Q3’22 GDP numbers shows that the agriculture sector grew by 1.34% y/y, slightly up from 1.2% y/y the previous quarter. Over the past eight quarters, the sector grew by an average of 2.2% y/y.
The low-single digit growth recorded in recent years does not do justice to the level of investments into the sector, particularly those by the CBN.
At its last meeting in November, the MPC disclosed that between January and October ’22, the CBN disbursed almost NGN1.8trn to agriculture related activities.
The CBN’s monthly report for October estimated that the sector received about 34.7% of the apex’s bank’s total credit interventions.
The underwhelming outcomes can be attributed to the persisting structural issues which affects supply chains. Of such is the insecurity in food-producing states, poor infrastructure, post-harvest losses due to inadequate storage facilities, amongst others.
The inability to ramp up output has left the country as a net-importer of food items. The NBS report on foreign trade in Q3 ‘22 shows that Nigeria remains a net-importer of agricultural commodities with a trade deficit of about -NGN429bn.
Although the government has maintained efforts at expanding domestic food production and substituting imports, data suggests that the country still has a long way to go in achieving self-sufficiency.
The demand and supply imbalance in agriculture reflects in the rate of food inflation which has been the major contributor to headline inflation. The dependency on imported food items creates an effective exchange rate pass-through to inflation and an avenue for imported inflation.