Simeon Shodimu
Nigeria’s agricultural sector for decades suffered step back due neglect , and with the sudden realization of importance of agriculture owing to ever bourgeoning population, Government for years have been shifting the much needed attention to it.
The agricultural sector indeed faces a paradox that threatens its competitiveness in global markets: the same informal networks that enable rural commerce are systematically destroying value at scale. As international buyers tighten traceability requirements and impose stricter quality standards, the country’s reliance on relationship-based trade, what I call the “trust-me” economy, is proving to be an increasingly expensive liability.
The Economics of Information Asymmetry .
The financial toll is substantial, according to report as Nigeria loses approximately $1.2 billion annually in rejected agricultural exports, primarily due to quality control failures that stem from fundamental information gaps across extended supply chains. Meanwhile, regional competitors like Kenya and Ethiopia, operating with more transparent aggregation systems and robust quality controls, continue to capture market share in products Nigeria has cultivated for generations.
A delve into transaction chain in Nigeria’s agricultural sector: a smallholder farmer sells to a local merchant (M1), who aggregates produce from 3-4 farmers. M1 sells to M2, who operates in a neighbouring town. M2 supplies M3 at a regional trading hub, Jos, Kaduna, or Minna. M3 feeds M4 in major commercial centres like Lagos, Kano, or Port Harcourt. Finally, a procurement officer sources from M4 to fulfil export contracts, often for 300 metric tonnes or more.
At each node, value leaks. More critically, essential market intelligence, quality specifications, variety requirements, food safety standards, pools rather than flows. When a procurement officer shares strict buyer specifications with M4, the response is typically: “Don’t you trust me? These goods are sand-free, very dry.” But M4 has no direct visibility into production practices, four intermediaries removed from the farm gate.
Understanding current market failures requires examining how we arrived here. During the colonial period, European trading firms relied on local middlemen, village heads, traditional aristocracy, and market leaders, to secure cash crops through an “advance” system. These intermediaries, often the only community members with access to capital, provided credit to farmers against future harvests.
The 1986 Structural Adjustment Programme dismantled state marketing boards. Many LBAs transitioned to private trading, working for Lagos-based manufacturers and exporters. The traditional dilali (middleman) persisted, but now as one link in chains so extended that farmers and end-buyers operate in functionally separate markets.
The critical difference: pre-colonial middlemen operated within tight social and cultural constraints, accountable to the communities they served. Today’s intermediaries answer primarily to profit, with minimal accountability to either producers or buyers.
