‘Fairtrade’ according to Oxford dictionary of English is an agreement of trade between companies in developed countries and producers in developing countries where the goods are priced at a slightly higher rate than normal, which provides the usually disadvantaged producers with a better deal. The idea of fair trade can be traced as far back as the late 1940s in the US, when Ten Thousand Villages started a needlework trade with poor communities in the South especially with Puerto Rico. In Europe, it can be traced to the late 1950s when Oxfam shops began selling crafts made by Chinese refugees. Fairtrade as a more established concept has become very mainstream with a lot of commonly purchased products such as coffee, chocolate, bananas, rice, tea, cotton, gold and even clothes carrying the Fairtrade certification. Fairtrade International operates in 74 countries with 1226 Fairtrade certified producer organisations worldwide and has approximately 1.65 million farmers and workers in Fairtrade producer organisations.
In a Fairtrade agreement, producers, most commonly coffee farmers, firstly, must belong to democratically managed cooperatives. The farmers must also pay to attain Fairtrade certification, agree to pay equitable wages to labourers and comply with all the rules stipulated by Fairtrade International legally registered as ‘Fairtrade Labelling Organisations International eV’, mainly on pesticide and chemical fertilizers permittable in production. The farmers are paid a minimum price for their produce ($1.40 as at 2016). This creates a ‘price floor’ which means that they are never paid below that minimum but are paid the market price when it is higher than the set minimum price. This protects the farmers from the highly volatile price fluctuations of international trade and ensures they are paid a fair price regardless of market conditions. A premium is paid by Fairtrade Foundation into the various cooperative communal fund accounts. The individual farmers collectively determine how the communal funds are spent. This is mainly on social, environmental and economic developmental projects beneficial to them based on the most pressing needs. Fairtrade premiums have been used to strengthen the various cooperatives, purchase tractors to increase productivity, provide education in the communities, and so much more.
The consumers are a very integral part of the Fairtrade system. Fairtrade certified products tend to come at a higher price than other conventional substitutes though this is not always the case. The consumers consciously purchase Fairtrade certified products, regardless of price, and this ensures the continuity of the Fairtrade scheme. It ensures that producers and the workers receive their fair share plus a premium. The additional money on the higher-priced Fairtrade products is not paid directly to the producers but is determined by competition laws.
The Nigerian business environment is high-risk characterised by high volatility, ineffective regulation or in cases where regulation exists, poor implementation and low-investments rate due to insecurity and poor infrastructural facilities. These factors are susceptible to change and skilful manoeuvring thus not completely marring the chances of business success rates. Nigeria is still actively receiving noteworthy investments, initiating international business alliances as well as being home to many extremely profitable businesses both locally founded and subsidiaries of global multinationals. Nevertheless, these factors are not very favourable to start-ups, SMEs and entrepreneurial businesses especially those in the Agribusiness industry. Primarily, the poorer fairing farmers in rural areas that if equipped with good investment, are capable of producing high quality products that can be consumed locally in even exported. So what benefits can the Fairtrade scheme hold for Nigeria?
The Agricultural industry contributes approximately N4.575 trillion to the country’s GDP and about 70% of the Nigerian labour force are involved in one way or the other in the agricultural sector. The most desired benefit Fairtrade potentiates is the empowerment of a group of Nigerians that may otherwise have been neglected. The fair price that the producers are paid is substantially more than they would have received in a volatile conventional market. There is also the premium paid into communal accounts of which the potential benefits have already been mentioned. These farmers are more likely than not, at the very bottom on the scale of preference for investments recipients. In 2014, Fairtrade certified cooperatives received over €106.2 million. This amount to about ₦44.6 billion which Nigerian farmers could be eligible to benefit from, in addition to the fair prices for their products. The ‘price floor’ provides stability explained previously which is essential for business growth and sustainability. Fairtrade sets various standards that provide a set of procedures and a system for the farmers to follow which brings about structure in a rather vague industry. The standards ensure the protection of the farmers and their rights which are vulnerable to neglect and abuse. The standards also ensure internationally acceptable quality produce. Nigeria is currently the 51st largest exporter in the world and the Fairtrade standards pose the potential to increase Nigeria’s agricultural exportation capacity because of an increase in quality and quantity.
Fairtrade also bans child labour, a phenomenon that has been long normalised in Nigeria especially in the rural areas. Fairtrade’s unwavering stance for its eradication is seen through the very serious repercussions given to cooperatives who fail to abide by this rule. This will be a step in the right direction for Nigeria as the controversial nature of child labour will prevent patronage from global multinationals who are very aware of harsh criticisms and backlashes that come from sourcing products utilising child labour and the unethical working conditions. Fairtrade exposes the workers to an already established distribution channel and access to international markets. The scheme acts as a platform for the farmers to access international markets which is somewhat hard to achieve and a rigorous process in a normal conventional system.
The current lack of Fairtrade certification has put Nigerian products at a disadvantage in foreign markets in comparison to products from the likes of Ghana, Côte d’Ivoire and Cameroon who are members of the Fairtrade movement. Products from these countries bearing the Fairtrade certification are receiving an increasingly high amount of patronage while Nigerian products continue to be disparaged. Fairtrade through all the benefits mentioned above (empowerment, standard setting, ethically accepted best practice, established distribution channels, and evenly-matched products with other African countries) as well as others like environmental protection, technical support, trade information and many more, will help bring Nigerian produce to an internationally competitive level.
In conclusion, this writeup has elucidated many reasons that aims resolve any reservations one may have regarding the Fairtrade scheme and if it would be beneficial to the ordinary Nigerian famer and the Nigerian economy in general. It is worth mentioning that the Fairtrade system is no magic wand to completely eradicate all the problems of farmers in developing countries and there are various cons of the system which have not been covered in this article. Certain prerequisites, already mentioned, are needed before membership to the Fairtrade system is confirmed, but it is also noteworthy to mention that this sort of scheme cannot work in an unreceptive environment. There is the possibility of misinterpretation of a scheme like this especially to the average ignorant and uneducated farmer. This brings up the need to create widespread awareness and educate people on the scheme. A list of things limiting Fairtrade’s success in Nigeria will not be complete without mentioning the one thing Nigeria has gained much notoriety for, corruption. There is the possibility of corruption limiting the success rate of the scheme or just plainly preventing the Fairtrade Foundation from considering operations in Nigeria. The big question, ‘Is Nigeria ready?’ is one that has no clearly defined answer, but the facts show that Nigeria needs to position itself in readiness because globalisation has made differentiation mandatory for sustained competitive advantage in global markets.
References
- Agricdemy.com. (2017). Agriculture in Nigeria. [online] Available at: https://www.agricdemy.com/post/agriculture-in-nigeria [Accessed 13 Jul. 2018].
- Atlas.media.mit.edu. (2016). OEC – Nigeria (NGA) Exports, Imports, and Trade Partners. [online] Available at: https://atlas.media.mit.edu/en/profile/country/nga/ [Accessed 13 Jul. 2018].
- Oxford Dictionaries | English. (2018). fair trade | Definition of fair trade in English by Oxford Dictionaries. [online] Available at: https://en.oxforddictionaries.com/definition/fair_trade [Accessed 12 Jul. 2018].
- World Fair Trade Organization. (2004). History of Fair Trade. [online] Available at: https://wfto.com/about-us/history-wfto/history-fair-trade [Accessed 11 Jul. 2018].
- Wydick, B. (2016). 10 Reasons Fair-Trade Coffee Doesn’t Work. [online] HuffPost. Available at: https://www.huffingtonpost.com/bruce-wydick/10-reasons-fair-trade-coffee-doesnt-work_b_5651663.html [Accessed 12 Jul. 2018].