Monday, January 13, 2020 / 09:35 AM / FBNQuest Research / Header
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The agriculture sector continues to garner attention as a favoured route to economic diversification. However, constraints such as an outdated land tenure system restricting access to land, the limited adoption of research and technology, high cost of farm inputs, inadequate storage facilities among others have contributed to relatively low agricultural output. Over the past eight quarters, the sector has grown by an average of 2.5% y/y. In Q3 2019, it expanded by 2.3% y/y.
The agriculture value chain is broad and provides an opportunity to boost job creation as well as promote entrepreneurship. We note that the average age of farmers has reduced to 30 - 40 years from 50 - 75 years, which was the norm over the past 40 years.
The CBN's anchor borrowers programme (ABP), launched in 2015, has supported increased agricultural output. We understand that about 1.1 million farmers have benefitted from the programme and there has been increased production of at least seventeen different agricultural products on the back of the ABP.
The border closure which took effect in August last year has resulted in an increase in demand for specific locally produced goods. This of course is a positive although Nigeria is not self-sufficient in a range of food and other products, resulting in selective price increases.
Agricultural GDP growth (% chg; y/y)
Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research
While listing the benefits of the border closure, the FGN disclosed that the closure reduced rice smuggling and catalysed rice production. However, the price of rice has spiked since the closure, pointing towards a lack in domestic supply.
The Rice Farmers Association of Nigeria (RIFAN) recently disclosed that about 600 rice farmers have been mobilised to commence dry season farming. Each farmer will be cultivating five hectares which should produce 300,000 tonnes of rice post-harvest.
As with most sectors, to boost economic activity, structural deficits such as power shortages still need to be addressed. Furthermore, promoting technology and training farmers will have a lasting impact on the sector.