As Nigeria Market Takes Off, Stakeholders Participate in Credit Roundtable about Barriers for Use of USDA Credit Guarantee Programs
Lack of credit and under-utilization of GSM credit guarantees have been longstanding constraints on sales of U.S. soy products to Africa. As part of its initiative to develop the multimillion-ton market for U.S. Soy in Africa, USSEC brought together key stakeholders to address the credit issue head-on.
On September 30, Nigerian banks, leading Nigerian supply chain executives, and Foreign Agricultural Service (FAS) administrators came together with U.S. soy industry representatives from USSEC and the American Soybean Association’s (ASA) World Initiative for Soy in Human Health (WISHH) during a virtual roundtable to discuss barriers to the use of U.S. Department of Agriculture (USDA) credit guarantee programs in Nigeria and other emerging African markets. USDA export credit guarantee programs can help make commercial financing available for imports of U.S. Soy and other food and agricultural products on deferred payment terms. Initial feedback on the event was extremely positive, with many participants encouraging a follow-up roundtable to continue the discussion.
USSEC CEO Jim Sutter greeted participants via Zoom, speaking of the importance of the Nigerian market, and Clay Hamilton, FAS Associate Administrator, provided opening remarks. Gerald Smith, FAS Agricultural Counselor based in Lagos, Nigeria, talked about the role of FAS in Lagos and its ability to support credit programs. Ed Beaman, USSEC COO, reiterated U.S. Soy’s commitment to Nigeria.
USDA representatives provided information about its credit programs. Amy Slusher, Senior Director, Credit Programs Division introduced Miguel Parkins, Senior Global Banking Analyst, Credit Programs Division, and Jeff Albanese, Agricultural Marketing Specialist, Credit Programs Division, who provided an overview of the GSM and FGP programs. Following the presentation, USDA-approved banks, Nigerian companies, and the USDA GSM/FGP program held an open discussion.
In a preliminary review, Albanese described the credit roundtable as excellent and the feedback very useful. “As a result, we will continue outreach in the region, seek to bring more U.S. banks on board willing to take Africa risk (which we received one new application and hope to receive another shortly), and emphasize our zero-tenor Sight L/C option in future events as a way to use the program while mitigating some of the exchange rate inflation concerns brought on by longer tenor periods,” he stated. “Also, the Nigerian banks indicated that they found the engagement with the leading Nigeria supply chain very useful and expressed the willingness to pass on some of the benefits of the credit program.”
In Nigeria, protein deficiency is not only a major cause of malnutrition, but also creates huge economic and social burdens. The U.S. soy industry has worked to develop this market since 2010, when WISHH began its focus on market building and addressing long-term demand. In 2019, USSEC launched the first phase of the Protein Challenge Campaign to target protein deficiency, which has included a baseline survey to determine the current status and dimensions of the country’s protein deficiency; building and nurturing an online and digital community; and a stakeholder engagement campaign.
While accurate data is still difficult to get, Nigeria produces around 600,000 metric tons (MT) of soybeans each year, and another 400,000 MT or so come across the border from neighboring Benin. Depending on credit availability and many other factors, USSEC estimates that Nigeria could become a 2 to 4 million metric ton (MMT) market for U.S. Soy in the medium to long-term. At this time, the country crushes about 1 MMT/year. USSEC estimates an almost immediate need for 50 to 100,000 MT to fill the current demand gap. In MY 2018/19, U.S. soybean meal sales to Nigeria’s poultry sector were between 31,000 and 50,000 MT. One such shipment of whole soybeans, initiated in August 2018, was valued at $15.461 million. Raw material insecurity is causing poultry producers and crush facilities to approach additional growth to address future demand with caution.
The work of the U.S. soy industry, coupled with the plans to train and educate the soy value chain through the Soy Excellence Center (SEC), and USSEC’s ongoing relationship management efforts bodes well in the long run for the import of U.S. Soy as demand continues to out-strip supply. The Protein Pull work and the training coming via the SECs are working hand-in-hand to help Nigerians realize their protein needs.