Overview of the Nigerian Sesame Industry Prepared by: Chemonics International Inc. 1133 20th Street NW Washington DC, 20036 Prepared for: The United States Agency for International Development (USAID)/Nigeria RAISE IQC Contract No. PCE-I-00-99-00003-00 Task Order No. 812 November 2002 FOREWORD Under the Rural and Agriculture Incomes in a Sustainable Environment (RAISE) IQC, Chemonics International is working with USAID/Nigeria and the Government of the Federal Republic of Nigeria (GON) to stimulate Nigeria’s economic growth through increased competitiveness in the world market. A key component of this effort centers on determination of specific agricultural products with the greatest potential for increasing foreign exchange and employment. While the project specifically targets increased agricultural commodity production and exports, it also seeks to boost domestic sales as well through opportunistic ‘fast track’ activities, which are loosely based on development of networks and linkages to expedite trade. At a stakeholders’ conference in Abuja, Nigeria in January 2002, participants identified five Nigerian products that held the greatest potential for export growth. Chemonics was charged with conducting sub sector assessments of these products, and then developing industry action plans (IAPs) for those that indicated sufficient market opportunities. In preparation for the sub-sector assessments, Chemonics’ compared the relative opportunities in each of the selected sectors, and decided to focus on commodities where the global market was US$1 billion or more, that is, where the market was of sufficient interest for the Nigerian economy. The current global market for sesame is roughly US$500 million. As such, the opportunities for investment in this market are small for Nigeria. Therefore the following is just an overview of the sesame market, rather than and in-depth sub-sector assessment accompanied by an industry action plan. This overview document examines market trends, opportunities and constraints, both international and domestic; production and processing requirements; operating environment issues; and recommendations to address the needs of the Nigerian industries. Chemonics International Inc. 2 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 TABLE OF CONTENTS EXECUTIVE SUMMARY .............................................................................................................................................. 5 I. THE INTERNATIONAL SESAME INDUSTRY ................................................................................................ 6 A. INTRODUCTION ..................................................................................................................................................... 6 B. SESAME PRODUCTS............................................................................................................................................... 6 C. MARKETS.............................................................................................................................................................. 8 C.1. Sesame Seed................................................................................................................................................ 8 C.2. Sesame Seed Oil........................................................................................................................................ 14 II. CURRENT STATUS OF THE NIGERIAN SESAME INDUSTRY ................................................................ 17 A. INTRODUCTION ................................................................................................................................................... 17 B. PRODUCTION....................................................................................................................................................... 17 C. PROCESSING........................................................................................................................................................ 18 D. MARKETING........................................................................................................................................................ 19 E. LOCAL CONSUMPTION ...................................................................................................................................... 19 F. EXPORT............................................................................................................................................................... 20 III. ENVIRONMENT............................................................................................................................................. 21 A. GOVERNMENT POLICY/INFRASTRUCTURE........................................................................................................... 21 A.1. Federal Ministry of Finance, Budget Office ............................................................................................. 21 A.2. The Nigerian Export-Import Bank (NEXIM) ............................................................................................ 22 A.3. The Africa Project Development Facility (APDF).................................................................................... 23 B. SOCIO-ECONOMIC ISSUES ................................................................................................................................... 24 B.1. Environmental Effects............................................................................................................................... 24 B.2 Impact on Incomes.................................................................................................................................... 24 B.3 Impact on Women ..................................................................................................................................... 24 B.4. Geographic Distribution........................................................................................................................... 24 IV. OPPORTUNITIES AND CONSTRAINTS................................................................................................... 25 A. OPPORTUNITIES................................................................................................................................................... 25 B. CONSTRAINTS TO OVERCOME ............................................................................................................................ 25 V. CONCLUSIONS AND RECOMMENDATIONS .............................................................................................. 27 APPENDIX 1: SWOT ANALYSIS OF THE NIGERIA SESAME INDUSTRY .............................................. 29 APPENDIX 2: CONTRIBUTIONS....................................................................................................................... 31 APPENDIX 3: PROJECT BACKGROUND........................................................................................................ 32 Chemonics International Inc. 3 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 TABLES TABLE 1: SESAME PRODUCTS...................................................................................................... 7 TABLE 2: SESAME SEED PRICES ................................................................................................ 14 TABLE 3 GLOBAL EXPORTS OF SELECTED VEGETABLE OILS ................................................... 15 TABLE 4 CHARACTERISTICS OF SESAME GROWN IN NIGERIA................................................... 18 TABLE 5: ANNUAL AVERAGE PRICE OF SESAME ....................................................................... 19 TABLE 6: NIGERIA SESAME EXPORT FIGURES (UNITS: TONNES) ................................................ 20 FIGURES FIGURE 1 WORLD PRODUCTION OF SESAME SEED....................................................................... 8 FIGURE 2 TOP TEN PRODUCERS OF SESAME SEED (2001) ........................................................... 9 FIGURE 3 EXPORTS OF SESAME SEED .......................................................................................... 9 FIGURE 4 TOP TEN SESAME SEED EXPORTERS .......................................................................... 10 FIGURE 5: MAJOR IMPORTERS OF SESAME SEED ........................................................................ 10 FIGURE 6 IMPORTS OF SESAME SEED INTO JAPAN ..................................................................... 11 FIGURE 7 IMPORTS OF SESAME SEEDS TO THE EU..................................................................... 12 FIGURE 8 IMPORTS OF SESAME SEED TO SOUTH KOREA............................................................ 12 FIGURE 9 IMPORTS OF SESAME SEEDS TO THE USA .................................................................. 13 FIGURE 10 IMPORTS OF SESAME SEED TO TAIWAN.................................................................. 13 FIGURE 11: MAP OF NIGERIA SHOWING SESAME PRODUCING REGIONS................................... 16 FIGURE 12 SESAME PRODUCTION IN NIGERIA ......................................................................... 18 FIGURE 13 TYPICAL PACKAGING OF SESAME SEEDS IN NIGERIA…………………………...……..18 Rate of Exchange (ROE): $US 1 = N 117 Chemonics International Inc. 4 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 EXECUTIVE SUMMARY Sesame is an important export crop in Nigeria, and Nigeria has a substantial role in the global sesame trade. Annual exports of sesame from Nigeria are valued at about US$20 million and Nigeria is the primary supplier of sesame seed to the world’s largest importer, Japan. These features are poorly recognized and it is timely to develop support and action to facilitate the continued expansion of this sector. The position of sesame is not well understood either in Nigeria or in the global trade, and a significantly clearer interpretation of Nigeria’s competitive position and opportunities is essential. The compilation of this report has revealed areas of uncertainty in both, and the formulation of strategy and associated activities is therefore premature. In the first instance, a greater understanding of the position of Nigeria and its options is needed and the following notes elaborate recommendations towards this goal. Recommendations 1. Appraise and evaluate the research, trials and extension services available to the sesame sector. 2. Investigate opportunities in other markets, with particular focus initially on the oil markets of the Far East, Korea and Taiwan. 3. Explore the possibility of changes in the Korean tendering process. 4. Evaluate the competitive position of Nigerian sesame in the Japanese market and assess the opportunity for increasing market share. 5. In conjunction with recommendation #4, evaluate the opportunity for differentiating. Nigerian sesame for oil users and explore the economics and market potential for pressing sesame in Nigeria on an industrial scale. 6. Appraise the requirements of other sesame sectors. Chemonics International Inc. 5 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 I. THE INTERNATIONAL SESAME INDUSTRY A. Introduction Sesame seeds (or sesamum or benniseed) are the seeds of the tropical annual Sesamum indicum. The species has a long history of cultivation, mostly for its yield of oil. The original area of domestication of sesame is obscure but it seems likely to have first been brought into cultivation in Asia or India. The plant is usually 60 to 120cm tall and the fruit is a dehiscent capsule held close to the stem. When ripe, the capsule shatters to release a number of small seeds. The seeds are protected by a fibrous ‘hull’ or skin, which may be whitish to brown or black depending on the variety. 1000 seeds weigh some 4-8g. The seeds have a high oil content of 44-60%. The plant is deep rooting and well adapted to withstand dry conditions. It will grow on relatively poor soils in climates generally unsuitable for other crops, and so it is widely valued for its nutritional and financial yield from otherwise inclement areas. It is well suited to smallholder farming with a relatively short harvest cycle of 90 –140 days allowing other crops to be grown in the field. It is often intercropped with other grains. Sesame is now cultivated around the dry tropics between the latitudes of 40° N and S. It is scarcely cultivated in the USA or Europe, not only because of climate but also because of the low returns per unit area. Non-shattering varieties have been bred in order to mechanize the crop, but the great majority of the world’s output is still harvested by hand. B. Sesame Products Sesame is grown for its seeds, and the primary use of the sesame seed is as a source of oil for cooking. The young leaves may also be eaten in stews, and the dried stems may be burnt as fuel with the ash used for local soap making, but such uses are entirely subordinate to seed production (see Table 1). Sesame is commercialized in a number of forms. Most sesame is processed directly into oil by the grower or within the producing region, but can also be sold in various stages of processing, for various uses, such as meal, paste, confections, and bakery products. Once harvested, the seed is cleaned and dried to about 8% moisture and may then be stored before crushing. The seed is typically crushed intact for the oil. This, however, yields a meal that is made bitter and somewhat indigestible by the presence of the fibrous husk. As such the meal is only useful as cattle feed. The quality of the meal can be improved by removing the seed coat, dehulling, before crushing. In India, where sesame meal is an important food, this process is a standard feature of an oil extraction plant. The meal is notable for its high protein concentration which is rich in methionine and tryptophan. Since these amino acids are missing from a number of other sources of vegetable protein, such as soya, sesame meal or flour can be added to recipes to give a better nutritional balance to health food products. Chemonics International Inc. 6 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 Dehulling is also important for the production of the ground seed pastes such as tahini and for confectionery uses. The dehulled seeds are extensively used in the ground form where they comprise the base material of tahini, a paste used as an ingredient in Eastern Mediterranean and Middle Eastern foods. The seeds, hulled or dehulled, roasted or raw are now widely used in the European and North American bakery industry as a garnish on bread products. For bakery products it is more a question of consumer preference: the McDonald’s burger buns, for example, use only the whitest grades of de-hulled seed which have been treated to maintain their whiteness on baking, whereas other bread products exploit the darker color of the whole seeds to give aesthetic appeal. Dehulling has always been a major problem for the sesame industry and a variety of solutions have been sought. The most basic approach is largely manual: the skins are rubbed off the wetted seed by hand. Mechanical techniques now use a similar combination of wetting and rubbing. Alkali treatments are also used to strip the hull, and this tends to result in a whiter seed. The most sophisticated plants now incorporate color sorters to differentiate between the different grades of seed. Table 1: Sesame Products Input Products Description and Uses Seeds Confectionery Fried seeds may be bound together with sugar syrup to give sweetmeats. Seeds Biscuits The whole seeds can be baked into biscuits. (Hulled) Bakery Popular in northern Europe either incorporated into breads or as seeds decorative toppings. May be used hulled or whole. Seeds, Oil Particularly used in oriental cuisine. The flavor is quite strong sometimes and rarely compatible with traditional Western style cooking but roasted also used as a salad oil. Oil Medicinal treatment Ulcers and burns Oil Margarine Once an important use, now other cheaper vegetable oils are available Oil Aerosol Reported use as a synergist for pyrethrum sprays Low grade Various Soaps paints, lubricants, and illuminants. Local uses, of no oil importance in international trade Hulled seeds Tahini A paste of sesame seeds which is used as an ingredient in eastern Mediterranean and Middle Eastern foods Tahini Dips &spreads Various ingredients, such as chickpeas or eggplants, are added to tahini to make dips and spreads such as hummus Tahini Halva A sweet made from tahini and sugar with other added flavorings Cake Animal feed Protein rich useful supplement Cake from Ingredient Used in some Indian cooking. Also as a snack in, for example, hulled seeds the Nigerian Kulikuli. Chemonics International Inc. 7 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 The dehulling process, no matter what the method, always involves wetting the seed, which leads to considerable drying costs. As a result, the price of de-hulled seed is at least 30% above the natural type. Dehulling is said to reduce the storage ability of the seed, particularly in hot climates. Only a small proportion of the global sesame harvest enters international trade. For the most part, the oil is expressed locally and used locally for cooking or the seeds themselves are eaten, particularly after being fried. The oil has a distinctive nutty sweet flavor that has become established in the Far Eastern cuisine. It is also used in Europe and North America for cooking or as a salad oil, but the Eastern hemisphere oil market is much greater. The oil is also useful in the industrial preparation of perfumery, cosmetics (skin conditioning agents and moisturizers, hair preparations, bath oils, hand products and make-up), pharmaceuticals (vehicle for drug delivery), insecticides and paints and varnishes. However, all of these uses are comparatively insignificant in terms of the quantities used. C. Markets C.1. Sesame Seed C.1.a. Production Global production of sesame seed is estimated by FAO at 3.15 mn tonnes per year (2001) having risen from 1.4 mn tonnes in the early 1960’s. Figure 1 World Production of Sesame Seed 4,000,000 3,000,000 s e n 2,000,000 n o T 1,000,000 0 1 1 1 1 1 1 1 1 2 9 9 9 9 9 9 9 9 0 6 6 7 7 8 8 9 9 0 Source: FAOSTA1T 6 1 6 1 6 1 6 1 The largest producers are China and India, each with an annual harvest around 750,000 tonnes followed by Myanmar (425,000 tonnes) and Sudan (300,000 tonnes). These figures are only rough estimates of the situation as sesame is a smallholder crop and much of the harvest is consumed locally, without record of the internal trade and domestic processing. Chemonics International Inc. 8 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 Figure 2 Top Ten Producers of Sesame Seed (2001) Tanzania M exico B ang lad esh Pakist an Nig eria Ug and a Sud an M yanmar Ind ia China 0 200,000 400,000 600,000 800,000 Tonnes Source: FAOStat C.1.b. Trade Global exports of sesame seed are estimated to have reached 657,000 tonnes in 2000, having risen from 427,000 tonnes in 1988. The 2000 exports were valued at $478mn. Figure 3 shows the rise of Africa over the last ten years as a supplier of sesame seed and also the growth of Indian output. Figure 3 Exports of Sesame Seed 250,000 Africa India 200,000 C America China s 150,000 e n n o T 100,000 50,000 0 1988 1990 1992 1994 1996 1998 2000 Source: FAOSTAT India is now the single largest exporter of sesame seed, with exports of some 180,000 tonnes, with Sudan in second exporting over 138,000 tonnes per year. In 1988 China was the principal exporter in the world. (Note that FAO data for China includes Taiwan). Chemonics International Inc. 9 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812 Figure 4 Top Ten Sesame Seed Exporters Thailand Tanzania Mexico 1988 Guatemala 2000 Venezuela Nigeria Ethiopia China Sudan India 0 50,000 100,000 150,000 200,000 Tonnes Source FAOSTAT Figure 5 shows the major importers of sesame seed. As before, FAO data for China includes Taiwan. The rise in international trade in sesame seed noted above is also shown in the increased imports in Figure 5. All the major importers show strong increase in consumption over the past 10 years. Figure 5: Major Importers of Sesame Seed Israel Arabian Peninsula Turkey Syria 1988 China 2000 USA Korea EU Egypt Japan 0 25,000 50,000 75,000 100,000 125,000 150,000 175,000 Tonnes Source: FAOSTAT Japan dominates the purchasing side of the trade for sesame seed, with an annual requirement up to 165,000 tonnes. Sesame oil, particularly from roasted seed, is an important component of Japanese cooking and traditionally this is the principal use of the seed. However, much of the recent increase Chemonics International Inc. 10 USAID PCE-I-00-99-00003-00 November 2002 Task Order No. 812