Friday, December 09, 2016 11:50 AM / FBNQuest Research
Probably the brightest spot in the otherwise dire national accounts for Q3 2016 was the performance of agriculture. The sector expanded by 4.5% y/y for the second successive quarter (after 3.1% in Q1).
It is not about to take off since just 8.2% of its output derived from the formal economy in 2015. However, we have identified enough encouraging pointers to be confident about the years ahead for agric. The one negative to highlight is the acute food shortage in the north east, notably Borno State.
Our first is that the sector benefits from continuity of government policy. The FGN has indulged in rebranding and so come up with a roadmap entitled the Agriculture Promotion Policy. The e-wallet initiative is however inherited from the previous administration. A total of 14 million farmers were registered on the federal ministry’s database for access to inputs in February, and a target of 30 million has been set.
Secondly, the CBN and other public bodies continue to provide financing for agriculture and compensate for the limited support from commercial banks. (At end-June just 3.1% of DMBs’ loan books favoured it.).
The FGN is to inject fresh capital of N1trn into the state-owned Bank of Agriculture. For its part, the CBN still has lending capacity within its commercial agriculture credit scheme of 2009 and its more recent N220bn enterprise fund for MSMEs, of which N80bn has been disbursed to date.
Our third pointer is the investment picture. The FGN is in the process of importing 110 rice mills, which it will supply at a discount. The CBN is again involved, this time through its anchor borrowers’ programme, which, it maintains, will have bridged the national supply/demand gap by 2017.
Outside rice, we note the large-scale planting of cashew seedlings across three states, and a US$150m investment in wheat milling and poultry by Olam, which was comfortably Nigeria’s leading non-oil exporter in 2014.
Fourth, in October the FGN gave some hope for employment by launching its smart farmer scheme, which is designed to create 490,000 posts.
Finally we have to comment on agricultural and related imports, having seen official figures ranging as high as US$20bn annually.
We have looked at the latest foreign trade statistics from the NBS and used the broadest definition to include live animals, vegetable products, oils and prepared foodstuffs.
This shows total imports at N1.29trn (US$7.8bn) in 2014, N1.17trn (US$6.0bn) in 2015 and N840bn in the first nine months of this year. The import bill is far too high in view of the unused cultivable land, of course, but has stabilized.