Nigeria also led global exports of cash crops such as palm oil, groundnuts, cocoa and cotton, and was completely self-sufficient in food production. Food imports accounted for only 3% of the country’s import bill in the 1960s and consisted mainly of processed foods and beverages consumed by the relatively small, at the time, urban wage-earning population.
Today the country is a net importer of food, with agricultural products accounting for around 15% of total imports in 2011, and just 5% of the country’s total exports, according to the World Trade Organisation (WTO). Put another way, Nigeria’s food import bill is over twice as much as its agricultural exports receipts. Conversely, oil exports account for between 85-95% of the country’s total exports and around 95% of all foreign exchange inflows. This lack of export diversity leaves the country’s economy vulnerable to volatile oil prices. In 2007, the government announced an ambitious policy objective of increasing the share of agricultural export receipts to around 50% of total export receipts by 2018. However, until recently, there seemed to be little real support for this objective. The country only adopted a formal plan, called the ‘Agricultural Transformation Agenda’ (ATA), to implement its objectives for the agricultural sector at the end of 2012.
Nigeria’s large food import bill – US$11bn in 2012 according to the Ministry of Agriculture and Rural Development – is now becoming a source of national embarrassment to a country whose favourable growing conditions, vast uncultivated arable land and ample labour mean that it should be able to produce more than enough food for its sizable population.
Fortunately, the situation is also becoming increasingly unacceptable to the country’s current government who rightly attributes the agricultural sector’s decline to long-standing neglect following the rapid expansion of the country’s far more lucrative oil sector in the 1970s. During this time, agricultural exports plunged from around 1.1m tons in 1973 to just 243 thousand tons in 1986. The government estimates that this neglect costs Nigeria US$10bn in lost export revenue annually.
To reverse the fortunes of the sector, the Minster of Agriculture is implementing reforms to help it to operate more like a business than in the past. For Nigeria, this translates into a complete overhaul of the current low-productivity, subsistence-farming model to a modern approach involving more fertilisers, irrigation and mechanisation. Through this approach, the government aims in the short term to achieve self-sufficiency in the production of wheat and rice by 2015 –Nigeria’s top two food imports – and double its output of cocoa to 1,000,000 metric tons by 2018.
In fact, the government estimates that it can create at least 390,000 jobs just by developing the cocoa sector alone. Such job creation would help reverse Nigeria’s high official unemployment level, which has risen from 4.3% in 1970 to 23.9% at the end of 2011 according to government data (though it should be mentioned that the country’s official definition of unemployment includes those who work less than 40 hours a week). Around two-thirds of Nigeria’s workforce relies on the agricultural sector for jobs and the country’s high food import dependence has impeded employment growth by displacing local production. Efforts to date have already helped achieve a 70% increase in agricultural production and helped attract US$8bn of private investment into the sector in 2011.
This post is part of a series managed by the Economist Intelligence Unit for HSBC Commercial Banking. Visit HSBC Global Connections for more insight on international business.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
