Ideally Nigeria should be close to self sufficiency with its food requirements. A few decades ago the country was the leading producer of a number of agric-related products such as palm oil, rubber, cocoa, sorghum, millet and the list goes on. Unfortunately, the oil boom in the 70s which should have been treated as an additional source of revenue led Nigeria to neglect its strong agricultural and light manufacturing bases in favour of an unhealthy dependence on crude oil.

Agriculture has suffered from mismanagement, inconsistent and poorly conceived government policies, and the lack of basic infrastructure. It accounts for about 23% of total GDP and last year it grew by 3.5% y/y, a slower pace when compared with the growth of 4.5% recorded in 2014. Lower crop output due to the insecurity in the north east was cited as the reason for slower growth by the National Bureau of Statistics (NBS).

A recent report by the NBS revealed that the informal economy amounted to N39.0trn in 2015, equivalent to 41.4% of GDP. Agriculture was the largest sector in the informal economy accounting for 92% of the total; this points towards substantial uncollected taxes. The sector employs about 70% of the country’s labour force but its record for formal job creation is poor.

If Nigeria got it right with agriculture, the possibility of standing tall with Brazil as a leading agric- producing country would be high as both countries share similarities in climate, natural resources and population size. However, they differ in terms of size of arable land as Brazil’s is larger than that of Nigeria. Brazil has progressively emerged as a major agricultural powerhouse and serves as a model for many developing countries. It is now the largest exporter of sugarcane, coffee, soybeans frozen chicken and beef.

A significant expansion of credit, the development of agricultural research institutes and the simplification of the tax system combined with a social policy for the underprivileged significantly transformed Brazil’s agric sector; this spurred investment and boosted domestic consumption. In 2014, the agribusiness sector (production, processing and distribution) accounted for 21% of Brazil’s GDP and contributed about 43% to the country’s total exports.

The recent decline in oil receipts has created acute fx scarcity and highlighted Nigeria’s heavy reliance on foreign sourced goods and services. This has added urgency to the FGN’s import substitution strategy which is concentrated on agricultural products. To encourage development in the agric sector as well as ease pressure on the country’s import bill, last year the CBN placed eight agric related products on its list of 41 import items no longer eligible for fx from the official window.

The new fx policy announced in June brings a more market-oriented rate for the naira compared with the previous CBN rate of N199/US$1; thus the previous blended rate which had a combination of the parallel market and the previous official rate will be no more and as such prices of imported products are likely to increase.

For restaurant chains as well as fast food companies, imported food products contribute significantly to their cost of doing business. Most of these businesses have had to revise their menu prices upwards. The inflation data for May show that prices in the Restaurant and Hotel sector rose by 9.9% y/y. It is possible that the price hike was linked to increased cost of imported inputs used in meal preparations. The challenges faced with importing food inputs should drive restauranteurs’ to source inputs locally which could boost growth in the agriculture sector.

If the FGN’s import substitution strategy is implemented effectively, manufacturing companies that utilise agric products as raw materials can source these products locally to minimise dependence on imported inputs. The current squeeze in consumers’ pockets has forced households to revise their spending priorities; lower prices for good quality products are now more attractive.

Apart from the fx sourcing issues there are structural problems the agric sector faces. Difficult land acquisition and titling process for large scale farming is one of them. The current land policy places some restriction on both urban and rural land ownership. Poor transport networks across the country also stifle growth within the sector; functional cargo rail lines are required to speed up transportation of farm products to end-users. About 30-50% of citrus fruits rot before getting to markets. In both Nigeria and Ghana, half of farmed tomato products get spoilt due to bad transport networks and logistics as well as poor storage facilities.

The next constraint, which is epileptic power supply is common across the various sectors of the economy and requires urgent attention from the FGN if agriculture is expected to move forward. Lastly, is access to credit; despite interventions by the CBN through its commercial agriculture credit scheme and the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), access to finance still remains a major roadblock. The FGN should consider setting up a functional Agriculture Development Bank which specialises in development financing by providing solutions to nurture investment and entrepreneurship across the entire agric-chain. This should assist with easing access to credit for agriculturists, it has worked well for Trinidad and Tobago.

In terms of opportunities, Nigeria’s agriculture sector has multiple windows. Given the country’s population size, demand is high for several products some of which are rice, fish and agro-processed products.

Nigeria remains the second largest importer of rice globally. Based on industry estimates, its annual consumption requirement is 5 million metric tonnes (mmt). This compares with estimated domestic supply of 3 mmt annually. Industry sources estimate annual average spending on rice importation at US$2bn. Currently, Nigeria has no fewer than 24 integrated mills to bolster the production process. The rice value chain is highly fragmented and lacks the backward integration which, for example, binds brewers and sorghum or textile companies and cotton. The large rice mills are yet to meet their full potential.

As for fisheries, although it is the fastest growing segment in the agriculture sector, total annual fish demand is estimated at 2.7mmt and just 30% of this demand is met domestically resulting in an annual spend of N125bn (US$625m) on fish imports. Nigeria’s aquaculture industry is largely untapped. Lack of the requisite technical skills, and the unavailability of good quality and moderately priced fish feed are among the obstacles inhibiting its expansion.

Another area to highlight is the agro-processing industry which is still at its infancy stage. For instance, fruit juice production and tomato paste are currently produced in the local market but at a low capacity. Based on industry sources, about 930,000 tons of citrus fruits are produced annually in Nigeria. Fruit juice production is viable as a wide range of fruits can be sourced domestically. As for tomato paste, there has been a slowdown in production due to the recent attack on tomato farms by the ‘Tuta absoluta’ crop pest. This has led to difficulty in securing fresh tomatoes for paste production. However, the process of eradicating the crop pest has begun.

The current administration is committed to growing the country’s agriculture sector and promoting import substitution. As part of its campaign promise, the FGN is partnering with the UN World Food Programme to implement its home-grown school feeding programme (one-meal-a-day). This will stimulate the agric sector as local farmers will be responsible for supplying the products used in preparing these meals. In addition to this, the CBN recently launched its Anchor Borrowers’ Programme (ABP) aimed at creating economic linkages between smallholder farmers and reputable large-scale processors to increase agricultural output. The programme is expected to complement the Growth Enhancement Support (GES) Scheme.

In the wake of Nigeria’s economic turmoil, diversifying the economy particularly in agriculture is a necessity. Economic and fiscal stability hinge upon a strong agricultural sector, an example can be seen in China where new policies for farmers helped to lift 500 million people out of poverty in just ten years. The macro challenges have intensified the pressure on businesses to make greater use of domestic raw materials. Potentially, the sector stands to benefit from the restrictions imposed by the CBN. However, the FGN has to create the appropriate enabling environment. It is now time to ‘walk the talk’.