• Tuesday, July 23, 2024
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BusinessDay

Nigeria: The agricultural imperative

Kano boosts agric production with N1bn free fertilizers to smallholder farmers

To say that the Nigerian agricultural sector is in a crisis that requires urgent attention would be an understatement. But the situation is not new and has certainly been accentuated by recent developments in the economy and politics. It is principally due to decades of public sector neglect and underfinancing, primarily the result of prolonged years of military rule, and a beclouded or poor understanding of the strategic role of the agricultural sector in the overall development of the economy, in achieving food security, and in the fight against poverty. The situation has only recently been compounded by a peculiar type of insecurity in most of the states of Northern Nigeria, targeting farmers and farm labour, and the effects of climate change.

Ironically, agriculture contributes the lion’s share of Nigeria’s gross domestic product (GDP). Of the top ten contributing activities to real GDP growth in Nigeria in the first quarter (Q1) of 2024, crop production, one of the four components of the agricultural sector in Nigeria, contributed the most (19.24 percent), followed by trade, and telecommunications and information services in second and third places. Crude petroleum and natural gas came in a distant fourth position with 6.38 percent.

“The situation has only recently been compounded by a peculiar type of insecurity in most of the states of Northern Nigeria, targeting farmers and farm labour, and the effects of climate change.”

But agriculture has maintained its pride of place in its contribution to the Nigerian economy, although the value of that contribution has declined from close to 40 percent of nominal GDP 20 to 25 years ago to 22.35 percent of nominal GDP in Q1 2023 and to 17.22 percent of nominal GDP in Q1 2024. This sliding performance of the agricultural sector over the years is principally due to the neglect and underfunding of the sector at both the national and sub-national levels and the failure to provide attractive incentives and an enabling environment to private sector investors to help realise the enormous untapped potential and opportunities in the agricultural sector in Nigeria.

Budgetary allocation by the federal government to agriculture has been historically low, hovering around 1 percent to 2 percent annually. The budgetary allocation of N362.9 billion to the agriculture sector by the Federal Government in 2024 increased from N228.4 billion allocated to the sector in 2023, which in relative terms represents a significant increase of 55.9 percent; but in absolute terms, it is a drop in the ocean, as it was only 1 percent of the total budget sum of N28.78 trillion.

The Rome-based United Nations’ Food and Agricultural Organisation (FAO) gave an apt summary of Nigeria’s agricultural sector, saying, “Despite its contribution to the economy, Nigeria’s agricultural sector faces many challenges that impact its productivity. These include poor land tenure systems, low levels of irrigation farming, climate change, and land degradation. Others are low technology, high production costs, poor distribution of inputs, limited financing, high post-harvest losses, and poor access to markets.”

Taiwo Oyaniran, then Associate Director, PwC Nigeria, in a paper titled “Current State of Nigeria Agriculture and Agribusiness Sector,” which he delivered in an AfCFTA Workshop in September 2020, identified the following key agricultural statistics of Nigeria:

“The share of agricultural contribution to GDP as of Q1 2020 stood at approximately 22 percent.

“The agricultural sector remains the largest employer in Nigeria, employing more than 36 percent of the labour force.

“More than 80 percent of Nigeria’s farmers are smallholder farmers (SHFs). These numbers account for 90 percent of Nigeria’s agricultural produce.

“Only about N40 billion was earmarked by the government for agricultural research and development (R&D) in 2019.

“The agriculture budget represents 1.8 percent (or N183 billion) of the total 2020 budget size. This significantly falls short of the 10 percent specified in the Maputo Declaration.

“Nigeria’s tractor density is put at 0.27 horsepower per hectare (hp/ha), which is far below the FAO’s recommended tractor density of 1.5 hp/ha.

“Nigeria’s agricultural trade deficit widened by N689.7 billion in 2019 compared to N549.3 billion in 2018.

“In four years (2016–2019), Nigeria’s cumulative agricultural imports stood at N3.35 trillion, four times higher than the agricultural export of N803 billion within the same period.

“Nigerians spent about N22.8 trillion on food items in 2019, representing more than half (56.7 percent) of the total household expenditure of N40.2 trillion.”

Food inflation in May 2024, as reported by the National Bureau of Statistics, was 40.66 percent, which was 15.84 percent higher than it was in May 2023. The persistent increases in food inflation in the last twelve months are perhaps the best indicator of the food crisis in Nigeria and the neglect and underfunding of agriculture. One only needs to go to the market to do a market survey to realise how dire and unprecedented the food inflation situation really is. The immediate solution would be programmed (limited) food importation to meet shortfalls in local production. Other short-term responses through coordinated efforts by the federal and state governments through the National Council on Agriculture and Food Security are also needed.

Nigeria has never been lacking in policy formulation for national development, and the agricultural sector is not an exception. Between 1988 and now, the Federal Government has launched at least five major agricultural policy documents. The missing link has been adequate agricultural finance. In the short term, additional finance in the form of a supplementary budget to address some of the urgent gaps identified by FAO above may be necessary.

But in the medium to long term, what we need is an entire strategic repositioning of agriculture as a sector with the greatest potential in the next ten years to generate jobs, incomes, growth, and development, fight inflation, achieve food security, fight poverty, and transform lives.