1 Agricultural Export Potential in Nigeria 1 Adebiyi Daramola, Simeon Ehui, Emmanuel Ukeje and John McIntire 1.1 Introduction Oil dominates the Nigerian economy, rising from 29 per cent of gross domestic product (GDP) in 1980 to 52 per cent in 2005. Oil and gas now contribute about 99 per cent of exports and nearly 85 per cent of government revenues, although their contribution to employment is estimated to be only 4 per cent. Agriculture, the second largest sector, fell from 48 per cent of GDP in 1970 to 20.6 per cent in 1980 and was only 23.3 per cent of GDP in 2005. Agricultural exports are negligi- ble and represent about 0.2 per cent of total exports. Nevertheless, an estimated 60 per cent of Nigerians are employed in the rural sector. Manufacturing and services represented 4.6 per cent and 19.9 per cent of GDP, respectively, in 2005 (Table 1). Most economic activity is therefore in primary production with limited value added through processing and agribusiness. Since 1999, Nigerian GDP has grown at an average annual rate of 3.5 per cent. The long-term growth rate has been about 2.8–3.3 per cent between 1980 and 1998. Growth has barely exceeded population growth, which has been between 2.8 per cent and 3 per cent. This trend is an indicator of the worsening poverty in Nigeria. Inflation has remained moderate thanks largely to a sustained increase in food production and the tight fiscal and monetary policy regimes of the federal government. The effects of increases in food production are lower cost of living and, consequently, lower consumer prices for manufactured products that depend on agricultural raw materials. Efforts at stimulating real sector activities have been dampened by high interest rates, poor infrastructure and import competition. Agriculture contributes to employment, food production, foreign exchange earnings and industrial inputs. In 2001, agriculture was about 41 per cent of GDP. Some 60 per cent of the workforce is employed in agriculture, predominantly smallholders (CBN, 2002). Nigeria has a total land area of 98.3 million hectares, of which only 71.2 million hectares are cultivable. Only 34.2 million hectares (about 48 per cent of the cultivable area) are actually being cultivated, and less than 1 per cent of the arable land is irrigated (FMARD, 2001). The modest growth of between 5.5 per cent and 7.5 per cent in the agricultural sector over the period 1999–2005 has been traced to the favourable weather conditions, while services and commerce expanded, following improvements in the purchasing power of
Transcript
1
AgriculturalExportPotentialinNigeria1
Adebiyi Daramola, Simeon Ehui, Emmanuel Ukeje and John McIntire
1.1 Introduction
OildominatestheNigerianeconomy,risingfrom29percentofgrossdomesticproduct(GDP)in1980to52percentin2005.Oilandgasnowcontributeabout99percentofexportsandnearly85percentofgovernmentrevenues,althoughtheircontributiontoemploymentisestimatedtobeonly4percent.Agriculture,thesecondlargestsector,fellfrom48percentofGDPin1970to20.6percentin1980andwasonly23.3percentofGDPin2005.Agriculturalexportsarenegligi-bleandrepresentabout0.2percentoftotalexports.Nevertheless,anestimated60per cent of Nigerians are employed in the rural sector. Manufacturing andservicesrepresented4.6percentand19.9percentofGDP,respectively,in2005(Table1).Mosteconomicactivityisthereforeinprimaryproductionwithlimitedvalueaddedthroughprocessingandagribusiness.
Agriculture contributes to employment, food production, foreign exchangeearningsandindustrialinputs.In2001,agriculturewasabout41percentofGDP.Some 60per cent of the workforce is employed in agriculture, predominantlysmallholders(CBN,2002).Nigeriahasatotallandareaof98.3millionhectares,of which only 71.2million hectares are cultivable. Only 34.2million hectares(about48percentofthecultivablearea)areactuallybeingcultivated,andlessthan1percentofthearablelandisirrigated(FMARD,2001).Themodestgrowthofbetween5.5percentand7.5percentintheagriculturalsectorovertheperiod1999–2005hasbeentracedtothefavourableweatherconditions,whileservicesandcommerceexpanded, following improvements inthepurchasingpowerof
2 Daramolaetal.
consumers.Agriculturaloutputhasbeen increasingataslowrateover the lastseveralyears,exceptin2002and2003,whenthesectorgrewatanaveragerateofabout7.5percentperannum.
Empirical analyses show lowandnegative long-run incomeelasticityofde-mandbuthighlong-runpriceelasticityofdemand,suchthatpricesriseandfallinresponsetotherelativelyhighglobalcommoditymarketprices.Thishasim-plicationsforinternationaltradepoliciesintheNigerianeconomy.ThepricesofNigeria’smajoragriculturalexportcommoditiesweregenerallydepressedintheinternationalcommoditiesmarket,withtheexceptionofcocoainthelasttradingseason(2005/2006).Thedeclineincommoditypriceshasbeenattributedtotheslackdemandandexcesssupplysituation.Usingdomesticprices,thedeclineinpricesrangedfrom4percentforcottontoabout40percentforcopra.Generally,domestic producer prices of Nigeria’s agricultural commodities have exhibitedmixedtrendsintherecentpast(AdubiandOkunmadewa,1999;Okoh,2004).
Themajorcauseofthedeclineinagriculturalexportswastheoilpriceshocksof1973–74and1979,whichresulted in large inflowsof foreignexchangeandneglectoftheagriculturalsectors(‘Dutchdisease’2).Theconsequenceofthisphe-nomenonwasthat,owingtothereducedcompetitivenessofagriculture,Nigeriabegan to import some of those agricultural products it formerly exported andotherfoodcropsthatithadbeenself-sufficientin.Forexample,between1970and1982,Nigerialostover96.6percentofherexports innominalterms.Do-mesticfoodproductionalsodeclinedsubstantially,causingthefoodimportbilltoattainahighofabout$4billionin1982.Theastronomicalincreaseinimportswasfinancedbyoilrevenues,whichensuredpositivecurrentaccountbalancesin1979and1980.
By1986,thesituationhadreachedcrisisstage,dramatizingtheineffectivenessofthepolicyofindustrializationthroughimportsubstitution.Thisstrategy,con-ferringprotectiononimport-competingmanufacturingbyimposinghighdutieson finished imports and low duties on raw materials and intermediate goods,taxedtheexportablegoods(agricultural)sectoroftheeconomysothat,bythetimetheoilmarketcrashed,manymanufacturingconcernscouldnolongeroper-atebecauseoflackofforeignexchangetoimportrawmaterials.
As presented in Table2, the major agricultural exports produced in Nigeriaconsistofcocoabeans, rubber,fish/shrimpandcotton.Whileagriculturalpro-duceaccountedfor33and42percentoftotalincomefromnon-oilexportsin2004and2005,respectively,processedagriculturalproductsaccountedfor49and41percent.Consequently,theagriculturalsectorcanbesaidtohavecontributed81.9and82.3percentintheseyears.Incomefromagriculturalproductsin2005grewby2.8percentoverthelevelof37,532.6millionnairato38,567.4millionnaira.Earningsfromcocoabeans,fish/shrimpand‘others’increasedby47.7,3.1
Tabl
e 2
Tren
dof
agr
icu
ltu
rale
xpor
tp
erfo
rman
cein
Nig
eria
,197
0–20
05
Yea
r
Vo
lum
eo
fag
ricu
ltu
ral
exp
ort
s(’
000
ton
s)
Val
ue
of
agri
cult
ura
lex
po
rts
(mil
lio
nn
aira
)
Ind
exo
fag
ricu
ltu
ral
pro
du
ctio
n
(198
5=
100)
Agr
icu
ltu
ral
shar
ein
to
tal
exp
ort
ea
rnin
gs(
%)
Shar
eo
fag
ricu
ltu
rei
n
no
n-o
ile
xp
ort
(%
)
Shar
eo
fag
ricu
ltu
rei
n
GD
P(
%)
No
min
al
exch
ange
ra
te
1970
1,08
7.0
265.
212
6.0
29.7
70.9
41.3
0.7
1971
779.
324
2.8
114.
218
.166
.735
.90.
7
1972
870.
017
2.0
94.0
12.0
68.6
31.5
0.7
1973
1,09
4.7
250.
110
2.2
10.5
68.8
27.6
0.7
1974
789.
627
6.0
118.
74.
564
.227
.50.
6
1975
527.
023
0.6
104.
34.
565
.925
.50.
6
1976
566.
627
4.1
97.6
4.3
64.4
22.3
0.6
1977
407.
137
5.7
96.7
4.7
71.8
22.4
0.6
1978
287.
641
2.8
93.5
6.2
65.8
21.9
0.6
1979
306.
246
8.0
92.4
4.6
69.8
19.2
0.6
1980
240.
734
0.1
192.
52.
461
.323
.40.
5
1981
127.
417
8.4
95.2
1.6
52.0
34.8
0.6
1982
182.
919
8.6
98.3
2.4
97.7
35.7
50.
7
1983
222.
243
1.2
93.9
5.7
72.6
37.6
0.7
1984
157.
720
8.8
100.
02.
384
.449
.40.
8
1985
166.
125
9.8
104.
62.
252
.340
.30.
9
1986
242.
840
7.4
108.
34.
673
.842
.82.
0
1987
332.
51,
588.
511
6.1
5.2
73.8
41.8
4.0
1988
497.
41,
780.
413
8.5
5.7
64.6
41.5
4.5
1989
354.
12,
131.
115
3.0
3.7
72.1
40.5
7.39
1990
318.
22,
429.
316
7.5
2.2
74.5
39.6
8.04
1991
296.
13,
425.
019
1.7
2.8
73.2
37.8
9.91
1992
366.
53,
054.
920
6.4
1.5
72.3
38.4
17.3
1993
422.
93,
437.
321
1.4
1.6
68.9
37.8
22.0
1994
263.
23,
818.
820
9.7
1.8
71.4
38.1
21.9
1995
304.
115
,512
.021
6.8
1.6
67.2
38.6
21.9
1996
174.
817
,202
.022
4.8
81.3
73.7
39.0
21.9
1997
691.
419
,826
.123
4.1
1.6
67.0
39.4
21.9
1998
295.
116
,338
.924
2.4
2.2
48.0
40.2
21.9
1999
397.
312
,204
.924
9.1
1.0
62.6
40.8
92.7
2000
407.
29,
322.
225
8.2
0.5
37.5
40.4
102.
1
2001
417.
07,
961.
414
8.9
0.4
28.4
40.3
111.
9
2002
426.
926
,955
.815
4.9
1.4
28.4
40.8
121.
0
2003
436.
720
,597
.416
5.4
0.7
21.7
40.3
129.
4
2004
446.
630
,777
.217
5.5
1.0
27.1
39.8
133.
5
2005
456.
438
,588
.118
6.9
1.2
48.1
41.2
131.
5
Sour
ce:A
nn
ual
Rep
ort
(var
iou
sis
sues
),C
entr
alB
ank
ofN
iger
ia.
Tabl
e 2
Tren
dof
agr
icu
ltu
rale
xpor
tp
erfo
rman
cein
Nig
eria
,197
0–20
05
Yea
r
Vo
lum
eo
fag
ricu
ltu
ral
exp
ort
s(’
000
ton
s)
Val
ue
of
agri
cult
ura
lex
po
rts
(mil
lio
nn
aira
)
Ind
exo
fag
ricu
ltu
ral
pro
du
ctio
n
(198
5=
100)
Agr
icu
ltu
ral
shar
ein
to
tal
exp
ort
ea
rnin
gs(
%)
Shar
eo
fag
ricu
ltu
rei
n
no
n-o
ile
xp
ort
(%
)
Shar
eo
fag
ricu
ltu
rei
n
GD
P(
%)
No
min
al
exch
ange
ra
te
1970
1,08
7.0
265.
212
6.0
29.7
70.9
41.3
0.7
1971
779.
324
2.8
114.
218
.166
.735
.90.
7
1972
870.
017
2.0
94.0
12.0
68.6
31.5
0.7
1973
1,09
4.7
250.
110
2.2
10.5
68.8
27.6
0.7
1974
789.
627
6.0
118.
74.
564
.227
.50.
6
1975
527.
023
0.6
104.
34.
565
.925
.50.
6
1976
566.
627
4.1
97.6
4.3
64.4
22.3
0.6
1977
407.
137
5.7
96.7
4.7
71.8
22.4
0.6
1978
287.
641
2.8
93.5
6.2
65.8
21.9
0.6
1979
306.
246
8.0
92.4
4.6
69.8
19.2
0.6
1980
240.
734
0.1
192.
52.
461
.323
.40.
5
1981
127.
417
8.4
95.2
1.6
52.0
34.8
0.6
1982
182.
919
8.6
98.3
2.4
97.7
35.7
50.
7
1983
222.
243
1.2
93.9
5.7
72.6
37.6
0.7
1984
157.
720
8.8
100.
02.
384
.449
.40.
8
1985
166.
125
9.8
104.
62.
252
.340
.30.
9
1986
242.
840
7.4
108.
34.
673
.842
.82.
0
1987
332.
51,
588.
511
6.1
5.2
73.8
41.8
4.0
1988
497.
41,
780.
413
8.5
5.7
64.6
41.5
4.5
1989
354.
12,
131.
115
3.0
3.7
72.1
40.5
7.39
1990
318.
22,
429.
316
7.5
2.2
74.5
39.6
8.04
1991
296.
13,
425.
019
1.7
2.8
73.2
37.8
9.91
1992
366.
53,
054.
920
6.4
1.5
72.3
38.4
17.3
1993
422.
93,
437.
321
1.4
1.6
68.9
37.8
22.0
1994
263.
23,
818.
820
9.7
1.8
71.4
38.1
21.9
1995
304.
115
,512
.021
6.8
1.6
67.2
38.6
21.9
1996
174.
817
,202
.022
4.8
81.3
73.7
39.0
21.9
1997
691.
419
,826
.123
4.1
1.6
67.0
39.4
21.9
1998
295.
116
,338
.924
2.4
2.2
48.0
40.2
21.9
1999
397.
312
,204
.924
9.1
1.0
62.6
40.8
92.7
2000
407.
29,
322.
225
8.2
0.5
37.5
40.4
102.
1
2001
417.
07,
961.
414
8.9
0.4
28.4
40.3
111.
9
2002
426.
926
,955
.815
4.9
1.4
28.4
40.8
121.
0
2003
436.
720
,597
.416
5.4
0.7
21.7
40.3
129.
4
2004
446.
630
,777
.217
5.5
1.0
27.1
39.8
133.
5
2005
456.
438
,588
.118
6.9
1.2
48.1
41.2
131.
5
Sour
ce:A
nn
ual
Rep
ort
(var
iou
sis
sues
),C
entr
alB
ank
ofN
iger
ia.
� Daramolaetal.
and17.1percent,respectively,whileearningsfromcottonandrubberdecreasedby35.7and13.5percentrespectively.Incomefromprocessedproductsdecreasedby 32.8per cent from 55,609million naira in 2004 to 37,367million naira in2005, while income from processed skins, cocoa products and furniture/proc-essedwooddecreasedby54.8,34.9and16.2percent,respectively,andearningsfromtexturedyarnand‘others’increasedby99and395percentrespectively(seeTables3and4fordomesticandinternationalprices).
1.2.1 Agriculturalsectorvisionandexportgrowth
A vision for agriculture is expressed in the National Economic, EmpowermentandDevelopmentStrategy(NEEDS)document,whichwasadoptedin2004.ThestrategicobjectiveofNEEDSistomovetheeconomyawayfromoilandtofosterprivatesectordevelopmentwithcommunityparticipation.
NEEDSrecognizestheimportanceofagricultureintheNigerianeconomy,des-pitetheprojecteddominantroleofoilasthechiefexport.PovertyreductioninNigeriaiscriticallydependentonagriculture,giventheshareofthelabourforceproducingruralgoods,prospects for foodsecurityandthesupplyof industrialrawmaterials.Accordingly, thegovernment is committed to increasing invest-mentinfoodandagriculturalproductionwith3percentofthenationalbudgetgoingtoagricultureandagrowthtargetof6percentforthesector.Torestoreag-riculturetoitsformerstatusasaleadingsectorintheeconomy,NEEDSenvisagesanincreaseinagriculturalexportsto$3billionby2007andreductioninfoodimportsfrom14.5percentoftotalimportsto5percentby2007.
1.3 Constraintstoagriculturalexportgrowth
Thepurposeof thischapter is toaddress thechallengesofagriculturalexportsinNigeriawithin the contextofnational economicgrowthbydiagnosing theconstraintspreventingthemfromachievingtheirpotentialand,onthebasisofevidence,offerpolicyoptionsforgreaterefficiencyandcompetitiveness.
1.3.1 Policies
Nigeria’s agricultural sector became a victim of policy discrimination after thelarge oil discoveries. In the early 1970s, labour and capital left agriculture formanufacturing,mining,constructionandservices.Thischronic‘Dutchdisease’,arisingfromovervaluationoftheNigeriancurrency,hasremainedwithNigeriauntilthepresentdespiteseveralstructuraladjustmentprogrammes.Theexplana-tionforthisdevelopmentwillbepresentedinthenextsection.
Two other policy constraints are noteworthy: exchange rate policy and inputpricepolicy.Fertilizerisanexampleofboth.Aprominentelementinagriculturalpolicysincethe1980sispublicfertilizerprocurementanddistribution.Recogniz-ingfertilizerasakeyfarminput,thegovernmenthascontinuedtopursueapolicytoensureitsusebyfarmers.Itssupplyhasbeenincreasedvirtuallyonanannualbasis.Forexample,between1989and1990,itincreasedby33percent,in1991by14percentandin1993by15percent.Theimportantissuehereisthatsup-plyhasconsistently,andincreasingly,laggedbehinddemand,givingrisetopriceincreasesandfraudindistribution.Toincreaseaccessbyfarmers,thenumberofdepotswasincreased,andthefederalgovernmentborethecostoftransportationfromdomesticplantsandseaportstothedepots.
Afertilizerpricesubsidyhasalsobeenprominent.However,followingtheSAP,subsidiesweresteadilyreduced.Thisthereforebecameacaseofconflictofpoli-cies–publicprocurementpolicy sought toencourage fertilizeruseby farmers,whileinputpricepolicyraisedthecosttofarmers.Anaturaloutcomeofthishasbeenthelowusageoffertilizers.Yearlynationwidesurveysofagricultureshowthatincreasesinthepriceofinputsmadeitdifficultforfarmerstoprocurethemin the required quantities. This has been attributed to the depreciation of thenaira, the increased costofpublicutilities and reduction in subsidieson ferti-lizer,fuel,agro-chemicalsandseeds.Forexample,a50kgbagoffertilizersoldin1999for1800naira inmostpartsof thecountry,asagainst therecommended800nairasubsidizedprice.Thus,nairaexchangeratedevaluationandcontinueddepreciationwhich,ontheonehand,boostedexportandproducerprices,ontheother,combinedwithsubsidypolicytoraisethecostof inputprices,andthuslimitedtheirusebysmallholderfarmerswhoconstitutethebulkofagriculturalproducers.
Tabl
e �
Dom
esti
cp
rodu
cer
pri
ces
ofa
gric
ult
ura
lexp
ort
crop
s(n
aira
per
ton
)
Yea
rG
rou
nd
nu
tB
enn
isee
dSo
ybea
ns
Co
tto
nse
edP
alm
ker
nel
Pal
mo
ilC
oco
aR
ub
ber
1970
6381
3710
857
8129
5
1971
6781
3710
857
8929
7
1972
7581
3712
361
7629
7
1973
8010
547
132
6184
354
1974
145
169
6015
614
220
448
7
1975
250
264
9930
815
026
566
0
1976
350
264
9930
815
026
566
057
5
1977
275
290
130
330
150
295
1,03
057
5
1978
290
300
135
330
150
355
1,03
057
5
1979
350
300
135
330
180
450
1,20
069
2
1980
420
315
150
400
200
495
1,30
079
5
1981
450
315
155
465
200
495
1,30
01,
000
1982
450
315
175
510
230
495
1,30
01,
200
1983
450
360
230
560
230
495
1,40
01,
200
1984
650
360
300
700
400
600
1,50
01,
300
1985
750
360
500
800
400
600
1,60
01,
300
1986
1,00
036
055
01,
000
400
1,00
03,
500
1,20
0
1987
2,07
52,
295
1,50
04,
000
850
1,20
07,
500
1,00
0
1988
2,25
02,
000
2,00
04,
500
1,00
01,
500
11,0
001,
500
1989
4,77
55,
120
4,03
02,
433
1,80
01,
310
10,1
002,
000
1990
4,32
04,
410
4,92
02,
600
2,00
01,
160
8,50
01,
395
1991
6,28
05,
979
3,96
04,
163
2,52
51,
258
1,01
53,
300
1992
6,84
39,
792
7,22
53,
778
5,69
212
,472
12,7
4512
,520
1993
12,9
5813
,388
11,6
883,
372
10,5
6720
,836
25,2
7824
,091
1994
13,5
0026
,307
12,7
5645
,000
14,3
7498
,630
61,1
8034
,400
1995
20,0
6451
,550
18,8
2740
,972
18,2
3966
,190
82,6
7453
,707
1996
24,1
2541
,028
30,7
7837
,757
22,1
8555
,853
80,2
2251
,917
1997
17,7
9738
,392
28,1
9235
,833
16,5
5448
,477
89,6
8756
,722
1998
21,5
0937
,611
32,8
5032
,953
21,0
0059
,280
79,6
0061
,833
1999
28,0
9746
,532
39,8
1340
,208
19,1
2951
,535
85,7
6657
,892
2000
44,1
1051
,134
42,6
9035
,000
20,0
0064
,587
90,0
0059
,400
2001
44,8
4363
,349
47,9
0833
,204
23,3
7978
,458
100,
944
69,8
00
2002
45,6
36.7
66,5
16.5
49,3
7033
,868
23,5
0088
,300
130,
670
95,6
67
2003
46,5
03.8
75,1
14.5
53,0
72.9
32,0
52.2
24,3
22.5
99,9
55.6
150,
943.
311
3,89
8.6
2004
47,4
80.4
78,5
69.7
56,0
4531
,250
.924
,736
11,0
151.
116
5,73
5.8
116,
290.
5
Sour
ce:S
tati
stic
alB
ull
etin
(va
riou
sis
sues
),C
entr
alB
ank
ofN
iger
ia.
Tabl
e �
Dom
esti
cp
rodu
cer
pri
ces
ofa
gric
ult
ura
lexp
ort
crop
s(n
aira
per
ton
)
Yea
rG
rou
nd
nu
tB
enn
isee
dSo
ybea
ns
Co
tto
nse
edP
alm
ker
nel
Pal
mo
ilC
oco
aR
ub
ber
1970
6381
3710
857
8129
5
1971
6781
3710
857
8929
7
1972
7581
3712
361
7629
7
1973
8010
547
132
6184
354
1974
145
169
6015
614
220
448
7
1975
250
264
9930
815
026
566
0
1976
350
264
9930
815
026
566
057
5
1977
275
290
130
330
150
295
1,03
057
5
1978
290
300
135
330
150
355
1,03
057
5
1979
350
300
135
330
180
450
1,20
069
2
1980
420
315
150
400
200
495
1,30
079
5
1981
450
315
155
465
200
495
1,30
01,
000
1982
450
315
175
510
230
495
1,30
01,
200
1983
450
360
230
560
230
495
1,40
01,
200
1984
650
360
300
700
400
600
1,50
01,
300
1985
750
360
500
800
400
600
1,60
01,
300
1986
1,00
036
055
01,
000
400
1,00
03,
500
1,20
0
1987
2,07
52,
295
1,50
04,
000
850
1,20
07,
500
1,00
0
1988
2,25
02,
000
2,00
04,
500
1,00
01,
500
11,0
001,
500
1989
4,77
55,
120
4,03
02,
433
1,80
01,
310
10,1
002,
000
1990
4,32
04,
410
4,92
02,
600
2,00
01,
160
8,50
01,
395
1991
6,28
05,
979
3,96
04,
163
2,52
51,
258
1,01
53,
300
1992
6,84
39,
792
7,22
53,
778
5,69
212
,472
12,7
4512
,520
1993
12,9
5813
,388
11,6
883,
372
10,5
6720
,836
25,2
7824
,091
1994
13,5
0026
,307
12,7
5645
,000
14,3
7498
,630
61,1
8034
,400
1995
20,0
6451
,550
18,8
2740
,972
18,2
3966
,190
82,6
7453
,707
1996
24,1
2541
,028
30,7
7837
,757
22,1
8555
,853
80,2
2251
,917
1997
17,7
9738
,392
28,1
9235
,833
16,5
5448
,477
89,6
8756
,722
1998
21,5
0937
,611
32,8
5032
,953
21,0
0059
,280
79,6
0061
,833
1999
28,0
9746
,532
39,8
1340
,208
19,1
2951
,535
85,7
6657
,892
2000
44,1
1051
,134
42,6
9035
,000
20,0
0064
,587
90,0
0059
,400
2001
44,8
4363
,349
47,9
0833
,204
23,3
7978
,458
100,
944
69,8
00
2002
45,6
36.7
66,5
16.5
49,3
7033
,868
23,5
0088
,300
130,
670
95,6
67
2003
46,5
03.8
75,1
14.5
53,0
72.9
32,0
52.2
24,3
22.5
99,9
55.6
150,
943.
311
3,89
8.6
2004
47,4
80.4
78,5
69.7
56,0
4531
,250
.924
,736
11,0
151.
116
5,73
5.8
116,
290.
5
Sour
ce:S
tati
stic
alB
ull
etin
(va
riou
sis
sues
),C
entr
alB
ank
ofN
iger
ia.
Tabl
e �
Inte
rnat
ion
alp
rice
sof
agr
icu
ltu
rale
xpor
tcr
ops
($p
ert
on)
Yea
rG
rou
nd
nu
tB
enn
isee
dSo
ybea
ns
Co
tto
nse
edP
alm
k
ern
elP
alm
oil
Co
coa
Ru
bb
er
1970
8811
351
151
7911
341
2
1971
9611
653
155
8112
742
7
1972
114
123
5618
692
115
451
1973
121
159
7120
092
127
538
1974
230
268
9524
722
532
377
3
1975
405
428
160
500
243
430
1,07
1
1976
558
421
158
491
239
422
1,05
391
7
1977
425
448
201
510
231
456
1,59
288
9
1978
478
495
222
544
247
585
1,69
994
8
1979
587
503
226
553
302
755
2,01
41,
161
1980
768
576
274
732
366
905
2,37
91,
454
1981
737
516
254
762
327
811
2,13
11,
639
1982
668
468
260
757
341
735
1,93
11,
783
1983
621
497
317
773
317
683
1,93
31,
657
1984
849
470
392
915
522
784
1,96
11,
699
1985
839
402
559
895
447
671
1,79
01,
454
1986
494
178
272
494
197
494
1,73
259
3
1987
516
571
373
995
211
298
1,86
624
8
1988
495
440
440
991
220
330
2,42
433
0
1989
646
692
545
329
243
177
1,36
627
0
1990
537
548
612
323
248
144
1,05
717
3
1991
633
603
399
420
254
1,02
553
4
1992
395
566
417
218
329
720
736
723
1993
587
607
530
479
944
1,14
61,
092
1994
616
1,20
258
22,
056
656
4506
2,79
51,
571
1995
916
2,35
586
01,
872
833
3024
3,77
72,
453
1996
1,10
21,
874
1,40
61,
725
1,01
325
513,
665
2,37
2
1997
813
1,75
41,
288
1,63
775
622
144,
097
2,59
1
1998
982
1,71
81,
500
1,50
595
927
083,
637
2,82
5
1999
303
502
429.
433
206
555
925
624
2000
432
500
418
342
195
632
881
581
2001
400
565
427
296
208
700
901
623
2002
377
549
408
279
194
729
1,08
079
0
2003
359
580
410
247
188
772
1,16
688
0
2004
355
588
419
234
185
825
1,24
187
1
Sour
ce:A
nn
ual
Rep
ort
(var
iou
sis
sues
),C
entr
alB
ank
ofN
iger
ia.
Tabl
e �
Inte
rnat
ion
alp
rice
sof
agr
icu
ltu
rale
xpor
tcr
ops
($p
ert
on)
Yea
rG
rou
nd
nu
tB
enn
isee
dSo
ybea
ns
Co
tto
nse
edP
alm
k
ern
elP
alm
oil
Co
coa
Ru
bb
er
1970
8811
351
151
7911
341
2
1971
9611
653
155
8112
742
7
1972
114
123
5618
692
115
451
1973
121
159
7120
092
127
538
1974
230
268
9524
722
532
377
3
1975
405
428
160
500
243
430
1,07
1
1976
558
421
158
491
239
422
1,05
391
7
1977
425
448
201
510
231
456
1,59
288
9
1978
478
495
222
544
247
585
1,69
994
8
1979
587
503
226
553
302
755
2,01
41,
161
1980
768
576
274
732
366
905
2,37
91,
454
1981
737
516
254
762
327
811
2,13
11,
639
1982
668
468
260
757
341
735
1,93
11,
783
1983
621
497
317
773
317
683
1,93
31,
657
1984
849
470
392
915
522
784
1,96
11,
699
1985
839
402
559
895
447
671
1,79
01,
454
1986
494
178
272
494
197
494
1,73
259
3
1987
516
571
373
995
211
298
1,86
624
8
1988
495
440
440
991
220
330
2,42
433
0
1989
646
692
545
329
243
177
1,36
627
0
1990
537
548
612
323
248
144
1,05
717
3
1991
633
603
399
420
254
1,02
553
4
1992
395
566
417
218
329
720
736
723
1993
587
607
530
479
944
1,14
61,
092
1994
616
1,20
258
22,
056
656
4506
2,79
51,
571
1995
916
2,35
586
01,
872
833
3024
3,77
72,
453
1996
1,10
21,
874
1,40
61,
725
1,01
325
513,
665
2,37
2
1997
813
1,75
41,
288
1,63
775
622
144,
097
2,59
1
1998
982
1,71
81,
500
1,50
595
927
083,
637
2,82
5
1999
303
502
429.
433
206
555
925
624
2000
432
500
418
342
195
632
881
581
2001
400
565
427
296
208
700
901
623
2002
377
549
408
279
194
729
1,08
079
0
2003
359
580
410
247
188
772
1,16
688
0
2004
355
588
419
234
185
825
1,24
187
1
Sour
ce:A
nn
ual
Rep
ort
(var
iou
sis
sues
),C
entr
alB
ank
ofN
iger
ia.
12 Daramolaetal.
1.3.4 Finance
Policytowardsagriculturalfinancecanbegroupedintofivecategories:(i)creditguidelinesbytheCentralBankofNigeria(CBN);(ii)concessionalinterestrates;(iii)ruralbankingschemes;(iv)agriculturalcreditguaranteeschemes;(v)directlending.Startingfromfiscalyear1972,theCBNprescribedcreditallocationbybankstodesignatedsectors.Bankswererequiredtolendaminimumproportionof their loanportfolio toagriculture.Themandatory sector allocation require-mentwasabolished inOctober1996.Thehistoricalguidelineswerenot reallyadheredtobythebanks,withagriculturebeingoneofthesectorsmostaffectedbecausebanksdidnot lend to ruralprojects.Rather, theypreferred topay thepenaltiesfornotlendingaccordingtotheguidelines.
Aruralbankingprogrammewasintroducedin1977,designedtomobilizeruralsavingsandtochannelthemintoproductiveruralactivities.ByJune1992,765bankbrancheshadbeenopened in766centres.The ratioof locallymobilizedfunds to rural lending was clearly stipulated. In 1977, it was 30per cent and,by1993,ithadbeenraisedto50percent.ThemandatorycreditallocationwasabolishedinOctober1996.Again,whileitlasted,theeffectivenessofthepolicyremainscontentious.TheACGS,whichwasestablishedin1978toprovideguar-antees in respectof loansandadvancesgranted to the sector,wasdesigned toencouragebankstoincreasetheircreditfacilitiestofarmers.Thescheme,fundedby theFederalGovernmentofNigeria (FGN)/CBN in the ratioof60:40,hada100millionnairacapitalbase.Thefundwasrequiredtorepay75percentofloansifbeneficiaryfarmersfailedtorepaythebanksunderthescheme.Availabledatashowthatanaverageofonly25percentoflendingundertheschemeduringthefirstfiveyearsofoperationshadmaturityof24monthsandabove.Lendingundertheschemerepresentsabout20percentofoverallagriculturallending.However,from1985,theCBNbegantostipulategraceperiodsforagricultureloans–onetofouryearsforsmall-scalefarmersproducingcashcrops,andfiveyearsforme-dium-andlarge-scalemechanizedfarmers.
Directlendingtoagriculturehasbeenpromotedfromcommercialandpubliclysponsoredspecializedbanks.Merchantbanks,whichperformbetteronlong-termlendingthantheconventionalcommercialbanks,wouldbeexpectedtoseeagri-culturalinvestmentfallwithintheirportfolio.However,smallholderexportcropsfarmers have benefited very little. For example, 90per cent of merchant bankloansforagriculturein1994–99wenttocorporateentities.NigeriaAgriculturalandCooperativeRuralDevelopmentBankhastwotypesoflending,directandin-directlending.Thelatterisusuallytostates’MinistriesofAgricultureforonwardlendingtosmallfarmers.Theformerisdirectlendingtobeneficiariesbythebank.Ithasbeenobservedthatthebank’sdisproportionateallocationofloansinfavouroflargeborrowersmayindicatethebank’srecognitionofeconomiesofscaleandthereductionintransactioncostsassociatedwithlarge-scaleborrowing.
A further problem has been the fate of the specialized lending institutionknownastheNigeriaExport–ImportBank(NEXIM).NEXIMwasestablishedpri-marily tograntcredit toexporters throughparticipatingcommercialbanks, toidentifyexportmarketsforNigeriancommoditiesandtolinkoverseasmarketswithexporters.NEXIMwasexpectedtoworkcloselywiththeNigeriaExportPro-motionCouncil,whichischargedwithadministeringexportincentivesacrossallstates.Thetwoinstitutionsfacedseriouschallengesindischargingtheirrespon-sibilities.Corruptioncontributedinnosmallmeasuretothepoorrecordsofthetwoinstitutions,especiallyinadministeringincentivessuchasthedutydrawbackscheme.NEXIMwasconfrontedwithadditionalproblemsofvolatileforeignex-changeavailabilityandundercapitalization.
Daramola(2004)arguesthatagriculturalpolicyformulationinNigeriaisatyp-icalmarket.ThispositionisderivedinpartfromAndersonandTyers(1988),whoarguethattheforcesofdemandandsupplyforpoliciesareconceptualized.Inthisview,policybeneficiariesdemandpoliciesandpoliticianssupplythem.Underthesituationof‘distorted’pricingpolicy,aswehaveexperiencedinNigeriainthere-centpast,thesupplycurveinthismarketrepresentsthemarginalpoliticalcostofprovidinganextraunitofprotectionto(orlesstaxationof)anindustry,intermsofreducedpoliticalsupportfromgroupsopposedtosuchapolicychange,whilethedemandcurverepresents,atthemargin,thepreparednessofgroupsseekingpolicychangetooffervariousdegreesofpoliticalsupporttotheleadership.Underthisgeneralframework,thereisalsotheneedtoaccommodatesocialandgovern-mentpreferences,whichincludealtruism,inadditiontopressurefromvariousprivate interest groups, on the supply side of policies. Therefore, the task hasbeenreducedtoexaminingthefactorsinfluencingthedemandforandsupplyofdistortedpoliciesinNigeriavis-à-visthoseofothercountriesatdifferentstagesofdevelopment.ThisisthefoundationfortheunfavourableagriculturalpolicyenvironmentprevailinghithertoinNigeria.
Inpoorcountries,thedemandforagriculturalprotection,especiallyproducerpricesupport,isoftenweak.Thisisbecausemarketablesurplusandpotentialben-efitsarelowrelativetothehighcostofcollectiveactionbyfarmers.Itiscostlytoorganizeforcollectiveactionowingtothelargenumbersoffarmers,geographicaldispersion,poorinfrastructureandloweducationinruralareas.Otherpressuregroupsarenotinterestedinpoliciesfavourabletoagriculturebecausesuchgroups– farm inputs and processing – are rudimentary. Urban elites favour industry,commerce,mining,constructionandothersectors.
InNigeria,policiesundersuccessivemilitaryregimesbefore1999discouragedagriculture. The industrialists, being fewer in number, better educated, urbanbased,politicallyconnectedandwithbetteraccesstoinfrastructure,gainedbetterassistanceandsupportpolicies.Generally,poorcountries(includingNigeria)taxagriculturalexportand/orimportinordertopromotethemanufacturingsector,whichtheyexpecttoreplaceimports.Besides,itiseasiertotaxexportcommodi-tiesdirectlythantoraisegeneraltaxrevenuethroughincomeorsalestaxbecausethelatteroptionisratherexpensivetocollect.
TheNigerianeconomybetween1960and1970canbe treated in twoperiods:fromindependencein1960tothecivilwarin1966andthecivilwaryears(1967–70).Intheperiod1960–69,therewasminimaldirectgovernmentinvolvementinagriculture.Thefederalgovernmentplayedasupportiverole,whileregionalandstategovernmentswerelefttotakemajorinitiatives.DuringtheearlyperiodofNigeria’shistory,different regions specialized inproducingvariousagriculturalexports.CrudeoilwasdiscoveredinNigeria incommercialquantities,andtheShellPetroleumCompanyconstructedthefirstoilwellatOloibiriin1958.How-ever,itwasnotearningasmuchforeignexchangeasagriculturewasfetchingfortheregionalgovernments.Nigeriacouldbedescribedashavingaveryrobustag-riculturalsectorduringtheperiod.Thecountrywasself-sufficientinfoodproduc-tionwithminimalimportsofprocessedfoodforelites.Farmersproducedenoughfoodcropstofeedthepopulationandexportcropstofinancegovernmentex-penditure.Infact,agriculturewasbeingtaxedtodeveloptheothersectorsoftheeconomysuchaseducation,health,constructionandfinanceimportsthroughtheforeignexchangebeingearnedfromagriculture.
The northern region (including the Middle Belt) was largely exporting cot-ton,hidesandgroundnuts;theSouthWestregionspecializedincocoa,whiletheSouthEastregion(includingthepresentSouthSouth)wasamajorexporterofrubberandpalmproduce.Smallholderfarmersproducedthebulkofagriculturaloutputforbothlocalandexportmarkets.Governmentfocusedonresearch,ex-tensionservices,marketingandpricingofexportcrops.However,itisimportanttomentionherethattheexportcropssub-sectoroftheNigerianeconomywasthenstrongerthanthefoodcropsub-sectorbecauseofthedesireofthepre-in-dependencecolonialgovernment(UK)tofeedtheirdomesticindustrieswithrawmaterials.Nigeriawasaverysmallimporteroffoodcrops.
1.4.2 Post-civilwar/oilboomera(1970–85)
ThecrisisofagriculturalexportsinNigeriastartedaround1970.Thiswastheerathatlaunchedtheoilboom,dilapidatedinfrastructureanddestroyedmostlargepalmoilplantationsineasternNigeria.Thewindfallfromtheoilwealthwasnotinvestedinagriculture,butratherincommerce,constructionandmanufacturing,leadingtoneglectof theagriculturalsector.Thesesectorsconspiredbyattract-ing factors of production away from agriculture, leading to a serious problemof ‘Dutchdisease’.Another seriousconsequenceof theoilboomwascurrencyovervaluation,which ledtoNigerianagriculturalexportsbeinguncompetitive.Themajorfactorresponsibleforthedeclineinagriculturewasthediscriminationagainstagricultureinfavouroftheurban(real)sectors(especiallymanufacturing)andservices.Factorsofproductionsuchaslandandlabourmigratedoutoftheruralagricultural sector to theurban industrial sectorbecauseofbooms in theconstruction,manufacturingandservicesectorsthatwerepayinghigherreturnsonthosefactors.
Theperiodwitnessedtheestablishmentofmanynewagriculturalinstitutionsandprogrammes.NotableweretheNigerianAgriculturalandCo-operativeBank(NACB)in1973andtheAgriculturalCreditGuaranteeSchemeFund(ACGSF)in1978,establishedtoprovideagriculturalfinance.(Morewillbesaidabouttheseinstitutions’ operations below.) During this period, World Bank-assisted ADPswereintroducedinanumberofstates.Theprogrammesweredesignedtoprovideanintegratedapproachtoagriculturalandruraldevelopment.RiverBasinDevel-opmentAuthoritieswerealsoestablishedtoprovideall-year-roundwaterthroughirrigationtofarmers.Moreresearchinstituteswereestablishedduringthisperiod.Inanticipationof the increasedagriculturaloutput arising from theseprojectsandOperationFeedtheNation(OFN),therewasareorganizationofmarketingboards,whichgaverisetothegrainboards.
TheSAPperiodbegantheeraofliberalizationofNigerianagriculturalexports,includingthescrappingofthecommodityboardsandderegulationoftheentireeconomy.Duringtheperiod1986–99,whichcombinestheSAPandpost-SAPera,market-oriented and not so market-oriented agricultural development policiesandprogrammeswereintroduced.RiverBasinAuthoritieswererestructuredfrom21to11;theDFRRIwasestablished,aswellastheNationalAgriculturalInsuranceCorporationandPeoples’Bank.Farminputsupplypolicywasactivelypursuedduringthisperiod.TradeliberalizationwasanimportantaspectofSAP.Abolitionofimportandexportlicensingandexchangecontrolmeasurestookplace.Withthese reforms, export earners became entitled to 100per cent of their foreignexchangeearningsprovidedthesewerekeptinadomiciliaryaccount.Thus,agri-culturalproducershadanincentivetoboosttheirexports.
Agricultural Export Potential in Nigeria 1�
The Export Incentive and Miscellaneous Provisions Decree of 1986 was en-acted, through which the CBN could provide refinancing and discounting fa-cilitiestocommercialandmerchantbankstoencouragethemtoprovidecreditand risk-bearing facilities in support of exports. This subsequently led to theestablishmentoftheNigerianExportCreditGuaranteeandInsuranceCorpora-tionin1988,whichwassubsequentlyrenamedtheNigerianExport–ImportBank(NEXIM).Theinstitutionactuallycommencedoperationsin1991.PerhapsthemostvisibleandpervasivepolicyunderSAPisthenairaexchangeratedevalua-tion.Therate,whichwas0.639nairatotheUSdollarin1981and0.9996nairain1985,averaged3.32nairain1986.By1992,ithadfallento19.66nairaandto91.83nairain1999.
There isnodoubt that the tremendousboost inproducerpriceswasduetonaira devaluation. For example, the naira value of the world market prices ofcocoa,rubber,cottonandgroundnutrosefrom2135naira,714naira,5170nairaand824nairapertonin1985to7387naira,16,739nairaand790nairain1991,representing246,967,1331and859percentincreasesrespectively.Theincreasein thenairavalueofworldmarketpriceswas similarly translated into increas-es inproducerpricesofcocoa, rubber,cottonandgroundnut from1500naira,750naira,700nairaand1750nairapertonin1985to12,745naira,5692naira,3778nairaand6843nairain1992.AndasTable4shows,theincreasecontinuedinthe1990s(seeFigures1and2).Cocoa,rubberandpalmkernelenjoyed502.3,549.1and469.3percentincreases,respectively,in1991–94,and40.2,68.3and33.1percentincreasesin1994–99.Thepositionoutlinedhereisthatgrowthinagriculturalexportearningsinrecentdecadeshasmerelybeenapriceeffect,withlittleoutputeffectevenwhenallowanceismadefortimelagsinoutputchangesrelativetopricechanges.Thelattereffectiswhatisrequiredtogiverealsustainedgrowthinagriculturalexport.
explained thegrowth inboth agriculturalproductivity and export sub-sectors.Thedetailsofthegrowthandexplanationsforitwillbecoveredunderthesectiononpolicyreforms.However,Table5providessomeinformationaboutthepolicychangesinNigeriaovertime.
1.4.6 Impactofpolicyreforms
Sincethepresentdemocraticadministrationassumedofficein1999,therehavebeensignificantstridesinagriculture.Somegrowthcanbeattributedtopublicinvestmentinthesector,notablytheWorldBank-assistedFadamaIandII.ThereareotherinitiativessuchastheFoodandAgricultureOrganization(FAO)-assistedNationalSpecialProgrammeonFoodSecurity(NSPFS),theInternationalFundforAgriculturalDevelopment-assistedRootandTuberExpansionProject.All theseprojectshavecombinedtoraisethecontributionofagriculturetoGDPgrowthto5.5percentinrecentyears(CBN,2005).However,themajorleapto7percentperannumisaproductoftheboldreformswithintheNigerianmacroeconomy,theconclusionof theNAPandreforms inthefinancial sector. It is thereformagendathatgavebirthtomanypresidentialinitiativesonvariouscommoditiessuchasrice,cassava,livestock,palmoil.Thereformwithinthefinancialsectorhasledtothebankingsectorbeingstrongerandmorewillingtofinancerealsec-toractivitiessuchasagricultureandmanufacturing.Thepoorliquidityofbanksandthepaucityofinvestmentfundshasbeenboostedbypensionreform,which
ThereisalsoanaggressivedrivebythefederalgovernmenttoattractforeigninvestmentintoNigeria.NotableagriculturalinvestorsincludetheUnitedStatesAgency for International Development, the UK Department for International
Agricultural Export Potential in Nigeria 21
Development, the Canadian International Development Agency, the Japan In-ternationalCooperationAgency,Chinese andZimbabwean (white) farmers. Inmanydifferentways,theseinterventionshavebeenmanifestedasgrowthintheGDP,whichisnowhigherthantherateofpopulationgrowth.TheimplicationofthisisthatpovertywilldeclineasaresultoftherateofgrowthinGDP(esti-matedat7.5percent)beingfasterthanpopulationgrowth(estimatedat3.0percent).Itisimportanttonotethatagriculturecontributesatleast40percenttoGDPgrowthinNigeria,andthesectoritselfhasbeengrowingatanaveragerateof6.5percentperannum.
Before the present government assumed power in 1999, agriculture was grow-ingatanaverageofabout2.8percentperannum,mainlyasaresultofacreageexpansion.Subsequently,withthereformagendaofthedemocraticgovernmentand better macroeconomic policies, the country has witnessed some improve-mentsinthebusinessenvironmentandproductivity.Throughthevariouspresi-dential initiatives, constraintsconfrontingdifferentcommoditiesarebeingad-dressedoneaftertheother.AccordingtotheCBN(2005),thecumulativeeffectofthesereformsisthattheagriculturesectorhasbeengrowingatbetween5.5percentand7.5percentinthelastfiveyears.
AccordingtotheWorldBank(2006a),thefundamentalcauseoflowagricultur-alproductivityinNigeriaistheverylowuseofmoderntechnologyevidencedinweakresearchandextension,limiteduseofimprovedseedvarieties(andbreeds)andlackofirrigation.Inaddition,weakhumanresourceandskillsbasesarealsofactors. Nigeria’s national research system has enjoyed only limited success ingeneratingnewtechnologiesthathavebeentakenupbyfarmers.Thisisdueto:(i)poorfundingofpublicresearchorganizations;(ii)weakcoordinationwithintheNigerianagriculturalresearchinstitutes(NARIs),resultinginunnecessarydu-plicationofeffort;(iii)atendencyforresearchtobesupplydriven,withlittleac-countabilitytofarmers.Publicinstitutesresponsibleforconductingagriculturalresearch in Nigeria have been underfunded, especially under military regimes.Within the NARIs, budgets have remained flat even as staffing has increased,forcing severe cutbacks in operating budgets. Lack of systematic collaborationbetweenresearchinstitutions intheagriculturalsectorhascreatedsub-optimalallocationofresourcescharacterizedbyduplicationofeffortinsomeareasand
AnothercloselyrelatedfactoristhefactthatextensionservicesinNigeriaaredeliveredmainlythroughpublicagenciesknownastheADPs.Manyofthestate-basedADPswereestablishedandempoweredwithWorldBankcreditfacilitiesinthelate1970sandearly1980s.Then,theywereactivelyengagedintheprovisionof integratedagriculturalandruraldevelopmentservices.Theywerequitesuc-cessfulbutsufferedlackofsustainabilitywhenthecreditexpired.Someprivateagribusinessfirms,mainlyinputdealers,provideextensionadvisoryservicestotheir clients,but the coverage is limited toa fewcrops.Public agricultural ex-tensionprogrammesinNigeriaarevestedinallthreelevelsofgovernment.Theweakness of the extension system is primarily caused by chronic underinvest-mentwithineachlevel.Similartotheresearchsystem,theextensionsystemlacksaccountabilitytofarmers.
Starting in the 1980s, the federal government established a unified agricul-turalextensionsystem.Althoughcoordinatedatthefederallevel,thissystemisimplementedthroughtheADPs,whicharerunbythestateMinistriesofAgricul-tureandNaturalResources.Atthelocallevel,manylocalgovernmentauthori-ties(LGAs)maintainagriculturalunitsthatofferextensionservices.Recently,allstates agreed to standardize extension service delivery through the LGAs. Thiscommonapproachhasmetwithlimitedsuccess.
1.5.1 Effectsonexport–croppricesandsupplyresponse
Nigeriahasapotentialcomparativeadvantageinmanyruralgoods,butlowpro-ductivityhasbeenabarriertogreatercompetitiveness.Ecologicallyandclimati-cally,Nigeriahasatleast95differentcommoditiesthatcanbecultivatedindif-ferentpartsofthecountry.Forexample,whiletheSenegalbasinproducesnericaatabout7.5tonsperhectare(WARDA,2005),Nigeriaatbestrecords4.0tonsperhectareundernericatrials(WARDA,2005).ThehighcostofproductiontendstomakeNigerianexportsuncompetitive.Nigerianhidesandskins,especiallythosefromtheSokotogoatbreed,commandapremiuminthe international leathermarket.Thereformagendahassucceededinbringingthechallengesfacingex-portersandmanufacturerstothefore.TheNigeriantanneriesbuyrawmaterialsfromeverywhereinwesternandcentralAfricainordernottohavetheirfactoriesidle.Andthechallengestheyfaceinthecourseoftheirbusiness,suchasthestateoftheinfrastructureofwater,electricityandroads,havebeenbroughttotheno-ticeofgovernmentforurgentremedies.
particularlytrueinNigeriawhereproductioncostsaregenerallyhighandimmo-bile.Inordertorectifythissituation,governmentpolicyinrecenttimeshasbeentoencouragetheadditionofaddedvaluetoprimaryproductsbeforeexport.Theimporting countries, especially inNorthAmerica andEurope,discourage localvalueaddition(especiallyforcocoa)becauseittakesawayemploymentfromtheircitizens,whilealsoincreasingtheircostsofproductionbecauseofhigherimportcosts(freeonboard(f.o.b.)orcost,insuranceandfreight(c.i.f.)).Whattheim-portingcountriesusuallypleadasexcusesarepoorstandards(specifications)andunhygienicconditionsoftheprocessingenvironmentinexportingcountries.So,supplyresponsetopriceincentivescanbehighinitiallyasaresultofdevaluation,butthemoneyillusionsoondisappearsbecauseofrisinginputcosts.Thiswastheexperienceofcocoafarmersinthelate1980swhentheSAPwasintroduced.So,thedevaluationwasnominal.
1.6 CompetitivenessofNigerianexports
TheNigerianeconomyisoneoftheleastcompetitivegloballyandeveninAfricabecauseofinappropriatepoliciesandanunfavourablebusinessenvironment.Onseveral of the ‘doing business indicators’, Nigeria performs poorly when com-paredwithmostothereconomiesincludinglow-incomeeconomiesinAfrica.TheWorldEconomicForum(WEF)2006reportranksNigeria88outof117countriesonitsglobalcompetitivenessindicators(GCI).Despitethelargedomesticmarket,only a small proportion of producers have been able to develop into sizeablebusinessesabletocompeteinternationally,asshownbythelong-termdeclineinnon-oilexports.
Whilethehumancapitalcontributionissmaller,acharacteristicofthisTFPmethodology, the increases in human capital in Indonesia tend to be muchlarger.
However one approaches competitiveness, whether from the perspective ofanenterpriseora sector, suchasagriculture,maintainingcompetitiveness is adynamicconcern.IntheNigerianagriculturalsector,inbothabsoluteandrela-tiveterms,performancecanbedescribedasuncompetitiveandgenerallypoor.Toassesscompetitiveness,observersoftenrefertochangesinmarketshare,ex-portsandprofitabilitybut,ultimately,thecompetitivenessofanation’sproductis rooted not in any single outward measure, but in the quantity and quality
of thecountry’sproductive resources.Theseare the factors thatdetermine therelativeefficiencyofmakingdifferentgoodsand,consequently,acountry’s‘com-parativeadvantage’ininternationaltrade.Theideathatcomparativeadvantagedependsonrelativeresourceendowmentsconveysthesensethatnationshavelittlecontrolovertheireconomicdestinies,atleastininternationaltrade.Thisisnotentirelytrueasgovernmentpolicies,nationalinstitutionsandevenculturalvaluescanprofoundlyaffecttheoverallproductivityofmanycountries’existingresources,andhaveimportantimplicationsforinternationalagriculturalmarkets.
Agricultural Export Potential in Nigeria 2�
Therearesuccessstoriesofcountriesthathaveachievedcompetitivenessinafewexportcropssuchascashews inTanzaniaandVietnam,cocoa inCôted’IvoireandIndonesia,palmoilinMalaysia,riceinIndiaandBangladesh,andcassavainThailand(Figure3).OneimportantsimilaritybetweenthesecountriesandNi-geria is that they are all developingnations and evidence that it canbedonein Nigeria when the required political will is applied. When significant policychangesaremade, the resultcanbe rapidchanges in thecompetitivenessofanation’sagriculturalproducts.
Globalizationisanimportantdeterminantofcompetitivenessrequirements.ThepressuresofworldmarketsarisingfromNigeria’scommitmenttotheWorldTradeOrganization (WTO), the General Agreement on Trade and Tariffs (GATT) andevenattheregionallevelwiththeEconomicCommissionofWestAfricanStates(ECOWAS)andAfricanUnion(AU)willcontinuetoincreasetheneedforenter-prisestoadapttochange.ThesecommitmentscallforgovernmenttolookatthepoliciesandinstitutionsrequiredtohelpNigerianenterprisesgrowandthrive.Rapid technological change is altering the nature and location of production.This,togetherwithtradeliberalizationandthefreemovementofcapital,isdriv-ingthephenomenonofglobalization.Indeed,theforeigndirectinvestment(FDI)thatcancontributesomuchtonationaleconomicgrowthisadirectmanifesta-tionofglobalization,whereaproductcanbedesignedincountryA,usingrawmaterialsfromcountryB,manufacturedincountryC,usingcomponentsfromcountryDandmarketedincountryE(suchaselectronics).Agoodexampleisthe
Therefore, Nigeria needs to take advantage of these trends in internationalbusiness.StrategiesoffreetradeandtheencouragementofFDIwillhavetobesupplementedwithnewstrategiestoenhanceinvestmentandcommercialpart-nershiplinkswithotherpartsoftheworld.ItisthisconceptthatledtheObasanjoregime todesign theNational EconomicEmpowermentDevelopment Strategy(NEEDS)asapanacea for theunattractive investmentenvironment inNigeria.Asexpected,opinionsaredividedontheappropriatenessandworkabilityofthestrategiesinthedocument.Theseauthorsbelongtotheschoolofthoughtthatsubscribestothefactthat,ifNEEDSdoesnotwork,itisnotbecausetheapproachiswrong.Twopossibilitiesexist:itiseitherthatthefactsfromtheofficialstatisticsbeingemployedarewrong(more likely tobeunderestimatedoroverestimatedintheNigeriancase)orthepoliticalwilltocarrythereformsthroughislacking,especiallyifthesucceedingpresidentin2007isnotreformmindedlikeObasanjo.Fromtheassessmentdonesofarusingtheindicatorsavailable,thevisionisoncourseandtargetsarebeingsurpassed.
However, the convergence, diffusion and pervasiveness of information andcommunicationstechnologies(ICT)aregivingrisetoanewtypeofeconomyandanewsociety,knownastheinformationsociety.Thesetechnologiesarealreadyoffering significant potential for productivity, efficiency and competitivenessgainsintheenterprisesectorandarehavinganimpactonthelocationdecisionsof inward investors. Tomake themostof theseopportunities and ensure thatcompetitiveness ismaintainedandexpanded in thisnewcontext, far-reachingactionswillbeneededintheareasofeducationandtraining,competitionpolicy,telecommunicationsinfrastructureandinencouragingthetake-upofICTbyag-riculturalenterprisesinNigeria.ItisimportanttomentionherethatNigeriahasrecordedamajorbreakthroughinICTinrecenttimes,withthelaunchingoftheNigeriansatelliteandthederegulationofthetelecommunicationssector.Nigeriahasjoinedtheglobalsystemofmobiletelecommunication(GSM),andtheprivatetelephone operators (PTO) have introduced fixed wireless telephones. Biotech-
Agricultural Export Potential in Nigeria 2�
nologyisanotherrapidlydevelopingfieldinwhichtheimpactonmarketsandproduction location is expected tobevery significant.Theeducation, trainingandmanagementsystemsneedtorespondto,andcapitalizeon,theopportuni-tiesthatthesebreakthroughsrepresent.Inthelastcentury,theglobalcontestwas,forthebetterpart,militaryinnature.SincetheendoftheColdWar,thebattlehasshiftedtotheboardroomsandbecomeeconomicinnature,andtheedgeincom-petitivenessamongnationshasbecomeknowledgebased(alsoknownasintellec-tualwarfare).Nigeriacannotaffordtobeleftbehindintheschemeofthings.
ThereisclearinterestinmodernizingNigerianagricultureonthepartofthefed-eralgovernment,butthereisinsufficientknowledgeaboutthegrowthpotentialofagricultureand,byimplication,itscontributiontofoodsecurityandexports.Thischapteremploysanappliedgeneralequilibriummodel(CGE)toestimatethegrowthpotentialofagricultureandagriculturalexportsinNigeria.Theessenceofthisapproachistodeterminewhetherreturnsoninvestmentsinagriculturalproduction and exports can compete favourably with returns on investmentsfromother sectorsor industries suchasmanufacturing, solidmineralsorevenoilandgas.TheempiricalfindingsfromthisexerciseprovideevidencetoguideNigerianpolicy-makersandplannersinmakingstrategicchoiceswithrespecttoagriculturalexports.Aninterestingfindingisthatafewagriculturalsub-sectorscanreallyoutperformsomemanufacturingandprocessingsectorsundercertainpolicyscenarios.
2� Daramolaetal.
1.7.1 Themodellingapproach
TheGlobalTradeAnalysisProject(GTAP),whichisanappliedgeneralequilibriumframework(Hertel,1997),isusedheretoanalysetheimpactofagriculturalpro-ductivitychangesandtradeliberalizationinNigeria.Recently,the1999Nigeriainput–outputstatisticswereincludedintheGTAPdatabase.3Weusetheglobalandeconomy-wideapproachforseveralreasons:whencertainagriculturalindus-triesgaininproductivity,otheragriculturalsectorswillbeaffectedtoonotonlythroughpricechangesinintermediateinputs(forinstancecheaperfeedgrains),butalsothroughpricechangesinprimaryfactors(likelandandlabour),whichwillaffectincomesandtheconsumptionoffooditems.Theglobalmarketaspectof the approach is important toogiven the fact that agricultural exports are acomponentofinternationaltradeandareaffectedbytradeliberalizationpolicy.Theextentandconditionsofinternationaltradewilldeterminethebenefitsac-cruingtotheNigerianeconomy.
TheGTAPmodelisbasedonassumptionsthatarecommonintheliterature:perfectcompetition,constant returns toscaleandnochange in theeconomy-wide employment of resources. Each economy consists of several economicagents:onthefinaldemandside,autility-maximizinghouseholdpurchasescom-modities(forprivateandgovernmentuse)andsavespartof its income,whichconsistsofreturnstoprimaryfactorsandnettaxcollections.Ontheproductionside,cost-minimizingproducersemployprimaryfactorsandintermediateinputstosupplycommodities.Demandersofcommoditiesareassumedtodifferentiateacommoditybyitsregionoforigin(the Armingtonspecificationisapplied).4
factor-biased technological change (such as land-specific productivityimprovementsvscapital-specificproductivityimprovements);improvementsindomesticandforeigntradetransportation;tradeliberalizationbyNigeria.
1.7.2 Findings
Table7 and Figure4 show the welfare effects from 1per cent sector-specific,Hicks-neutral,technologicalimprovementsinfoureconomies:Nigeria,Uganda,ZimbabweandIndonesia.WecompareNigeriawiththeseotherthreeeconomiesmodelledinGTAP.UgandaandZimbabwearetwocountrieswhoseeconomiesarelargelydependentonagriculturewhile Indonesia isanoil-procuringeconomy.Table7showssectorsales,welfareeffectsandtheratioofwelfareeffecttosalesbysector.InNigeria,theoilsectoraccountsforoveraquarteroftheeconomy.Thus,1percenttechnologicalprogressintheoilsectorgiveslargewelfareben-efitsindollarterms,$142.72million.NoothersectorinNigeriagiveslargerwel-faregains.
Figure4focusesonmediumtolargesectors(withmorethan$100millioninsales)inthefoureconomiesunderstudyinthemodel.Toaddressthesize-of-sec-torissue,wedividedwelfaregainsbythevalueofthesector’soutput,andthatmagnitudeisshownontheverticalaxisofFigure4.AveryimportantfindingforNigeria is thatseveral foodandagriculturalsectorshavevaluesthatarehigherthanthatfortheoilsector:cattle(1.23percent),otherlivestock(1.23percent),othergrains(1.04percent)andfruitsandvegetables(1.02percent).InIndone-sia,ZimbabweandUganda,agriculturalsectorsranklow.InNigeria,comparableinvestmentswouldyieldhigherreturnsinsomeagriculturalsectorsthaninoil.7
Figure5 shows thewelfare effects from1per cent factor-biased, technologi-calprogressinNigeria.Technologicalimprovementsrelatedtounskilledlabourproducebyfarthehighestreturnsinagriculture.Specifically,cattle,otherlive-stock,fruitsandvegetableshavethehighestreturns.Theimplicationisthatthesenon-traditionalagriculturalexportcommodities suchascattleby-products (forexamplebonemeal,hidesandskin),fruitsandvegetablessuchaspineappleandplantainsarehigh-valueproductscapableofgeneratingbothemploymentandincomes. In manufacture, the highest returns are obtained from technologicalimprovementsrelatedtocapital.
Table8showssectoraloutputeffectsthatcanbegeneratedfroma1percentimprovement in internationalanddomestic transportationcosts. Internationaltransportation improvements lower the cost of both Nigerian exports and im-ports.ExamplesincludeimprovementsinNigeria’sterminalfacilities(forexam-pleportsandairports)aswellas improvements inNigeria’s importandexportproceduressuchastheongoingportreformsthroughprivatizationthatseektoincreasetheefficiencyofoperations.
The agricultural sub-sectors that benefit the most from transportation im-provementsarefruitandvegetables,cattleandotherlivestock.Othermanufac-turingisthesectorthatbenefitsthemostfromdomestictransportationimprove-mentsthroughmoreefficientsupplyofbothrawmaterialsandoutput.This is
ThisanalysisconfirmsthatthereisgreatpotentialininvestinginagricultureinNigeria.Whilethelonger-termstrategyshouldbetorestorethecompetitivenessof traditional export crops and high-value commodities, in the short run, thestrategyofthegovernmentshouldbeonimprovingthecompetitivenessofNi-gerianagricultureindomesticandregionalmarkets.Thus,policy-makersshouldfocustheirattentiononthesmallholderproducerswhoconstitutethemajorityoftraditionalcropproducersinthecountry.Butfortheagriculturalsectortotakeoff,severalactionsshouldbetaken.Thepublicsectorshould: 1 Improve R&D investment in agricultural research. Currently, the low
productivity of agriculture is a major constraint to agricultural growth inNigeria. For agricultural productivity to improve, Nigeria’s farmers needaccesstonewtechnology.Technologyalonewillnotsolvetheproblemoflowproductivity,butitisanecessarycondition.ItisimportantforthegovernmenttorevisittheR&DagendaandincreaseinvestmentsinagriculturalR&Dthatleadtoimprovedtechnologies.Inparticular,thegovernmentwillalsoneedtoimproveitsresearchandextensionservicesinordertoimprovetheuseofgeneticmaterialsandpurchaseinputs(WorldBank,2006a).
2 Improvemarkets, infrastructureand institutions.Fair,properly functioningmarketsandaccesstobothinputsandfoodatreasonablepricesareneededforpoorNigerianfarmerstofullycapturethebenefitsfromaccesstoimprovedtechnologies. Improved and timely access to credit, productive inputs(especially inorganic fertilizers) and extension services are needed; policies(liketaxesandsubsidies)thatcreatedistortionsincapitalmarketstofavourlarge enterprises and limit capital to small-scale farmers must be removed.Increasinginvestmentsinruralaccessroadsandirrigationarealsocriticaltoreducedomesticcosts.Marketdevelopmenteffortswillbenefit frompublicsupportinensuringafavourablebusinessclimateandadequateinfrastructurethatprovidesreliableandreasonablypricedtransport,communicationandpower,andwaterservices.
4 Strengthen the agricultural input supply systems. There will be no growthin agricultural productivity and exports unless Nigerian farmers increasetheiruseofpurchasedinputs,especiallyimprovedvarietiesofseed,chemicalfertilizers, crop protection chemicals, including pesticides, herbicides and
�� Daramolaetal.
fungicides,andanimalhealth-relatedproductssuchasvaccines,medicationsandnutritionalsupplements.Strengtheninginputsupplysystemswillensurethat these inputs are available in a timely fashion and at affordableprices(WorldBank,2006a).
Thischapterhasattemptedtoshowthepotentialforagriculturalexportde-velopmentinNigeria.Nigeriahasclearpotentialtoearnmorefromagriculturalexports both in traditional commodities such as cocoa, rubber, palm produce,cotton, hides and skins, crafts and textiles and in non-traditional ones. Therearealsoimmenseopportunitiestobetappedfromthedevelopmentofnon-tra-ditionalexportssuchanon-timberforestproducts(NTFPs)includingmedicinalplants,snails,mushrooms,cultivatedwildlifeandsoon.SomeoftheseproductsareinhighdemandinNorthAmerica,EuropeandAsiawherenichemarketsexistforthem.Besidesthediversificationinforeignexchangerevenueforthecountry,othereconomicopportunitiesinthissectorincludeincomegenerationandgain-fulemploymentatbothproductionandvalueadditionstages.
because it has high potential for employment, food security and exports. ThepresentgovernmentisdoingagoodjobintermsofreformsandmakingNige-rianexportscompetitivethroughvariousincentives.TheNigerianeconomyhasexpandedatafastpacesince2000.Non-oilGDPhasgrownatanannualaveragerateof5.8percent.Inthepasttwoyears,non-oilgrowthaccelerated,reaching7.4percentin2004and8.2percentin2005(WorldBank,2006b).Butthepro-ductivityandcompetitivenessofthenon-oileconomy,andparticularlyagricul-ture,havebeendecliningovertheyears.Thereformagendashouldbesystematicandsustainedirrespectiveoftheprofessionalbackgroundofthesuccessivepresi-dentsofthecountry.Intheshortrun,thestrategyofthegovernmentshouldbetoimprovethecompetitivenessofNigerianagricultureindomesticandregionalmarkets(WorldBank,2006b).Asagriculturalgrowthwillcontinuetobeledbysmallholderfarmers,policy-makersshouldtakeboldactionto:(i)improveR&Dinvestmentinagriculturalresearch;(ii) improvemarkets, infrastructureandin-stitutions;(iii)improveirrigationcapacity;(iv) strengthentheagriculturalinputsupplysystems.Theseactionswillgoalongwaytoimprovingagriculturalgrowthandexports.Alongertermstrategywouldbetorestorethecompetitivenessoftraditionalexportsandpromotenewer,high-valuecrops.Forthistosucceed,im-provementintheinvestmentclimatewillbecrucialsothatlarge-scaleinvestmentcanbemade.
Notes
1 Theviewsexpressed in this chapter are thoseof theauthors anddonotnecessarilyrepresentthoseoftheWorldBank,theCentralBankofNigeria,theFederalUniversityofTechnology,Akure,oranyoftheirofficials.
2 NamedaftereventsthatoccurredintheNetherlandsduringthe1970sfollowingthediscoveryofnaturalgasundertheNorthSea,Dutchdiseaseisaneconomicphenom-enonthatcanbetriggeredbysuddenlargeinflowsofforeigncurrency.Dutchdiseaseisoftenassociatedwithexportsofanaturalresource(typicallyoilornaturalgas)but,strictlyspeaking,theforeigncurrencyinflowscancomefromanysource,includingre-mittances,foreignaidoreventaxes.InacountryafflictedbyDutchdisease,theinflowsofforeigncurrencycausethevalueofthecountry’scurrencytorise,makingdomes-tically produced manufactured goods and agricultural commodities less competitivecomparedwithimportedgoodsandcommodities.Importsconsequentlyincrease,andnon-resourceexportsdecrease,resultinginreduceddomesticeconomicactivity.Dutchdiseaseweakenstheeconomywhenthesectorsthatarecrowdedoutarevitaltothecountry(seeWorldBank,2006b).
5 In a production function framework, technological change is Hicks neutral when itdoesnotaffecttheoptimalchoiceofinputs.WeimplementHicks-neutralproductivitychangesbyshockingtheexogenousGTAPvariablesaoallir, i∈PROD_COMMandr∈ REG.
6 Theconceptoffactor-biasedtechnicalchangewasfirstintroducedbyHicks(1932)todescribetechniquesthatfacilitatethesubstitutionofotherinputsforaspecificproduc-tion factor.He called techniques that facilitated the substitutionofother inputs for
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