August 5, 2021/United Capital Report
The agriculture sector remains a key interest sector in Nigeria’s plans to diversify its economy. Despite increased interventions from policymakers, the sector’s output has remained largely underwhelming over the last three years, with an average growth rate of 2.2%, owing largely to low mechanization levels, high insecurity in key food-producing states and perennial supply chain bottlenecks.
In Q1-2021, the agriculture sector grew by 2.3% y/y, a 7bps rise from Q1-2020 and a 1.1% fall from Q4-2020, largely supported by commendable policy support and financial intervention. Some of the interesting policy interventions include approval of the $1.2bn financing for the Green Imperative Programme (a partnership with the Government of Brazil), sustained implementation of the Presidential Fertilizer Initiative (PFI) which has resulted in 44 blending facilities as of Q1-2021 (compared with 4 as at 2016) and extension of the phosphate supply deal between Morocco and Nigeria in Mar-2021. Other existing schemes to provide funding for farmers were sustained such as Commercial Agriculture Credit Scheme (CACS), CBN’s Agribusiness Small & Medium Enterprises Investment Scheme (AGSMEIS) and the Anchor Borrowers Program (ABP).
Looking ahead, given the positive recovery prospects of the broader economy in 2021, we expect the agriculture sector to expand. However, the structural problems that continue to stymie the sector’s growth must be addressed. Aggressive investment in farmer education and R&D, as well as storage and transportation infrastructure will go in long way in boosting industry yield and easing route-to-market bottlenecks. That said, we expect the persistent insecurity challenges in food producing states will continue to weigh on the sector’s growth.
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