ECONOMY - 12 FEB 2020

Nigeria’s bet on agriculture

Nigeria’s bet on agriculture
Indorama Fertiliser Plant, Port Harcourt, Nigeria.  Source: AfDB via Flickr

“I belong to everybody and I belong to nobody.”

A memorable statement from Buhari's Inaugural speech during his swearing-in ceremony. He made it clear that he will be a man of the people without risk of influence. When it was time to talk about the economy, he stated how the government will address the country's unemployment problem "frontally" through the revival of agriculture. 

Revival is an appropriate term. 

By Nigeria’s independence in 1960, its largest industry was agriculture, with cocoa dominating in the West, oil palm in the East and groundnut reigning supreme in the North. Nigeria was the world’s largest producer and exporter of the ever-common palm oil with a global share of over 40% in the 1960s. Today, that share is less than 2%. In 1965, agriculture was responsible for 70% of employment and export cash crops, in particular, contributed to 62% of foreign exchange and 66% of GDP. 

Agriculture’s decline in Nigeria came soon after the petroleum boom. The overvalued naira, combined with the sectoral shift towards the new cash cow meant agriculture was no longer priority numero uno.

According to the latest GDP figures from the National Bureau of Statistics (NBS), agriculture accounted for 29% of Nigeria’s real GDP in the third quarter of 2019. However, the sector is still responsible for most of our labour force, with a share of just under 50%. Given the potential impact the sector can have on the population's means of income, it is unsurprising that the agriculture industry would be a priority for any Nigerian government. The World Bank estimated that Nigeria needs to create between 40 and 50 million additional jobs between 2010 and 2030; it's hard to see how that can be done without agriculture having its say.

The government also has an eye on the sector for other reasons. Self-sufficiency through agriculture (a goal of the Buhari administration) directly impacts food insecurity, an important problem in a country where food poverty half of the population.

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Protectionist policies

To boost agriculture and indeed the rest of the economy, Buhari and other Nigerian Heads of States have looked to restrict competing foreign imports. Sometimes it goes as far as closing borders for all goods which Buhari has done twice. In most instances of major protectionist policies, agriculture is in the spotlight. 

Closing the borders is visually representative of protectionist policies that remain very attractive to the Nigerian government. The rationale is that restricting foreign competition will incentive or force consumers to patronise local producers and also nudge more local producers to invest given the higher chance of success without foreign competition. Campaigns like “Buy Naira to Grow the Naira” and “eat what we grow” are attempts to convince Nigerians to support their own. 

This idea isn’t inherently a Nigerian one; globally, agriculture industries are heavily supported. Countries like the United States and members of the European Union (EU) are known for providing a range of subsidies/grants to local agriculture producers and restricting foreign suppliers with high trade barriers. As a result, foreign agriculture suppliers have struggled to compete in the EU. 

But restricting foreign suppliers is not the way to fully enhance the sector. There are fundamental issues "on ground" that must also be addressed. 

 

On-ground policies

In 2016, the government put out the Agriculture Promotion Policy which laid a roadmap for its approach to the agriculture sector. The sector’s core issues were identified and policies to address them were clearly stated. In principle, the government sought to boost productivity in the sector by improving farming inputs such as fertilisers and promoting better farming techniques like including irrigation and mechanisation. Additionally, there was a big push to improve access to credit, which is where the Central Bank of Nigeria (CBN) has come in alignment with the overall government's objectives. 

To boost productivity, one of the main policies deployed is the Presidential Fertiliser Initiative (PFI). On the program, the government supplies farmers with discounted fertilisers which have been blended using a mix of locally and foreign-sourced inputs from Morocco and Europe. Progress has been made: fertiliser consumption is at a record high and the fertilisers are now available to farmers at ₦5,500 per bag, from ₦9,000 per bag. 

To provide access to credit, the Anchor Borrowers Programme was born: its objective is to provide smallholder farmers with single-digit loans to unlock financing constraints faced by poorer farmers. Between 2015 and 2018, ₦174 billion had been disbursed to close to a million farmers. In that time, the CBN estimates that over 8 million indirect jobs have been created. However, concerns over corruption and repayment are beginning to surface. The total repayment as at the end of 2018 stood at ₦21 billion. Recently, there have been conflicting reports surrounding the CBN potentially suing rice farmers in Kebbi for defaulting on a ₦17 billion repayment.  

Many other programs exist across the government policy package but there is a question on what cumulative impact they have had on the wider economy. 

 

So where are we?

It has been four years since the Agricultural Promotion Policy was announced, so where do thing stand today?

On the productivity side, yield (crop output per unit of land) hasn’t changed much and is still below global and African averages. Without improvements in yields or productivity, output gains from agriculture could simply be down to spending more on inputs—like spending more hours on the field or using more land area. The key to unlocking agriculture is by becoming more efficient such that we can make more with the same level of capacity. 

In terms of the macroeconomic outlook of the sector, growth has slowed. Latest NBS figures put the growth of the sector at 2%, much lower than an average 4% growth it experienced even through the recession in 2016. The Buhari administration’s own target was 6%-12% between 2016 and 2020. These numbers are pretty far off, partly due to Nigeria's overall economic slowdown.

From a cursory reading of the Agricultural Promotion Policy, the government correctly identified the constraints facing the agriculture industry and the right policy framework to address it. However, as with everything government related, implementation was a different beast.

A good place to start would be a government-led assessment of their own policy and a commitment to seeing it through—what can be done to speed up growth? Currently, there is no publicly available report on the APP or research to review the government’s policies and targets. Instead, it seems our policymakers think the best way forward is more of the same. The Minister of Agriculture and Rural Development, Sabo Nanono predicts Nigeria will be a rice exporter by 2021 if it continues on its current path because of the border closure. Unfortunately, a border closure won’t build storage facilities, roads or provide power. If the Buhari administration wants an agriculture sector that will boost the economy, it will have to commit to doing the dirty work needed to fix the problems they acknowledged exist. 

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