The narrative on agriculture is gradually changing, and the sector can now plausibly be seen as the economy’s new backbone. Agriculture has posted uninterrupted growth for the past eight quarters. It has been the beneficiary of several official interventions.
One such is the CBN’s agricultural credit guarantee scheme; a fund established to assist farmers with little or no collateral with which to gain access to loans from commercial banks. In Q4 2017, N1.5bn (US$4.2m) was guaranteed to 10,259 farmers under this scheme compared with N2.4bn recorded in the previous quarter.
- At a recent briefing on Nigeria’s Economic Outlook 2018 we attended in Lagos, government officials alluded that agricultural GDP has not accelerated at the desired pace (that is, given the several interventions within the sector) due to output losses. This is not surprising since storage and logistics issues still exist.
- In Q3 2017 the sector grew by 3.1% y/y. Crop production remained the largest contributor to agriculture GDP, accounting for 92% of the total. Meanwhile, livestock farming represented just 5%.
- · Based on CBN data, importation of food and agricultural products accounted for 10.4% and 1.7% respectively of fx utilization in Q3 2017, compared with 8.4% and 1.6% recorded in the previous quarter. The initial ban on access to fx for 41 items via a CBN circular distributed in June 2015 assisted with curbing imports of specific agricultural and food products.
Sources:: National Bureau of Statistics (NBS); FBNQuest Capital Research
- However, due to better access to fx (including the parallel market), it seems this ban now has a limited effect. It is widely reported that the palm oil sector is currently suffering a supply glut. Local producers such as Okomu Oil are competing with imported alternatives. Okomu currently mills 30 metric tonnes per hour.
- · There is, therefore, a need for new measures to control this import influx, which is undermining the import substitution strategy.