Reasons Why Agriculture is Still Below Potential
The latest national accounts that the agriculture sector expanded by 1.2% y/y in Q3 ’21, following a 1.3% growth in the previous quarter and 1.4% in the year earlier period. Agriculture contributed c.30% to Nigeria’s Q3 GDP and grew by an average of 2.0% y/y over the past eight quarters. Despite significant credit interventions by the CBN and state-owned development banks, the sector continues to underperform.
Crop production accounted for 91% of agriculture GDP and expanded by 1.4% y/y. The forestry and livestock segments also grew by 2.0% y/y and 0.1% y/y respectively. Fishery on the other hand contracted by -4.0% y/y.
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At its last meeting, the MPC disclosed that between September and October ’21, the CBN disbursed NGN43.2bn under the Anchor Borrowers’ Programme (ABP) to support the cultivation of over 250,000 hectares of maize, sorghum, soya beans and rice during the 2021 dry season.
The CBN also disbursed NGN5.9bn to finance six large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS), and NGN41.2bn for the commencement of “the brown revolution”, a large-scale wheat program intended to reduce the country’s dependence on wheat imports by 35% in the first year.
On Tuesday, the African Development Bank (AfDB)’s Board of Directors approved a USD210m loan to co-finance phase 1 of Nigeria’s Special Agro-Industrial Processing Zones programme which is intended to augment certain value chain commodities in seven states and the FCT. The programme’s general aim is to unlock the agriculture sector’s potential by promoting industrialisation through the development of strategic crops and livestock. It is expected to benefit 50.4 million people. Financing from other partners is to amount to USD538.1m.
These investments and interventions are good news for the agricultural sector and the country. However, the benefits are being hampered by challenges such as the persistent insecurity in food-producing areas of the economy.
Another challenge is the magnitude of farmers’ post-harvest losses. It was disclosed at the 3rd ECOWAS Agriculture Budget Summit held recently that annual post-harvest losses in Nigeria amounts to 51% of total food supply in West Africa. In monetary terms, these losses were estimated at NGN3trn annually. The underlying reason for this is the sector’s poor storage culture, very limited farm mechanisation, and logistic challenges.
Agriculture lies at the heart of the FGN’s economic diversification goals. While we welcome the substantial inflow of funds into the sector, we believe paying more attention to the sector’s structural challenges would significantly improve agricultural productivity which will in turn affect many areas of the economy positively.