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Rice, maize macroeconomics

Despite the seeming lack of cohesion on the part of government policies and implementation, the hype ‘to return to agriculture’ is encouraging a lot of…

Despite the seeming lack of cohesion on the part of government policies and implementation, the hype ‘to return to agriculture’ is encouraging a lot of private effort and collaboration in the agricultural sector of the economy. It has also increased the level of farming activities at the grassroots and local communities thereby increasing the demand for agricultural input and services and affecting many value chains.

The Anchor Borrower Programme

The federal government through its economic diversification agenda has created much hype about agriculture on the mantra that agriculture is Nigeria’s new economic strategic direction as the country looks towards reducing its dependence on the oil and gas industry.  But it appears there is lack of coherence in policy direction on driving agricultural activities and weak implementation of financing programmes like the Anchor Borrower Programme (ABP) and N200bn Commercial Agriculture Credit Scheme (CACS).

The Central Bank of Nigeria has a number of programmes designed to support the federal government’s drive to diversify the economy through agriculture. The ABP is the key programme launched by the government through the CBN in 2015 with the main objectives of creating economic linkage between smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilisation of processors[1].

The programme has disbursed billions of Naira to tens of thousands of farmers since inception.  However, the success of this programme as regards the repayment of the loans and thereby the return on investment on the side of the apex bank is unclear. What is clear though is that it has ushered a renewed interest in primary production and many people have at least accessed the programme and its funds.

Maize import ban and waivers

Based on the Federal Ministry of Agriculture and Rural Development’s data, annually Nigeria needs an estimated 15.5 million metric tons of maize while the country’s domestic maize production stands at an estimated 10.5 million metric tons, leaving a demand shortfall of five million. It was to the great shock of many when the federal government placed a total restriction on the exportation of maize and the importation of rice through land borders. Because of the shortfall of five million metric tons, a lot of maize still had to be imported.

In 2017, the governor of Katsina State and Senator Aliero, who is also a former governor of Kebbi State, accused the federal government of granting import duty waiver rights to Olam to allow it import large shipment of maize which flooded the market. The waiver was cancelled after concerns over its possible negative impact on the local maize farmers was raised by the Maize Association of Nigeria (MAAN). This scenario repeated itself in 2020 when the Nigeria Customs Service confirmed that Wacot Limited, Chi Farms Limited, Crown Flour Mills Limited and Premier Feeds Company Limited have been given an emergency approval by  the CBN to import 262,000 tons of maize into Nigeria.

Agriculture and Nigeria’s latest recessions

Shortage of foreign exchange has been a major issue in Nigeria largely due to slump in oil prices and the oil sector’s inefficiency which has slowed down oil production. With any significant improvement in oil prices, the Naira is expected to strengthen against the Dollar as more foreign exchange becomes available. But this may also have impact on local commodity prices and stabilize the prices of imported farm input.  After suffering a recession between 2016 and 2017, the Nigerian economy recovered with headline inflation falling from a high of over 18 per cent in October 2017 to about 12 per cent in April 2018.  Nigeria suffered another recession amidst the COVID-19 pandemic and only recovered in February 2021.

News agencies reported that “Nigeria’s economy unexpectedly came out of a recession in the fourth quarter as growth in agriculture and telecommunications offset a sharp drop in oil production.” This shows that improving prices also means that grains and other agricultural produce will become a little cheaper and thereby leading to greater effective demand.

The fertiliser situation

Significant improvement has been witnessed in terms of availability and price stability of fertiliser. In the past, fertiliser scarcity often resulted in high prices and was very common occurrence yearly. Stability in both supply and prices last year can be attributable to the federal government’s intervention through a collaborative effort with the Kingdom of Morocco.

As part of the federal government’s collaboration with Morocco, significant quantities of fertiliser was imported from Morocco to bridge the usual fertiliser demand gap in Nigeria. This feat was to be repeated in 2018 especially with as many as 11 fertiliser blending plants becoming active as a result of the Memorandum of Understanding (MoU) signed between the Nigerian and the Moroccan governments on the supply of phosphate. Something even more transformational than the Morocco deal for Nigerian fertiliser industry is the Dangote refinery is now live and has the capacity to produce 3.0 million metric tons of urea per annum, with its first commercial quantity products hitting the market last week. This and many more point to a very prosperous season for rice and maize farmers in Nigeria.