November 3, 2023/CSL Research
The Vice President of Nigeria, Kashim Shettima, recently urged foreign investors to invest in the nation’s agricultural sector, assuring them that the country is ready for agribusiness. He noted that owing to the country’s 70 million hectares of under-utilised arable land which is 75 percent of the country’s total land mass, Nigeria is one of the most favourable destinations for such investments. Investments into the agricultural sector have not been encouraging and have been declining. According to the National Bureau of Statistics (NBS), Capital importation into Nigeria’s agricultural sector declined by 82.6% y/y to US$1om in Q2 2023 from US$57.4m in Q2 2022.
Foreign Direct Investments into the agriculture sector is usually low for many developing countries. Bottlenecks to investments in the sector include access to remote areas which usually hold the arable lands, issues around land ownership and titles, fragmentation of the agricultural value chain which reduces investment demand and, unavailability of appropriate instruments for managing agricultural related risks. Several shocks that have hit the sector in recent times such as the pandemic and effects of the Russia-Ukraine war have also been detrimental to investments in the sector.
For Nigeria in particular, high level of insecurity remains one of the biggest issues facing the sector, and the situation continues to deteriorate, forcing many farmers to abandon their farmlands. Insecurity has significantly affected the agricultural sector with stakeholders constantly calling on the government to address issues of terrorism, banditry, and herdsmen attacks across the country as well as armed robbery and kidnapping that have constantly put investments in the sector in peril. Food prices in the country have continued to rise with no respite in view and food inflation has been the highest contributor to the nation’s rising inflation. Food inflation grew to 30.64% y/y in September 2023. In our view, successfully attracting investments into the sector will go a long way to avert a food crisis in the country.
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