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Agriculture, Still Room for Improvement as Sector Grew by 2.2% YoY in Q1 2020

Agriculture	2582 VIEWS
Agriculture
2582 VIEWS

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Friday, July 10, 2020 / 10:20 AM / by FBNQuest Research / Header Image Credit: Genetic Literacy Project

The latest national accounts show that the agriculture sector grew by 2.2% y/y in Q1 2020, compared with 2.5% recorded in the previous quarter. Crop production accounted for 88% of agriculture GDP and grew by 2.4 y/y. We also note that the forestry and fisheries segments grew by 1.7% y/y and 1.5% y/y respectively, but each from a low base. Over the past eight quarters, agriculture has grown by an average of 2.1% y/y. The ongoing pandemic (Covid-19) has resulted in supply chain disruptions, particularly across the food sector which has a direct link with agriculture.

The temporary lockdown in some states across Nigeria has harmed farming activities as well as the distribution of agricultural products. Transport restrictions have impeded farmers' access to markets, resulting in upward price adjustments of farm produce such as rice.

Over the past six months, there have been steady upticks in the rate of food inflation. The latest report from the NBS shows that in May food price inflation was 15.04% y/y. The highest increases were recorded in meat, oils and fats, tubers, bread, cereals, potatoes, fruits and vegetables.

The CBN's anchor borrowers' program (ABP), launched in 2015, has supported increased agricultural output. The CBN has disbursed about N190bn in loans under the ABP since its inception. Through the ABP total loans worth N432bn are expected to be disbursed to 1.1 million farmers across the country.

To combat the current economic headwinds, the CBN has rolled out stimulus measures including a reduction in interest rates from 9% to 5% on its existing intervention programs (ABP inclusive) over the next year.

In June the CBN announced plans to fund 1.6 million farmers in the 2020 wet season across the country. This scheme falls within the ABP. The director in the CBN's Development Finance Department disclosed that cotton farmers would also be included. As at last month, at least 250,000 such farmers had been identified for this initiative.

The general assumption is that better access to credit would enhance the agricultural value chain. However, farmers are urged to take loan repayments seriously so as to give room for new debtors within this scheme in 2021.

Agriculture has benefited from several FGN interventions. However, there seems to be a misalignment when we consider the investment injected into the sector and the sluggish pace of growth exhibited. Notwithstanding, steady investment will assist with repositioning agriculture as a backbone for the economy.

The heavy reliance on one commodity for its export earnings has resulted in significant macroeconomic slippage for Nigeria. Agriculture provides an opportunity for revenue diversification. According to the Nigeria Export Promotion Council, agricultural exports have the potential to generate US$30bn per annum.