June 1, 2022/United Capital Research
The NBS estimated that the agriculture sector grew by 3.2% y/y in Q1-2022, down from 3.6% y/y in Q4-2021. Growth in crop production, which accounted for 92.1% of the sector’s output, moderated to 2.97% y/y, down by 91bps compared to the previous quarter. The livestock and fishery sector grew 5.1ppt and 1.5ppt to close at 5.6% and 3.1% y/y. The forestry sub-sector grew to 1.4% y/y (vs 1.4% y/y in Q4-2021).
The Agriculture sector grew by 3.2% y/y in Q1-2022, up from the 2.3% y/y growth recorded in Q1-2021, but down by 42bps, reflecting the seasonal impact of the peak harvest season and festive food demand in Q4-2021. We attribute the growth of the Agriculture sector in Q1-2021 to the positive impact of sustained CBN intervention in the sector, increased commercial private sector presence, and the likelihood that the increasing supply gap globally would have created opportunities for stronger output. Lastly, we note that the final stretch of the harvest season was mainly in Q1-2022, which provided decent support for agriculture output. The sector remains highly vulnerable to insecurity issues as the farmer-herder crisis, and banditry activities in critical food-producing states continue to hamper production and discourage farming activities.
Looking forward, we remain broadly upbeat for the rest of 2022. However, we note that seasonal impacts of the planting season will moderate output growth in Q2-2022 and Q3-2022 before festivities, and the start of the harvest season drives faster growth in Q4-2022. The drivers of output growth momentum will remain the country’s robust food demand. At the same time, an increasing supply gap for crucial commodities in the global market could become an incentive for farmers to raise output to plug some of the holes, thereby creating an opportunity for above-average growth in the Agricultural sector. In addition, the apparent concern about a food crisis will see intervention funds deployment sustained with likely additions from international financiers. We highlight the recent surge in the cost of farm inputs (seeds & fertilisers), and the current scarcity of these items could be potential headwinds for output growth in the sector. Lastly, legacy issues around insecurity, agriculture infrastructure (storage & transport) and farming methods sponsor all drag that will continue to limit growth in the sector.
