Agriculture remains integral for developing economies, capable of stimulating growth across the non-oil economy via its broad potential value-chain interlinkages.
The latest national accounts released by the National Bureau of Statistics (NBS) show that agriculture accounted for c.23% of total GDP. On a y/y basis, the sector grew by 1.2% y/y in Q2 ’22, compared with 3.2% in the previous quarter. Within the sector, crop production grew by 1.5% y/y and accounted for 90% of agriculture GDP. The forestry and fisheries segments grew by 1.3% y/y and 0.9% y/y respectively.
However, livestock contracted by -2.9% y/y.
Over the past eight quarters, agriculture has grown by an average of 2.2% y/y. The agricultural sector has been a beneficiary of substantial credit interventions by the CBN and state-owned development banks. At its July meeting, the CBN/MPC disclosed that total disbursements under the Anchor Borrowers’ Programme (ABP) amounted to N1trn as at end-July ’22, distributed to c.4.2 million smallholder farmers across the country.
Furthermore, the total disbursements under the Commercial Agriculture Credit Scheme (CACS) amounted to N744bn for 678 projects in agro-production and agro-processing. The CACS is among the better performing credit intervention programmes, given its positive repayment outcome (currently estimated at c.N700bn). Meanwhile, for ABP only 40% of mature loans have been repaid.
The misalignment between the growth figures recorded in this sector and intervention efforts can be partly attributed to the large informal economy, which is estimated to represent c.50% of the economy. The formalisation process is partly hampered by absence of bank accounts (by an estimated c.40% of Nigerians).
Given the rural nature of agriculture, a significant number of farmers are unbanked. This contributes to the difficulties in accessing funds. The CBN is gradually winding down special intervention funds, except those that are tagged as critical (relating to SMEs and the power industry). This points towards gradual tapering to maintain the price stability mandate.
It is worth highlighting that the sector is still saddled with unresolved insecurity and structural challenges that undercut investments. Some of these structural challenges include poor storage facilities, poor transport networks, low technology, among others. These challenges contribute to the risk-averse posture of some banks with regards to providing credit to players within the agriculture sector.
Although there have been laudable interventions by the CBN and the FGN, the sector still requires investments. Based on the latest data from the CBN, credit to the agricultural sector accounted for just 6.1% of total credit to the private sector, compared with sectors such as trade/general commerce (7.1%), finance, insurance and capital market (8.6%), oil and gas (16.1%) as well as manufacturing (17.4%) in August ‘22.
Based on another data source, the NBS, agriculture accounted for 3.7% (USD57.4m) of total capital importation in Q2 ’22 compared with 3.3% (USD28.9m) recorded in the corresponding period in 2021. This is an increase of 99% or USD28.5m.
To encourage increased investments into the sector, financial institutions should consider innovative financing solutions targeted at active players across the agricultural value chain. This should boost returns and profitability as well as stimulate economic activity within the sector.
Regarding trade, agriculture exports accounted for 2% of total trade, declining by -30% q/q to N371bn in Q2. We note that cashew nuts in shell, sesame seeds, standard quality cocoa beans, shelled cashew nuts, and natural cocoa butter featured as top export products in Q2 ‘22.
However, agricultural exports have remained below 5% of total exports over the past five years. There is still vast room to boost agro-related exports. This can be achieved through sustainable public-private partnerships that can potentially transform the agriculture sector to ensure that it realises its potential.
In addition, a boost to export receipts should assist with fx revenue diversification and by extension, support overall GDP growth.
As for agriculture imports, it accounted for 9% of total trade, growing by 5% q/q to N464bn in Q2. The growth in imports is unfavourable for imported food inflation. As at August, imported food prices is 17.9%, increasing by 54bps YTD. On the back of supply-chain constraints exacerbated by the Russia-Ukraine crisis, prices of some agriculture commodities have spiked. Notably, the prices of maize and wheat have increased by 20% and 19% respectively YTD.
The Africa Continental Free Trade Area (AfCFTA) agreement should support agricultural activity, create new regional markets for farmers and strengthen the agro-value chain. However, there should be increased focus on value chain interventions, especially around agriculture commodities that the Nigeria has comparative and competitive advantage.
Furthermore, to boost agricultural exports, there is a need to improve quality of products to meet and/or exceed the global standard. This can be achieved through sensitisation programmes geared towards educating exporters across the country. This should assist with solving poor packaging, and high level of chemicals (in the case of agricultural produce), improper labelling, insufficient information on nutritional content, presence of high level of pesticide residue, among others.
Overall, agriculture can potentially drive economic diversification in Nigeria. Improving the agriculture sector requires stakeholders to adopt a longterm view and commit to short-term sacrifices beneficial to expanding the sector.
Vice President, Yemi Osinbajo Seeks Collaboration With Vietnam on Agriculture and Technology
Nigeria’s Vice President, Prof Yemi Osinbajo has sought collaboration with Vietnam in the areas of agriculture and technology. The vice president spoke in Vietnam at a bilateral meeting on Monday.
During the meeting with his Vietnamese counterpart, Võ Thị Ánh Xuân, Osinbajo acknowledged both countries’ market potentials in the digital economy, telecommunications, and agriculture.
Speaking at the Presidential Palace in Hanoi, Vice President Yemi Osinbajo noted that telecommunication penetration in Nigeria is one of the deepest in any developing country, stating that about 120 million Nigerians now use one telecom service or the other.
Calling for collaboration on digital economy, Osinbajo said “We have close to 120 million of our citizens who have put to use telecom equipment or devices. And also, broadband connectivity is vastly improved. We hope that by 2025, we will have broadband connectivity for all of our over 200 million people”.
On the call for collaboration in the area of agriculture, the vice president noted that cashew production is an important area in which both counties can partner.
He said ” Given the food crisis that the world faces today, and is likely to continue facing even in the coming years, I like to say that the way forward is for our countries to collaborate. For instance, establishing cashew processing plants in Nigeria”.
Investors King understands that Vietnam is the world’s second-largest cashew processor with an annual processing capacity of 1.2 million tons representing up to 40 percent of the world’s total capacity.
Speaking at the event, the Vietnamese Vice President commended Nigeria’s leadership role in the ECOWAS sub-region and Africa generally, especially in the peaceful resolution of disputes.
She also commended Nigeria’s handling of the Covid 19 pandemic while reposing confidence in Nigeria’s ability to resolve challenges confronting the African continent and the West African region in particular.
Conclusively, she added that her country would continue to work with Africa to meet its aspirations in agriculture, clean energy and digital penetration.
Togo, Benin, and Niger Republic Owe Nigeria N4.1 Trillion in Electricity Debts
Nigeria currently supplies electricity to the Republic of Benin, Togo, and Niger through the Nigeria Bulk Electricity Trading, NBET Plc
The House of Representatives on Public Account has disclosed that Nigeria’s neighbouring countries, Togo, Benin, and Niger Republic owe the country about N4.1 trillion in electricity bills.
The revelation was contained in a letter sent by the committee to the Managing Director of Nigeria Bulk Electricity Trading, NBET Plc, Dr. Nnaemeka Eweluka.
According to the letter which was signed by the Chairman of the Committee, Hon. Oluwole Oke, the Managing Director of NBET is expected to appear alongside Dr. Marilyn Amobi, who served as MD/CEO from 2016 to 2020.
The house committee has accused the former MD, Amobi of non-rendition of the Audited Accounts for the years 2014, 2015, 2016, 2017, 2018, and 2019.
Investors King understands that Nigeria currently supplies electricity to the Republic of Benin, Togo, and Niger through the Nigeria Bulk Electricity Trading, NBET Plc. About 6 percent of the electricity generated in the country is sold to the neighboring countries.
Meanwhile, according to the managing director of NBET, the federal government is working on structures that will enhance power distribution in the country, stating that most of the power-generating companies are currently located in the southern part of the country.
“Most of the power generation companies are located within the south-south and south-west largely because of gas with one in the south-east, of course, we have the hydros in Niger state,” he said.
The MD added that Nigeria could generate up to a capacity of about 14,000 megawatts. He however noted that the distribution capacity is only between 4,000 to 5,000 megawatts per day.
Eweluka nonetheless sounded a note of hope, making references to the intervention projects that are currently ongoing such as the partnership with Simens.
“To address this gap between what is available and what the system can currently carry; there are a number of intervention projects that the government is currently pursuing, that include the presidential power initiatives in partnership with Siemens,” he concluded.
No Plan to Increase Fuel Price; Says FG
The Federal Government has stated that it has no plan to increase fuel price during the yuletide period.
This assurance is coming amid the nationwide fuel scarcity which has pushed the price of petrol above N250 in many retail stations.
Investors King learnt that fuel is being held for N250 per litre in Abuja and several other cities across the country while black marketers are charging between N400 and N450 per litre.
The scarcity and the high price of fuel are however becoming unbearable for many Nigerians, especially those who have reasons to embark on business travel for the December festivals.
According to the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Ukadike Chinedu, most of the association members, who owned the bulk of the filling stations across the country, were now subjected to purchasing PMS at about N220/litre, which was why many outlets currently dispensed at about N250/litre and above.
He noted that the cost of the commodity has been on the rise due to its unavailability and other concerns in the sector.
He added that the price of fuel could be sold from N350/litre to N400/litre before the end of the year.
Meanwhile, a number of senior officials at the NNPC had stated that the subsidy was becoming too burdensome on the national oil company, as this was another reason for the scarcity of PMS.
According to a source who is familiar with the development as reported by Punch News, “How can we continue to import 60 million litres of petrol daily and keep subsidising it, while millions of litres are either diverted or cannot be accounted for? The burden is too much, as you rightly captured in that story”.
Investors King understands that NNPC is the sole importer of petroleum into the country and it pays billions of naira every month to subsidise the product to N147 per litre.
Reuters News reported that in August 2022, NNPC paid more than $1 billion as fuel subsidy while the federal government earmarked N3.6 trillion as fuel subsidy in the 2023 budget proposal.
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