Agriculture, An Obvious Alternative

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Friday, March 27, 2020 /09:18 AM / by FBNQuest Research / Header Image Credit: Global Citizen

                                                                                

The latest national accounts show that the agriculture sector grew by 2.4% y/y in 2019 compared with 2.3% recorded in the previous year. In Q4 2019, it expanded by 2.5% y/y. Crop production accounted for 90% of agriculture GDP and grew by 2.5 y/y. We also note that the forestry and fisheries segments grew by 1.3% y/y and 2.3% y/y respectively, but each from a low base. Over the past eight quarters, agriculture has grown by an average of 2.3% y/y. The sector accounts for c.20% of Nigeria's total GDP and, according to industry sources, at least 60% of the country's working population are smallholder farmers.

                                                                                                            

Agriculture has benefited from both policy continuity and several FGN interventions. However, there seems to be a misalignment when we consider the investments injected into the sector and the sluggish pace of growth exhibited.

 

Over the past six months, the food rate inflation has been the driver of steady upticks in the headline inflation. For February, there was 5bp increase to 14.9% y/y in the food rate inflation. There are growing fears around steady food supply on the back of the current covid-19 crisis. These fears are hinged upon the realisation that it is planting season, and yet farmers are unable to work due to isolation instructions.

 

The CBN's anchor borrowers programme (ABP), an intervention program launched in 2015, has supported increased agricultural output. On the back of the ABP, there has been increased production of at least seventeen different agricultural products. To combat emerging headwinds, the CBN has rolled out stimulus measures including reducing interest rates from 9% to 5% on its existing intervention programs over the next year.

 

Agricultural GDP growth (% chg; y/y)

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

 

The FGN has made positive strides within the agriculture sector. We assume that the recent global health crisis which has led to slippage in Nigeria's macro economy would reinforce the FGN's commitment towards growing the agriculture sector to diversify its economy.


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