In the FY-18 outlook “The Silver Lining?” report, we noted that to unlock the sector’s hidden potentials and further bolster its contribution to the broader economy, it is essential that the government revisit its commitment to allocate 10.0% of its national budget to the agricultural sector as agreed in the Maputo Declaration alongside other African states. However, based on the recently signed N9.1tn 2018 budget, current allocation to the sector is way below target, standing at a meagre N203.1bn (2.2% of the 2018 budget).
Thus, the sector growth is hinged on sustained favourable policy directives, rather than budgetary allocations. Also, going into H2-18, and as the 2019 election draws near, we expect the government to intensify effort to tame the ongoing insecurity threats in the food producing states. In the oil-palm subsector, despite a weak domestic CPO price outlook, we expect increased palm oil supply in the medium term, as players continue to benefit from favourable government policies.
Overall, given the positive prospect of the broader economy in 2018, the Agriculture sector as a key driver of growth is expected to remain resolute in the positive region, notwithstanding government’s paltry budgetary allocation. However, to unlock the long-term potential of agriculture and prevent further food price inflation, structural constraints on basic infrastructure and distribution channels must be addressed.