Jumpstarting Nigeria’s agricultural sector growth
Nigeria’s economic growth rate remains impressively high as it surpasses South Africa as the largest economy on the continent. However, sustaining that growth rate is a major challenge for the Nigerian government, which is increasingly faced with the consequences of long periods of uneven economic development. Despite its economic powerhouse status, the majority of Nigeria’s populace face crippling poverty.
Nigerian economic power and growth is dominated by the country’s oil sector. And yet, the oil sector is blamed for widespread corruption, a political culture of patronage, and uneven and inefficient economic development. Nigeria suffers from a substantial infrastructure shortfall, and its other economic sectors have declined, or at least, failed to grow sufficiently, in the shadow of the oil sector.
Effectively utilising the demographic advantage that Nigeria has, is a key to sustaining economic growth and diversifying Nigeria’s economic mix. To realise this, Nigeria’s agricultural sector must grow in size, to help provide employment, but must also increase productivity and general efficiency levels in order to become competitive. Nigeria’s economic growth is impressive, but lacks sufficient transformation for sustainable growth.
Sustaining Nigeria’s economic growth rate
Nigeria’s recently rebased gross domestic product (GDP) data suggests that it has surpassed South Africa as the continent’s biggest economy. Rebasing effectively updates a country’s GDP statistics and is undertaken every few years, although it should be noted that Nigeria had not updated the components in its GDP base since 1990. More poignantly, South Africa’s GDP numbers are essentially three times larger than Nigeria’s.
A lack of productivity growth in the agriculture sector, a sector with the potential to generate millions of jobs, is considered particularly problematic. Agriculture is not growing as fast as the wholesale and retail, and telecommunications sectors. Rapid structural transformation: the quick change in the pattern of economic activity across sectors from agriculture to manufacturing to services, and in terms of migration from rural to urban areas, is not occurring at the rate needed to sustain economic growth.
Growth in the agricultural sector
In essence then, structural economic transformation in Nigeria hinges on increasing productivity in the agricultural sector. As productivity rises it makes labour available for factories and service industries, while at the same time, allows the agriculture sector itself to grow and provide jobs through increased competitiveness. Before the discovery of oil in the Niger Delta, Nigeria was one of the most promising agricultural producers in the world.
Between 1962 and 1968, export crops were the country’s main earner. Nigeria once provided some 18 percent of the global production of cocoa, in the 1960s this made it the second highest producer of cocoa, but that figure today is down to 8 percent. Nigeria’s Minister for Agriculture, Akinwumi Adesina has previously bemoaned the state of the Nigerian economy:
“Nigeria is known for nothing else than oil, and it is so sad, because we never used to have oil – all we used to have was agriculture.”
In particular, Adesina has noted the disconnect between Nigeria’s oil-based high growth rate, and the actual benefits of that growth on the Nigerian populace: “and that is why we had a rising poverty situation. We were having growth but without robust growth able to impact millions of people because it is not connecting to agriculture.”
Finance a critical catalyst to growth
Increasing productivity, according to United Nations Development Programme (UNDP), requires wider use of fertilizer and better seeds, improved water management (including irrigation), and improved access to markets among other reforms. Overcoming the challenges of underdeveloped infrastructure, and a lack of financing options is also vital.
Finance is a critical catalyst to growth, and has been a focal point of Adesina’s reformation efforts:
“You find that only 2 percent of all bank lending in Nigeria goes into agriculture – a sector that is 40 percent of GDP and 70 percent of employment.”
A key problem was a lack of investment confidence in the sector. However, that is slowly changing, thanks to a series of reforms implemented by Adesina’s administration to root out corruption and improve efficiency in 2013. One major area of focus was the reformation of the previously highly corrupt fertilizer industry. Other measures include the formation of a facility to provide provides risk management, financing, trading, and strategic solutions.
The Nigerian agriculture sector
The Nigerian agriculture ministry, in conjunction with the Central Bank of Nigeria, and helped by international development agency donor assistance, formed an agribusiness initiative: Nirsal. This initiative is geared toward reducing the risk of agricultural lending by providing credit risk guarantees and brokerage services to buyers and sellers of agricultural commodities. According to Adesina, the best performing stocks in the Nigerian Stock Exchange are now not banks, but agricultural companies
The Nigerian agriculture sector can certainly benefit from increased investment, but fundamentally, the sector requires significant institutional reform. Policy reform geared toward enhancing productivity, business efficiency and thereby, competitiveness is vital. Attracting private sector and financial market support will follow those incentives, and in that way, help ensure sector growth.
To further learn more on Nigeria’s rebased GDP, please join us this Thursday 24th April by 14:00 (CAT) on KPMG Africa Lunch with Our Leaders as we host Dr. Lyal White to discuss the Rebasing of the Nigerian GDP and its effect on Africa’s economy.
Where: KPMG Africa Lunch with Our Leaders Group on LinkedIn. In case you cant join, please feel free to send in your questions/comments to firstname.lastname@example.org
For more information:
- Adam Robert Green, ‘Agriculture Is The Future Of Nigeria‘, Forbes, 8 August 2013. Available at: http://www.forbes.com/sites/skollworldforum/2013/08/08/agriculture-is-the-future-of-nigeria/
- ‘Nigeria becomes Africa’s biggest economy‘, BBC News Africa, 6 April 2014. http://www.bbc.com/news/business-26913497
- ‘Boosting Nigeria’s agricultural output‘, Business Day (Nigeria), 27 March 2014. Available at: http://www.businessdayonline.com/2014/03/boosting-nigerias-agricultural-output/#.U0K95Vfxj-p