Tuesday, August 18, 2015 09:06AM / FBN Capital Research
Agriculture is one of the few sectors of the economy for which the Buhari presidency has not pledged marked changes. Indeed, it emerged from the president’s meeting with the permanent secretaries at the agriculture and water resources ministries in July that the growth enhancement support (GES) scheme is to be maintained.
The scheme was championed by Akinwunmi Adesina, the former agriculture minister and president-elect of the African Development Bank. Food production increased by up to 70% on his watch from 2011-15. Our hope is that his successor also brings technical expertise and energy to the post.
The reworking of the national accounts last year showed that the tertiary (services) sector is the largest in the economy. Agriculture accounted for 19.6% of GDP at constant prices in Q1 and expanded by 4.7% y/y (compared with 3.9% for the economy as a whole). Its potential for job creation and thus halting the rural-urban drift also explains the official focus on the sector.
The flow of news from the sector has slowed in recent months although some developments are worth reporting. The agriculture ministry has reported that locally grown wheat now enjoys competitive advantage over the imported product. This follows the development by the Lake Chad Research Unit of two seed varieties which the FGN is making available to farmers at deep discounts.
The FGN opened a sugarcane factory at Zaria in Kaduna state in May with capacity of one million seedlings per year. The bio-factory is the first of several proposed for the next five years.
One of the dividends from the president’s official visit to the White House last month was the pledge of US technical support for Nigerian farmers.
While the GES scheme is intact, all sectors are affected by the CBN’s circular dated 23 June. There are seven agricultural items on the list of 41 goods no longer eligible for fx from official sources. These include rice, palm oil products, meat, vegetables, fish and tomato paste.
These items can be imported with fx from the parallel market although cash deposits are not being accepted in domiciliary accounts. We should flag the possibility of shortages in the short term if the customs posts at national borders are rigorous. The CBN governor has alluded to this scenario in an interview.
1. Fisheries segment in transition