Nigeria aiming to reap benefits of agricultural goals

Partway through an ambitious agricultural development strategy, Nigeria is looking to the land to boost employment, ease the economy’s dependence on oil and ensure food security, but it will need to address a host of challenges before it can enjoy the fruits of its investments.

Although hydrocarbons account for 95% of exports and 75% of government revenues, agriculture plays a crucial role in the economy. The sector has provided as much as 40% of GDP in recent years and according to the International Fund for Agricultural Development, an agency of the United Nations (UN), around 60% of the workforce is employed in agriculture, though some estimates put the figure closer to 70%.

While employment levels are high, Nigeria still faces challenges when it comes to meeting its food needs, spending more than US$10bn each year on imports, mainly wheat, rice, sugar and fish. In fact, in spite of ample tracts of suitable land, the country has historically been the largest rice importer in the world. To reduce this drain on the economy, the government is promoting greater investment in the agricultural sector and imposing higher tariffs on products purchased from abroad.

Transformation plan

Central to the government’s plans is the Agricultural Transformation Agenda (ATA), which was launched in 2011 and sets out various medium- and long-term goals. Among the more immediate objectives are boosting overall crop production by 20m tons, self-sufficiency in certain crops such as rice, and the creation of an additional 3.5m jobs in the sector, all of which is to be achieved by 2015.

The longer-term plan is to expand the sector’s contribution to GDP from its present level of just under $100bn to $300bn by 2030, aiming not only to achieve food security but to develop a strong export industry, both of raw and processed products.

Addressing a recent seminar, Akinwumi Adesina, the minister for agriculture and rural development, said the ATA had already had a positive impact, reducing the import bill while also raising output of some staples, though any move towards self-sufficiency was only an intermediate step on a longer journey.

“Our vision is to move Nigeria to become an agriculturally industrialised economy, to create wealth, jobs and markets for farmers, and revive the rural economy,” he said.

There have been some success stories so far, such as an improved fertiliser subsidy scheme, as well as foreign investment in both rice farms and processing mills, including from Olam International.

Another positive sign has been an increase in lending to the sector, with loans to farmers rising from $22m in 2012 to $126m as of November last year. Banks have been encouraged by the state to provide credit to the agriculture sector, mainly through the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending. This scheme has provided funds and guarantees to banks to lend to operators in the rural segment, aiming to lower the risk factor in advancing credit to farmers.

A long way to go

However, many challenges remain, among them insufficient post-harvest transport and storage infrastructure. According to data issued by the Ministry of Agriculture and Rural Development, post-harvest losses can run at between 40% and 50% of crops.

These losses, the ministry said in a statement in mid-November, stem from poor management, low quality produce, weak marketing infrastructure, limited storage facilities and the absence of an organised market for produce. Even where storage and processing facilities have been established, cuts to power supplies, and problems with transport and communications contribute to post-harvest wastage.

Strengthening the infrastructure backbone is key if agriculture is to flourish, according to Ken Ife, a consultant to the Ministry of Trade and Investment. The connection between farms, storage facilities and food processors is poorly developed, Ife said in a November interview with the local media.

“Post-harvest practices are very crude and mundane, and we do not have enough storage facilities. We do not have very good food chains,” he said.

Meanwhile, a sharp increase in government taxes on imported rice, a policy that was designed to promote local suppliers, has instead resulted in high prices, food shortages and widespread smuggling. One estimate from Nigerian Customs put the cost to the state from unpaid duties on illegally imported rice at $6.3m a day. In September, the UN’s Food and Agriculture Organisation warned that parts of the country faced severe food insecurity.

Nigeria’s rice farmers have been unable to meet the rise in demand in part due to security concerns, particularly in the northern states, where crops were abandoned earlier this year during the harvest season, according to a report from the Chad Basin Development Authority.

These supply shortages suggest that the government may need to scale back its goal of rice self-sufficiency by 2015. While significant progress has been made in many areas of the sector, the state will likely need either to make additional investments in local farmers or establish the conditions that will encourage the private sector to do so before it can fully wean itself off foreign goods.

This article is re-published with permission from Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia and Latin America.

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