensure minimum loss from microbial contamination, mold growth and fermentation.
• Aggregators: These are the assemblers and traders of ginger who provide storage systems for collection of the product and source from mild processors or directly from the farmers. According to a survey published by the American Journal of Marketing research, about 90% of the Kaduna state ginger assemblers have attained various levels of formal education. This emphasizes the need for education in sourcing and collecting market information in order to gather and link farmers and their products to wholesalers and, in some cases, the export market.
• Wholesalers: The wholesalers who are located in public markets often buy ginger from the aggregators, and in some rare cases, they go to the farmers directly in which case they have permanent stalls where deliveries from farmers are received and stored until a buyer is found or comes along. Ginger deliveries are usually bought within 24 hours. Payment is promptly given to the farmer or to the driver for delivery to farmer. Slip is given showing classification, weight, and volume. These wholesalers cater mainly to international market through international distributors.
• International Distributors: They play a major role in the ginger value chain by interfacing with wholesalers to distribute collected ginger to the international market. They serve the larger market by acting as intermediaries between the ginger wholesalers and the international market.
• International Processors: They see through the conversion of dried ginger, which are sourced from local aggregators, into final products which are processed mainly outside Nigeria by companies located in the countries in which most of the final products are consumed. They are the last component of the international value chain receiving consignments from international distributors
• Domestic Processors: These are secondary processors of ginger who buy collected ginger directly from ginger aggregators, for example; Belphins Nigeria Limited. Though, a number of small processing activities are conducted within Nigeria, precisely in Kaduna city, including production of ginger essence and the mixing of ginger with other spices to create spices for the Nigerian market, these secondary processors have not yet been able to break into international markets on a significant scale.

• Domestic Distributors: These are middle men interfacing between the Processors of ginger and the retailers. They buy processed ginger in large quantities and sell in smaller quantities to retailers of the products.
• Retailers: The retailers source from market specialists; carry both conventional and organic ginger products and sell small quantities of ginger; procure from wholesalers and wholesaler – retailers.  The ginger retailers are well placed to source marketing information and to introduce innovation in ginger marketing.
• Final Consumers: An increase in demand is seen in the food and beverage preparation sector, as the consumer becomes more adventurous in seeking new flavors. Traders describe the market for gingers as stable and quiet, but this is a complex market with end users responding to different drives.

The Challenges of Ginger Production in Kaduna  

We look to highlight some of the major issues mitigating the growth of the ginger industry in Kaduna, the interventions we aim to undertake and the resulting impacts it would have on the smallholder farmer and the ginger industry in general:

• High Labor Demand/ Drudgery: Ginger cultivation is labor intensive i.e. planting, mulching, fertilizing, weed control, harvesting, and processing are done manually, hence using family members or hired labor is not enough which contributes to reduced output for the farmers.

• High Cost of Inputs: High quantity and cost of planting materials, as well as other inputs such as: fertilizers, Chemicals etc. which are not easily obtainable by the farmers pose a serious challenge to ginger production. Aside the high cost of these inputs, there is the rampant cases of adulteration.

• Lack of Mechanization of Farm Operations: Production is still largely done using traditional crude implements as the hoe. Lack of tractors and other machines for laborious land preparations and harvesting operations limits the hectares of land put under cultivation and inadvertently reduces output.

• Lack of Modern Processing Equipment: Farmers lack modern processing machines-washing, peeling, splitting, drying kilns etc. For instance, farmers split harvested ginger rhizomes manually with local knives.

• Infrastructural Deficits: Lack of and/ or poor access motor-able road networks; improved means of transportation to major markets; epileptic power/ electricity supply; all pose a serious challenge affecting the growth of the ginger industry in the country.

• Poor Level of Industrialization: Nigeria majorly exports ginger in its raw form, lack of modern ginger processing and manufacturing companies’ impact negatively on the revenues which could accrue to the farmers and the economy in general, hence the need for the establishment of such.

• Inefficient Marketing/ pricing: There is a recurring problem of inefficient long supply chains and ineffective marketing channels. Most small scale farmers do not even have access to the international market and are consequently left at the mercy of middle men, who shortchange them heavily. Farmers have repeatedly called on government to provide them access to the international market as it will not only increase their revenue but also allow them address some of the challenges inherent in the value chain.

• Poor Storage Facilities: Lack of modern storage facilities. Majority of small scale farmers do not have access to proper storage facilities hence why they are often shortchanged by middlemen who capitalize on their desperation to offload the products.

• Poor Quality of Produce for Export: Even though, the Nigerian ginger is said to be of very high quality, it most times, have difficulty in meeting up with the quality standards of importing countries largely because, the produce for export is often infected with fungi, bacteria, insects and contaminants from rodents; during the storage and handling stages.

• Lack of/ or Poor Financing Windows: Lack of financial capacities of the predominantly, small holder, resource poor farmers; and farmers inability to access loans from financial institutions due to their stringent and inflexible lending terms; coupled with high interest rates; commercial banks demand as high as 28% on loans disbursed to these smallholder farmers.

• Lack of/ or Poor Funding of Research and Development (R&D): Presently, there is paucity of robust research into aspects of production and development of the ginger industry. This is largely in part due to inadequate funding of the sector by government; coupled with the inability to source and attract local or foreign funding by the Research Institutes/ and industrial centers – attributable to a myriad of bottlenecks.

• Security challenges: Southern Kaduna where the bulk of the Nations Ginger is reportedly produced is faced by religious disputes, kidnapping and banditry which may affect the production and harvesting of ginger if not curbed.

Our Interventions

• Marketing Services: Our services include access to both local and international markets which would reduce the long inefficiencies associated with middlemen, while also assuring good warehousing practices and increased profits. The goal is to provide a platform that would solve problems of linkages and inclusion for the smallholder farmers. The key approach here is the establishment of purchase contracts with the end-users and then cascading such a contract down the value chain in a transparent manner.

• Financial Services: We are developing an innovative way to de-risk members of the low-income farm group to enable easier access to loans to finance farming activities. To achieve this, we will use farming contracts to attain a level of stability/security for financing investments in the farm.

Finance plays a huge role in upgrading the quantity and quality of the produce; as it would allow the farmers have access to mechanized farm inputs and modern processing equipment thereby increasing the hectares of usable farmlands available to the farmers. 

• Agricultural Input Services: Access to quality and subsidized farm inputs such as seeds, fertilizers, chemicals, and other improved mechanized services would go a long way in assisting the farmers. An appropriate balance of agricultural inputs, at the right time, applied in the right way, at highly competitive prices would ensure that farmers attain optimal levels of productivity and product quality, while minimizing negative environmental impact. We are partnering with input providers to ensure access to quality inputs.

• Infrastructural Development: The poor / dismal levels of infrastructures in Nigeria also pose a serious challenge that must be rectified in order to grow the ginger industry in Nigeria. The lack of adequate processing facilities, inadequate storage facilities are among problems hindering the development of the ginger industry. We are partnering with both small- and large-scale warehouses to upgrade their operations to comply with international best practices.

• Training and Development: Ginger farmers are encouraged to cluster themselves together as groups or cooperatives, this would enable them easily access training and professional development opportunities to improve their farming techniques; learn how to operate mechanized farm instruments and move away from crude methods of farming, as well as means to improve the quality of products to be accepted at the international market by all stakeholders.
• Government Policies: we will support advocacy efforts to develop policies that would positively address issues of subsidy, access to the international market, good road networks, storage facilities etc.

Our Partners

Belphins

Access Bank

Riby

Store Harmony

Afex Holdings Plc