May 28, 2021 / 11:43 AM / By CSL Research / Header Image Credit: The Sun Daily
During Nigeria's economic recovery from the recession, the agriculture sector played a dominant role, growing by 2.3% in the first quarter of the year. The performance of the sector remains a major concern to us, as we note that the growth recorded was significantly lower when compared with Q4 2020 (3.4%). While we acknowledge the impact of the cyclicality on the sector, the output gap remains wide, and growth still lags the first quarter long-run average of 3.1%.
This reflects the lingering impact of security challenges in the food-producing regions. According to the Famine Early Warning Systems Network (FEWSNET), Boko Haram attacks continues in the northeast, and insecurity in the northwest and north-central states are causing displacement of households. Over 2.5 million people are currently internally displaced in these regions, which portends a downside to food production.
In a bid to support the sector, the CBN has intensified on Agro-interventions. Specifically, under the Anchor Borrowers Scheme, the CBN disclosed that over N631.4bn was disbursed to smallholder farmers cultivating about 3.8m hectares of land. Also, Under the Agric, Small, and Medium Enterprise Scheme (AGSMEIS) initiative, about N111.7bn was disbursed to 29,026 beneficiaries.
However, the impact of these schemes has not entirely translated to growth for the sector. Our channel checks revealed that the challenges of the scheme include poor timing of disbursement by the CBN and elevated bad credit due to non-repayment of loans. To aid quick repayment of credit, the CBN promised farmers a good repayment record, a solar home system to power essential home appliances.
Overall, rather than address the main issue of insecurity, the government has continued to intensify these credit interventions which have yielded limited results. We expect the sector to grow by 2.6% in Q2 2021, due to a low base from the corresponding period last year.