ECONOMY - 18 APR 2017

Unlocking Nigeria's Agriculture Potential

Unlocking Nigeria's Agriculture Potential
Agriculture is expected to play a key role in the government's diversification efforts.

In 1960, Agriculture was the largest industry in Nigeria, driven by cocoa in the Western Region, groundnut in the Northern Region, and oil palm in the Eastern Region. Today, with the sector barely a quarter of the nation’s economy, you will find a newfound desire to recreate past glories. The agriculture sector is at the heart of the diversification rhetoric that has dictated economic policy for the last half-decade, and this has borne some fruit; after all, this sector grew last year when Nigeria entered a recession. One reason for this is government policy – the infamous list of 41 barred items has supported the agriculture sector, most notably, the local oil palm industry.

More generally, the Federal Government (FG) has set an agenda for developing this sector, first through the Agriculture Promotion Policy (APP) and now, through the Economic Recovery & Growth Plan (ERGP). Both should run through the next four years. But these policies must overcome three key challenges: access to inputs, access to credit, and access to markets. By taking a cursory look at the progress made on these three fronts, we get a clearer picture of the future of the sector, and how far we are from those glory days.  

 

Boosting Productivity Through Access to Inputs

In terms of access to inputs, there is no shortage of land and labour in the country, but we lack high-quality inputs for crop production, most especially, fertilisers. Put simply, Nigeria is not fully leveraging on the use of fertiliser as a way of boosting agriculture productivity. To tackle this, the FG set up the Growth Enhancement Scheme (GESS), a public-private-partnership aimed at increasing fertiliser use in the country. One key positive of the GESS is that it should eventually shift the government’s role from directly providing fertiliser to facilitating and regulating the fertiliser value chain, allowing the private sector to do the heavy lifting. Unsurprisingly, the GESS has suffered teething problems. Most revolve around poor utilisation of technology for the program, funding gaps, and incredibly, product shortages.

At least Nigeria can look to others in dealing with this problem as it is one common across developing countries. Subsidies have been particularly popular in some. But recent research suggests that this may not work on its own. A paper by Esther Duflo shows that poor decision-making and self-control could prevent farmers from taking advantage of profitable fertiliser investments, like through subsidies or the GESS. The lesson is that if we want to increase the use of high-quality inputs, we cannot simply throw money at the problem.

 

Enabling Growth Through Access to Credit

Meanwhile, low credit availability is an even greater challenge. Most farming in Nigeria is done on smallholder farms which means that the sector fails to exploit potential economies of scale. Given the upfront costs required for agriculture investment and the long gestation periods, access to long-term finance is crucial. But as the ERGP puts it, “Most farmers struggle to obtain financing to modernise or expand their farms, invest in productive assets or buy inputs.” In response, the Central Bank of Nigeria runs the Anchor Borrowers Programme to provide low-interest loans to farmers. The scheme has been relatively successful, with Kebbi State a notable highlight

In truth, the issue of credit availability transcends the agriculture sector. A combination of high long-term inflation, asymmetric information, and significant government domestic borrowing means that interest rates are always high. Even as it intervenes to subsidise credit to the agriculture sector, addressing the high-interest rate and low-information environment would be a more potent long-term solution.

 

Ensuring Profitability Through Access to Markets

Finally, after securing finance, planting, and harvesting, the produce must be made available in a market. There are two options here: domestic consumption or export. The former makes sense considering we currently have a deficit of food products. But Nigeria’s poor infrastructure is a significant stumbling block, particularly since most farming is done in the North. Meanwhile, exporting is attractive because of the potential to earn dollars – something the FG highlights as a key opportunity for the sector. Whichever is chosen, we need to improve the standard of produce in the country. We often hear stories of exports being rejected at their destination, usually because they fail one quality standard or another. With the significant health risks in this area – as seen with the damage of Tomato Ebola – quality assurance is essential. Thankfully, the ERGP acknowledges this by setting out plans to implement a national agricultural quality assurance programme, especially for export produce.

 

A Path to Sustainability and Self-sufficiency

Climate change and regional conflicts are constant threats to the agriculture sector and food security but dealing with the three discussed points will be crucial to ensuring sustainable growth in the sector. Remember, access to inputs is necessary for productivity, access to credit is necessary for growth, and access to markets is necessary for profitability. 

Though the issues in the agriculture sector go deeper than what I have presented here, we have a sense of what needs to be done to recreate some of our past glories. In truth, agriculture is an unglamorous industry in the 21st century and not one we should pin our long-term economic hopes on but there is a logic to redeveloping the sector and developing self-sufficiency in essential foods. The clock is ticking on those particular targets – tomato paste (2017), rice (2018), wheat (2020). These will act as a gauge for progress in the sector.  

 

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Kitan Williams

Kitan Williams

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