Thursday, January 14, 2021 / 10:52 AM / by FBNQuest Research / Header Image Credit: The Guardian Nigeria
The latest national accounts show that the agriculture sector grew by 1.4% y/y in Q3 '20, compared with 1.6% the previous quarter. Crop production accounted for 92% of agriculture GDP, and expanded by 1.4 y/y. We also note that the forestry and livestock segments grew by 2.5% y/y and 2.3% y/y respectively, both from a low base. Meanwhile, fisheries contracted by -2.1% y/y in Q3. Over the past eight quarters, agriculture has grown by an average of 2.2% y/y. The sector accounts for c.31% of Nigeria's total GDP and is regarded as a leading job generator.
Although agriculture has benefited from both policy continuity and several FGN/CBN credit interventions, its pace of growth has been sluggish. Interventions such as the CBN's Anchor Borrowers' Programme provide small-scale farmers with financing yet the farming industry still lacks adequate access to finance.
Furthermore, Nigeria experiences very low yields per hectare due to shortages in the supply of inputs such as seedlings and fertilizers as well as inadequate irrigation and harvesting systems.
As for supply chain linkages within the sector, Nigeria focuses heavily on agricultural output, neglecting the processing and manufacturing segment of the value chain. We note that shortages of resources, lack of financing and inefficient transport systems exacerbate the development of food production along the value and supply chain.
Over the past few years, a new trend has emerged within the sector: an increased number of younger Nigerians are now taking up farming to secure alternative revenue streams. We have therefore a gradual shift in rural areas from just Nigerian farmers to a mix that includes professionals from urban centers. We see that agricultural lproducts that are easily exportable (such as sesame seeds, ginger and hibiscus) are favoured by this new wave of farmers.
The Covid-19 pandemic has clearly had a negative impact on Nigeria's agriculture. Lockdowns, whether partial or full, have disrupted the agricultural supply chain and created additional challenges for small and large farm holders.
Transport restrictions and quarantine measures have impeded farmers' access to markets. Furthermore, access to inputs such as fertilizers has been difficult. To put this particular challenge into perspective, the lockdown in China in the early months of 2020 severely affected the international fertilizer trade.
The FGN and CBN have provided several interventions to boost activity within agriculture. However, their impact on output remains at best modest. It could be that the solution lies merely in strengthening the monitoring and evaluation processes that underpin these interventions in the sector.
Agricultural GDP growth (% chg; y/y)
Source: NBS; FBNQuest Capital Research