Agriculture Well Below its Potential

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Monday April 19,  2021 / 09:01 AM / by FBNQuest Research / Header Image Credit: UNHCR 


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The latest national accounts show that the agriculture sector grew by 3.4% y/y in Q4 '20, compared with 1.4% the previous quarter. This is its strongest growth since Q4 '17. Crop production accounted for 91% of agriculture GDP, and expanded by 3.7 y/y. We also note that the forestry and livestock segments grew by 1.2% y/y and 2.4% y/y respectively. Meanwhile, fisheries contracted by -3.6% y/y in Q4. Over the past eight quarters, agriculture has grown by an average of 2.3% y/y. The sector accounts for c.27% of Nigeria's total GDP and is regarded as a leading job generator.

 

Based on industry sources, as at January '21, NGN555bn had been disbursed to 2,849,490 farmers under the CBN's Anchor Borrowers' Programme (ABP). Additionally, the CBN has disbursed NGN107bn to 27,956 beneficiaries under its Agribusiness Small and Medium Enterprises Investment Scheme.

 

The FGN's investments into the fertiliser segment have provided support for agriculture. We understand that through the Presidential Fertiliser Initiative (PFI) launched in 2016, to reduce the country's reliance on fertiliser importation, fertiliser blending plants across the country have increased to 44 (as at March '21) compared with only 4 recorded in 2016.

 

In March, the FGN announced that it was extending the current phosphate supply agreement between the Kingdom of Morocco and Nigeria. This will be done through the development of a USD1.3bn basic chemicals plant for the production of ammonia and fertilisers in Nigeria. The new plant is expected to complement the existing Dangote and Indorama Chemicals facilities.

 

Agriculture has benefited from both policy continuity and several FGN/CBN credit interventions. However, its pace of growth has been sluggish. Agriculture GDP growth has failed to hit 5.0% y/y over the past five years. Interventions such as the CBN's ABP provide small-scale farmers with financing yet the farming industry still lacks adequate access to finance.

 

One reason for underperformance within the sector is low mechanised farming across the country. Nigeria is still heavily dependent on subsistence farming. According to the Food and Agricultural Organisation (FAO), tractor density in Nigeria is 0.27hp/hectare. This is far below the FAO tractor density recommendation of 1.5hp/hectare.

 

To address the issue of low mechanised farming, in February, the FGN secured a USD1.2bn loan under the Green Imperative project (GIP). The GIP is an agricultural bilateral project between Nigeria and Brazil which is expected to boost mechanisation and strengthen agricultural assets through effective farm and land management systems. 

 

Agricultural GDP growth (% chg; y/y)

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Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research


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 Proshare Nigeria Pvt. Ltd.

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