September 30, 2022/Coronation Economic Note
Agriculture remains integral for developing economies, capable of stimulating growth across the non-oil economy via its broad potential value-chain interlinkages.
The latest national accounts released by the National Bureau of Statistics (NBS) show that agriculture accounted for c.23% of total GDP. On a y/y basis, the sector grew by 1.2% y/y in Q2 ’22, compared with 3.2% in the previous quarter.
Within the sector, crop production grew by 1.5% y/y and accounted for 90% of agriculture GDP. The forestry and fisheries segments grew by 1.3% y/y and 0.9% y/y respectively. However, livestock contracted by -2.9% y/y. Over the past eight quarters, agriculture has grown by an average of 2.2% y/y.
The agricultural sector has been a beneficiary of substantial credit interventions by the CBN and state-owned development banks. At its July meeting, the CBN/MPC disclosed that total disbursements under the Anchor Borrowers’ Programme (ABP) amounted to N1trn as at end-July ’22, distributed to c.4.2 million smallholder farmers across the country.
Furthermore, the total disbursements under the Commercial Agriculture Credit Scheme (CACS) amounted to N744bn for 678 projects in agro-production and agro-processing. The CACS is among the better performing credit intervention programmes, given its positive repayment outcome (currently estimated at c.N700bn). Meanwhile, for ABP only 40% of mature loans have been repaid.
The misalignment between the growth figures recorded in this sector and intervention efforts can be partly attributed to the large informal economy, which is estimated to represent c.50% of the economy. The formalisation process is partly hampered by absence of bank accounts (by an estimated c.40% of Nigerians).
Given the rural nature of agriculture, a significant number of farmers are unbanked. This contributes to the difficulties in accessing funds. The CBN is gradually winding down special intervention funds, except those that are tagged as critical (relating to SMEs and the power industry). This points towards gradual tapering to maintain the price stability mandate.
It is worth highlighting that the sector is still saddled with unresolved insecurity and structural challenges that undercut investments. Some of these structural challenges include poor storage facilities, poor transport networks, low technology, among others. These challenges contribute to the risk-averse posture of some banks with regards to providing credit to players within the agriculture sector.
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