Before oil there was farming. In the 1960s, Nigeria was largely an agrarian economy, with agricultural output accounting for two-thirds of GDP. The agriculture sector was also the biggest foreign-exchange earner, exporting cocoa, cotton, ground nuts, palm oil and rubber, as well as being the largest employer. Forty years later, Nigeria is a net importer of food and the sector accounts for little more than one-third of GDP.

Under normal circumstances, agriculture’s declining share of a country’s GDP reflects the growing size and contribution of its manufacturing and services sectors. In Nigeria’s case, it reflects the mismanagement and neglect of the sector over four decades, and large areas of arable land now lie uncultivated.


Raising output

As part of its reform plan, the government has set a target of a minimum of 6% annual growth in agriculture. It also wants to reduce food imports, from 14.5% of total imports to 5% by 2007. To achieve this, it has utilised trade and tax policies to curb food imports and encourage domestic production, although the impact has been limited. For investors, it makes more sense to engage with the government through one of the presidential initiatives.

The initiative on cassava is directed at developing industrial uses of the crop, such as chips, flour and oil. Nigeria is already the largest producer of cassava worldwide but the crop is mostly cultivated by small-scale farmers who sell it through traditional market channels, unprocessed and for use in home cooking.

The goal of the initiative is to boost output, meet local demand and capture a share of export markets. Nigeria’s various research institutions have been given the task of developing more productive and resilient varieties of the crop, and finding new industrial uses. The Commerce Ministry is responsible for developing export markets, and last year secured an order for 500,000 tons of cassava chips to China.

The government is also looking for ways to raise project finance. In August, the state-owned development finance institution, the Bank of Industry, announced that it would lend N1.3bn ($10m) to Ekho Agro Farms to make glucose syrup from cassava.

The cassava initiative is aiming for annual output of 150 million tons, up from the current 36 million tons. To achieve this, substantial investment is needed for storage facilities and transportation infrastructure. Commerce minister Idrus Waziri, who chairs the initiative, believes that the crop and its processed derivatives could generate up to $12bn in export earnings for Nigeria, if the initiative is pursued wholeheartedly.

There are also presidential initiatives on rice, vegetable oil, sugar, livestock, tree crops and cereals. Large-scale commercialisation of agricultural production in Nigeria has barely begun and the development of downstream agro-processing industries is even more nascent. Associated industries are also undeveloped, including agricultural input supplies and machinery, transportation and down-stream agro industries such food processing.

Cash encouragement

To stimulate the sector, the government has introduced supportive measures that include tax incentives, tariff protection, trade finance facilities and export promotion assistance. The Export Development Fund, for example, has been set up to provide financial assistance to private sector companies to defray export promotion costs incurred. The Export Adjustment Fund Scheme serves as a supplementary export subsidy to compensate exporters for the high cost of local production arising mainly from infrastructure deficiencies and from other natural and negative factors beyond the exporter’s control.