Contributing nearly 25% to GDP and employing 70% of the workforce, agriculture is both a key area of the economy and a way of life for Nigerians. Indeed, the agriculture sector was the country’s main export earner until oil and gas production became Nigeria’s economic mainstay. Since then, however, the country has become a net food importer. Key segments include livestock, forestry and fisheries. While recent years have seen major efforts to develop downstream food processing and agri-business industries, developing this segment requires greater investment.
Challenges
The sector faces a number of challenges across the value chain, from the land tenure system to the transport and logistics networks. Global headwinds, mostly related to the rising cost of fertilisers, continue to impact the prices of agricultural products. Climate change is exacerbating these challenges, with Nigeria experiencing widespread flooding in October 2022.
The sector has shown great resilience in the face of the Covid-19 pandemic, supported by new schemes introduced by the federal government to boost added value of products, such as the Special Agro-Industrial Processing Zones (SAPZ) launched in October 2022 (see analysis). Efforts are also being made to boost productivity by improving access to finance. Research and development programmes, along with education and training initiatives, are being rolled out to promote better farming techniques and improve the quality of seeds. Such steps can help to boost productivity, cut down on imports and attract investment.
Structure & Oversight
The Federal Ministry of Agriculture and Rural Development (FMARD), which was established in 1966, is the chief government body responsible for the sector. Other government entities, such as the Ministry of Industry, Trade and Investment (MITI), also play a key role in the downstream segment, regulating agri-businesses and food processing units.
On a sub-national level, FMARD is comprised of six regional and 37 state offices, research institutes, colleges and agriculture universities, supported by a range of other agencies and departments. Various scientific bodies provide support at the national level, including the National Cereal Research Institute, the National Biosafety Management Agency and the National Agricultural Seed Council. The sector also receives support from specialised institutions such as the Lake Chad Research Institute, which aims to address the impact of climate change and overuse in the lake basin.
FMARD convenes an annual gathering, the National Council on Agriculture and Rural Development (NCARD), of federal agencies, and state-level officials and other stakeholders to develop policies. In March 2022 FMARD also announced that it was establishing a Community of Practice to ensure the effective implementation of the policies and programmes approved by the NCARD.
Each state has its own agriculture ministry or department that implements local development policies. These state-level organisations may also function as enterprises. For example, the Lagos State Ministry of Agriculture serves nearly 600,000 farming families through its agricultural value chain.
While the vast majority of the country’s farmers are smallholders, there are also several large agri-businesses. These include Olam’s subsidiary Crown Flour Mills, aggregator Babban Gona, Stallion Group, Dangote Group, BUA Group, AgroMall, Greenhills Cassava Farmstead and Indorama.
Key Produce
The country’s staple crops include maize, cassava, yams, beans, sorghum, millet and rice. Nigeria is the world’s largest producer of cassava, with 60m tonnes produced in 2020. Ruminants such as sheep, goat and cattle are largely reared by farmers. The country had 20.7m goats, 47.7m sheep, 18.4m cattle and a chicken population of 166,125 as of 2020.
Fish is a key part of the Nigerian diet. On average 1m tonne of fish is produced per year, out of which 90% is consumed domestically. The country is the second-largest producer of farmed fish in Africa, and around 80% of the fish comes from small-scale ponds in urban and semi-urban areas. Around 94m ha are used for fishery production and the segment employs 1.5m people.
Nigeria was Africa’s largest producer of wood in 2004. However, production has declined as the country lost 11% of its wood cover between 2001 and 2021 due to deforestation, and it continues to lose cover at a rate of approximately 3.5% per year. In 2021 Nigeria launched the Reducing Emissions from Deforestation and Forest Degradation strategy to reduce deforestation in collaboration with World Bank, the UN and the UN Food and Agricultural Organisation (FAO). The strategy aims to address climate change by putting an end to the destruction of forests.
The Nigerian government also made a pledge at COP26 UN Conference on Climate Change held in Glasgow in November 2021 to end deforestation by 2030 and is developing policies to meet this target.
Performance
The government implemented various plans to boost production and expand the sector as global headwinds such as the pandemic and the effect of Russia’s invasion of Ukraine on grain prices, continued to affect the performance of the sector. After the first case of Covid-19 was detected in the country in 2020 the local currency depreciated, leading to an increase in the price of agricultural imports and inputs. The drop in oil prices and border closures also affected the government’s ability to fund programmes such as the Anchor Borrowers Programme (ABP), which intends to expedite agricultural development through the provision of low-cost credit Annual wheat production fell from 60,000 tonnes in 2019 to 55,000 tonnes in 2020 and 2021. Maize output – Nigeria’s prominent coarse grain – declined from 11m tonnes per year in 2019 to 10m tonnes in 2020, while the area under maize cultivation fell from 6.5m ha to 5.5m ha over the same period. Rough production of rice fell from 8m tonnes to 7.8m tonnes, even while the area harvested rose from 3.5m to 3.6m ha. The sector’s recovery began after 2021 as crop production increased, with 110,000 tonnes of wheat harvested from 100,000 ha of land and 12.5m tonnes of maize harvested from 6.3m ha at the end of the trade year in September 2022. Rough rice production reached 5.4m tonnes from a harvested area of 3.7m ha during that year. Much of this decline has been attributed to security issues.
The most recent figures from the National Bureau of Statistics for the third quarter of 2022 show that crops were primarily responsible for agricultural expansion, accounting for nearly 92% of overall growth that quarter. The sector contributed 27.6% to GDP, up from 26.8% in 2021 and 21.9% in the second quarter of 2022. Another factor affecting performance was Russia’s invasion of Ukraine, which caused supply chain disruptions and a rise in global food prices. It cut access to important sources of grain for Nigeria, driving up the cost of agricultural imports. The increase in petroleum prices also affected transport costs, creating supply chain disruptions and contributing to food inflation.
Plans & Policies
The government has long pledged to diversify away from oil and gas. Federal authorities aim to boost the contribution of the sector to GDP and enhance production. The authorities aim to facilitate growth in the domestic sector through a system of import controls and tariffs designed to protect local farmers from international competition. Import bans on poultry meat, beef, pork and other red meat have been implemented in line with restrictions on dairy imports. Moreover, wheat and maize imports carry a 5% tariff, and there is an additional 15% levy for the Wheat Development Programme that supports wheat farming in several states in the north and north-west. Demand for the staple food is has been as locals increasingly adopt bread and pasta into their diets. It is against this backdrop that the government aims to reduce wheat imports by 50% by scaling up production.
In 2022 FMARD introduced a 10-year plan, ending in 2032, to boost domestic wheat production using heat-tolerant wheat strains, with the eventual goal of achieving self-sufficiency. These efforts come at a time when the Russia-Ukraine war is causing disruptions in food supply and driving prices higher.
Another important crop is rice, and a 10% duty and a 60% levy is imposed on rice imports. Foreign exchange controls have also been used to restrict the ability of traders to import agricultural commodities, obliging them to use parallel markets at weaker exchange rates, thereby driving up costs.
As part of its initiatives for plantation crops, the National Sugar Development Council (NSDC), which falls under the authority of MITI, introduced a 10-year Nigeria Sugar Master Plan that is due to end in 2023. The second phase of the plan was approved by the authorities in October 2022 and will run through 2033. Meanwhile, in 2019 the federal government rolled out its National Gender Policy in Agriculture, which aims to empower women in the sector to enhance productivity.
Development Schemes
Several policies have been implemented to support the sector’s development, facilitate self sufficiency and reduce imports. With the Agricultural Promotion Policy coming to an end in 2020, the authorities launched the National Agricultural Technology and Innovation Policy (NATIP) in August 2022 in collaboration with USAID, the International Food Policy Research Institute and Michigan State University. The policy will run through to 2027 and aims to modernise the sector in line with changes in global food systems and supply chains. The six-year plan has 10 thematic areas including rapid mechanisation, the establishment of an agricultural development fund, the strengthening of the crop value-chain, and the development of fisheries and aquaculture. An agricultural land investment partnership, and improved knowledge creation and transfer processes are also targeted alongside development of the livestock segment and the revitalisation of extension service delivery, among others.
The NATIP thus targets some of the most pressing challenges of the sector. In recent years agricultural produce has not been able to completely meet domestic demand, leading to a rise imports. The figure rose from N656.4bn ($1.6bn) in 2016 to N2trn ($4.8bn) in 2021 while export increased from N60.7bn ($144.6) to N504.9bn ($1.2bn) in the same period.
In a further effort to enhance domestic production, Nigeria has become one of the world’s leading adopters of genetically modified (GM) crops, with Bt cotton and Bt cowpea approved in 2018 and 2019 and fully commercialised by 2020. Maize and soybean are also now on the list of approved GM crops.
Land
A little over one-third of Nigeria’s total land area was arable in 2019, at 34m ha, along with 6.5m ha of land under permanent crops and 28.6m ha of permanent meadow or pasture. Some 23.9% of the land was forested in 2019, according to World Bank, an amount in steep decline. While urban land area was unknown, it is likely to be expanding rapidly. The UN estimates that by 2035 Lagos, Nigeria’s maritime and commercial centre and largest city, will be home to 24.9m people, up from around 15.3m in 2022. Indeed, rapid population growth and urbanisation have limited the sector’s capacity to meet domestic demand.
The land tenure system is another factor affecting productivity and profitability. Around 80% of Nigeria’s farmers are smallholders, responsible for some 90% of the country’s total agricultural output. Low profit margins lead to low income levels for such farmers, and production is only sufficient to fulfil household and domestic consumption.
These factors are in part responsible for the low levels of investment in the mechanisation and automation of agriculture processes. For example, Nigeria’s tractor density is 0.27 horsepower per ha, well below the 1.5 horsepower per ha level recommended by the FAO.
Resource Utilisation
Access to financing remains a challenge for the majority of farmers due to the low level of banking penetration. In 2021, 45.3% of adults had a bank account, up from 39.7% in 2017, although this proportion is lower in rural areas.
“Because of underinvestment, much of the land remains underutilised. Indeed, according to estimates from the FMARD as much as 56% of existing arable land may be underutilised,” Mohammed Abubakar, the minister of agricultural and rural development, told a meeting of the NCARD in September 2022.
The underdeveloped rural transport and IT infrastructure posed another significant challenge, with the former also impacted by security issues in certain parts of the country. A lack of comprehensive road and rail links, along with limited cold chain capacity – often due to under-resourced rural power networks – make moving agricultural goods challenging and costly.
Nigeria has suffered from the impact of climate change in recent years. In October 2022 the country saw some of the worst floods in a decade, particularly in Anambra, Delta, Cross River and Bayelsa states. The UN estimated that around 100,000 ha of cassava, rice and plantain crops were affected by the crisis. The deterioration and desertification of some northern grazing lands has also forced some livestock owners to move further south, often bringing them into conflict with existing residents of these areas.
Opportunities & Strengths
Nigeria is among Africa’s largest countries by area and it has a wide availability of different varieties of land. These stretch through several climatic regions, from arid sub-Saharan areas in the north to tropical climates in the south, increasing the range of domestic agricultural practices. The country has an extensive coastline on the Atlantic Ocean, and is home to several large rivers. The largest of these is the Niger, which exits into the Atlantic through a delta entirely within the country’s boundaries.
Average annual rainfall ranges between 300 mm in the north to 4000 mm in parts of the south. A large number of lakes and lagoons are present in the country, contributing 267bn cu metres of fresh surface water and 58bn cu metres of underground fresh water. This provides 3.1m ha of irrigable area, according to the FMARD, although less than 7% of this is currently utilised. A variety of altitudes also enables farmers to grow different crops such as tea plantation on the Mambilla Plateau – home to Africa’s largest tea farm.
Nigeria is also the largest consumer market in Africa, with a population of 218.5m as of July 2022, comprising 15% of Africa’s and 60% of West Africa’s population. In 2019 food items made up 56.7% of household expenditure nationwide, reaching around N22.8trn ($54.3bn).
Intra-African Trade
Nigeria’s agriculture sector has the potential to take a leading role in growing intra-African trade. A long-term trend across the continent has been the establishment of greater cooperation and more open markets through organisations in which Nigeria has been pivotal. This trend is now being led by the African Continental Free Trade Agreement (AfCFTA), which aims to bring together the 55 members states of the African Union with eight regional economic communities, such as ECOWAS. The AfCFTA can potentially open up a market that has a population of 1.3bn people and a total GDP of $3trn.
The AfCFTA aims to regularise much of the existing cross-border trade in West Africa, with its long, often porous frontiers. This is no small challenge, with governments sometimes reluctant to open their domestic markets to foreign competition. In 2019, for example, Nigeria closed its borders to trade with Benin, Chad, Niger and Cameroon for several months in an effort to stop smuggling of agricultural goods.
Financing
The federal government has taken measures to improve access to finance for rural communities. In 2015 the Central Bank of Nigeria launched the ABP for farmers cultivating cereal, cotton, roots and tubers, sugar cane, tree crops, legumes, tomatoes and livestock. A number of microfinance, development finance and deposit banks have offered loans to farmers in these segments, who have then sold their crops to various anchors. This programme has been largely successful. Indeed, by the beginning of 2022 there were 4.8m smallholders participating in the programme.
In October 2022 the federal government approved new incentives for investors in the food processing and production segments. These came in addition to the launch of SAPZs, which are being rolled out in seven states during the first phase, before being rolled out in 19 more in phase two. The incentives include tax and duty-free holidays for five years, tax-free agricultural loans and zero-tariffs on the import of agri-chemicals.
Outlook
The October 2022 flooding is likely to have a further short-term impact on production. Security concerns will also remain in some areas, while the impact of Russia’s invasion of Ukraine on oil, gas and food supplies will continue to be felt over the year ahead.
However, Nigeria’s farmers have a long history of successfully overcoming challenges. New initiatives and programmes such as the agricultural zones are being launched to improve output and quality. At the same time, a wider recognition of structural issues such as land tenure security, the impact of climate change and environmental practices, along with the importance of addressing gender issues in developing sustainable practices, are making headway. The sector has the potential to not only produce for the domestic population but to have surplus production for exports.
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