from OKORO CHINEDU in Lagos, Nigeria
Nigeria Bureau
LAGOS, (CAJ News) – LACK of access to funds by farmers, insecurity and structural challenges are hampering the potential of the agricultural sector to Nigeria’s economy.
Ultimately, inflation is accelerating in the continent’s largest economy, which remains overly reliant on the volatile crude oil industry.
Yet, an analyst noted, agriculture remains integral for developing economies, capable of stimulating growth across the non-oil economy via its broad potential value-chain inter-linkages.
The latest national accounts released by the National Bureau of Statistics (NBS) indicate that agriculture accounted for 23 percent of total gross domestic product (GDP).
On a year-on-year (y/y) basis, the sector grew by 1,2 percent in the second quarter of 2022, compared with 3,2 percent in the previous quarter.
The agricultural sector has been a beneficiary of substantial credit interventions by the Central Bank of Nigeria (CBN), including the N1 trillion (over US$2,3 billion) disbursed to farmers under the Anchor Borrowers’ Programme as at the end of July.
Furthermore, the total disbursements under the Commercial Agriculture Credit Scheme (CACS) amounted to N744 billion for 678 projects in agro-production and agro-processing.
However, as pointed out by economist Chinwe Egwim, the misalignment between the growth figures recorded in this sector and intervention efforts can be partly attributed to the large informal economy.
It is estimated to represent half of the economy.
The formalisation process is partly hampered by absence of bank accounts, by an estimated 40 percent of Nigerians.
This is a vast number in a population estimated at 217 million, the largest in Africa.
“Given the rural nature of agriculture, a significant number of farmers are unbanked. This contributes to the difficulties in accessing funds,” Egwim, Chief Economist at Coronation Merchant Bank stated.
He also noted the insecurity and structural challenges.
The insecurity is highlighted by the Boko Haram’s mass killings and kidnapping of farmers in the northeast. There are also intermittent clashes between subsistence farmers and livestock herders.
Egwim explained some structural challenges include poor storage facilities, inadequate transport networks and low technology.
“These challenges contribute to the risk-averse posture of some banks with regards to providing credit to players within the agriculture sector,” the expert stated.
Meanwhile increases in the price of food are driving inflation.
NBS last week reported inflation increased for the seventh consecutive month to 20,5 percent in August from 19,6 percent the previous month.
Some 41 of the 43 food items surveyed recorded y/y price increases.
Food constitutes about 50,7 percent of the composite Consumer Price Index basket.
Tunde Abidoye, Equity Research Analyst at FBN Capital, said the rising food prices continued to reflect the structural flaws in the economy, such as widespread insecurity.
“Other well-known issues include, inadequate capacity for food storage and processing, low levels of mechanisation in the agricultural sector and post-harvest losses due to weak transportation infrastructure,” Abidoye noted.
– CAJ News