August 2, 2023/CSL Research

Based on Q1 2023 GDP data, Nigeria’s agricultural sector contracted by 0.90% in Q1 2023 in real terms compared to the 3.16% growth recorded in the corresponding period in 2022. On a quarter-on-quarter basis, the sector’s 0.9% contraction in Q1 2023 compares with a growth rate of 2.05% recorded in Q4 2022. The NBS attributed the overall decline in the country’s economic growth to the adverse effects of the cash crunch experienced in the first quarter of 2023. We believe that the cash crunch significantly affected Agricultural businesses owing to the short shelf life of fresh farm produces.

Nigeria’s agricultural sector has long been touted as the sector that can drive economic growth and development if adequately supported to grow. However, challenges such as the Ukraine invasion, floods, surge in input costs, and worsening insecurity pressured the output of farmers. These challenges have exacerbated food inflation. Food inflation rose to 25.25% in June 2023 with significant price increases across items such as cereals, yam, meat, fish, and fruits etc.

The government of Nigeria has initiated several agricultural programs such as the Anchor Borrowers Program (ABP) to diversify its economy away from oil, but these programs have
failed to have a significant impact on the sector.

Reports from the international trade administration stated that Nigeria relies on US$10 billion of imports to meet its food and agricultural production shortfalls (mostly wheat, rice, poultry, fish, food services, and consumer-oriented foods) with Europe, Asia, the United States, South America, and South Africa being the major sources of these imports. Looking ahead, we believe that the recent Naira devaluation and the removal of PMS subsidy amidst worsening insecurity will have a significant effect on the prices of food, which in turn will further hamper the growth of the agricultural sector.

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