June 18, 2021/Proshare
by FBNQuest Research
The latest national accounts show that the agriculture sector grew by 2.3% y/y in Q1 ’21, compared with 3.4% the previous quarter. Crop production accounted for 88% of agriculture GDP, and expanded by 2.3% y/y. We also note that the forestry, livestock and fisheries segments grew by 1.3% y/y, 1.7% and 3.2% y/y respectively. Agriculture accounts for c.22% of Nigeria’s total GDP and employs two-thirds of the labour force. However, over the past eight quarters, the sector has grown by a meagre 2.2% y/y on average. Its constant underperformance, often attributed to structural factors, has been a major impediment to the FGN’s efforts towards revenue diversification.
Agriculture continued its underwhelming growth in Q1 ’21, despite substantial credit interventions by the CBN and state-owned development banks.
At its last MPC meeting, the CBN disclosed that as at end-February ’21, total disbursements under the various agricultural programmes amounted to NGN1.5trn. NGN686.6bn of the total was disbursed under the Commercial Agricultural Credit Scheme (CACS) while NGN601.8bn was disbursed under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers.
Additionally, the CBN has disbursed NGN111.62bn to 28,961 beneficiaries under its Agribusiness Small and Medium Enterprises Investment Scheme. Around 70% of the beneficiaries are in the agriculture sector.
Insecurity remains a major impediment to reaping the dividends of the FGN’s investments in the sector. Disruptions in agricultural supply chains are occasioned by bandits and herdsmen in food-producing areas of the country. Borno for instance, a North-Eastern state which contributed c.30% to the country’s total wheat output before the onset of Boko Haram insurgency, now produces next to nothing because farmers have been forced to vacate their farmlands for safety. Other structural challenges include poor storage and logistics.
Turning to the fertilizer space, this week, Dangote Industries Limited’s USD2.5bn fertilizer plant commenced the sale of fertilizer across the country. The plant is expected to produce 3 million metric tonnes of urea per annum and generate USD400m annual foreign exchange as proceeds from exports.
The sector can play a significant part in Nigeria’s economic recovery, help to improve export earnings and boost job creation. However, to achieve its full potential, internal factors (afore mentioned) responsible for supply bottlenecks need to be addressed.
Agricultural GDP growth (% chg; y/y)
Source: National Bureau of Statistics (NBS); FBNQuest Research
