On government creation and funding of ranches

Plans by the Federal Government to create and fund 94 cattle ranches across ten states at the massive cost of N179billion have drawn howls of protest from groups, organisations and communities in the South and Middle Belt of Nigeria.  These are areas for whom the ranches are supposed to be a solution to the challenge of clashes between farmers and herders. The Federal Government would inject N70b into the project in the first three years.

BusinessDay examines the case for and against the government’s effort at providing the impetus and funding for innovation in animal husbandry in the country. We consider in particular the stated rationale against the backdrop of cattle rearing as an age-long private sector occupation.  Ranches are also not new in the land, casting doubt on the genuineness of the Government’s motives. There are better ways in our view.

According to the National Economic Council headed by Vice President Yemi Osinbajo, a professor of Law, the project would take off as soon as possible in Benue and Nassarawa states. Minister of Agriculture Chief AuduOgbeh assured that the government would not acquire any land for the project forcefully. Ogbeh is from Benue State, the epicentre of disputations between herders and farmers.

Reports say Dr Andrew Kwasari is the coordinator.  According to Kwasari, “The National Livestock Implementation Plan is a mediation plan stemming from meetings and recommendations of the Federal Ministry of Agriculture and Rural Development (FMARD) and the National Economic Council (NEC) in 2017 as regards state interventions following the constant pastoralist-farmer conflicts.

“We are going to have 94 ranches in 10 states. We have received 21 gazetted grazing reserves from seven states. The plan focuses on pilot intervention in the frontline states Adamawa, Benue, Edo, Ebonyi, Kaduna, Nasarawa, Oyo, Plateau, Taraba, and Zamfara.

“A Ranch Design Plan has also been proposed in models of various sizes clustered in 94 locations in the ten pilot states. We will have clusters of 30, 60, 150, and 300 cow ranch models in a location within the donated and gazetted grazing reserves.The total spending for the 10-year period is slightly in excess of N179 billion. Funding for the first three years of the pilot phase is about N70 billion.”

The Federal Government wants to create one more State-Owned Enterprise (SOE) with a substantial initial capital and far-flung operations spread around ten states. It comes against the backdrop of the known failure of the many state-owned enterprises. It also comes against the context of the failure of the current administration as the owner of various parastatals to do something as fundamental as constituting the boards of its SOEs for more than two years.

The stated rationale for this step into one more SOE is to stem the incidence of farmer-herder clashes and the associated cases of internally displaced persons, improve nomadic education as well as increase the productivity of Nigerian livestock.

We note that State Owned Enterprises remain a feature of the global economy. Their share of the Fortune Global 500 grew from 9% in 2005 to 23% in 2014, driven mainly by the growth of Chinese SOEs such as SINOPEC Group, China National Petroleum and the State Grid, according to a report by PWC. State-owned enterprises can act as catalysts for public value creation and remain an option in the toolbox of government to deliver desired outcomes.

In this age, experts cite as critical success factors for SOEs active ownership and management as well as avoiding competing unfairly in markets where private and third sector enterprises (not for profit) can deliver more efficiently and effectively the goods and services that citizens need and want.

Advantages of state-owned enterprises include furthering social outcomes, providing physical infrastructure and creating stability in times of crisis within and across supply chains. Disadvantages include the destruction of value in the absence of best practices in ownership and management as well as corruption, bribery and inefficiency.

Unfortunately for the Federal Government, the evidence of Nigerian history with forming and running SOEs speaks against what we may call the Federal Cattle Ranch company. Governments with higher capacity, capability, commitment as well as clear objectives have failed spectacularly in running SOEs successfully in the country not to mention one that cannot articulate clear visions for parastatals. The Federal Cattle Ranch Company is an idea headed to failure and waste of public resources in economic terms.

SOEs strive for broader societal objectives. They work to cause integration and bring the might of government to jumpstart activities in areas where private capital is reluctant to engage. The Federal Cattle Ranch idea runs against the perception of ulterior motives behind its creation. From the SouthWest through the Middle Belt to the SouthEast, citizens whose interest it should servehave rejected it as serving other interests rather than integration or peacebuilding.

The business case is also wrong. Even the Federal Government admits and cites private investors running this business already. The government would only bring scale. Location is questionable. Ifthis pioneer project requires land as a critical component, why not use the vast area available in Sambisa Forest that the Federal Government claims to have freed from the anarchists of Boko Haram?

There are more difficulties and costs in running a multi-location enterprise than in running one in a single base. Timing is also an issue. Emotions are raw and suspicions rife on federal investment and involvement in this private sector activity following at least three initiatives to acquire land in Southern Nigeria to serve the interests of pastoralists.

There are better ways. The government should deploy this enormous capital outlay as a fund for an Agency that would provide grants to persons interested in ranching. It would apply to everyone involved in ranching, and not be limited to any ethnic group. It would then contract the Agricultural Development Bank or the Bank of Industry to manage the National Livestock Management Ranching Grant programme. It would define criteria for grant-making and accountability procedures.

Further, the Federal Government should designate a Sambisa Ranch City. Innovation would lie in getting a concessionaire to run it along best practice standards in ranching to derive associated benefits. Grantees would work as cooperatives or individual enterprises.

We urge the Federal Government to discard the nebulous idea of government-owned ranches as the government has no business in the business of ranching.