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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.
Since1999,NigerianGDPhasgrownatanaverageannualrateof3.5percent.The long-termgrowth ratehasbeenabout2.8–3.3per centbetween1980and1998.Growthhasbarelyexceededpopulationgrowth,whichhasbeenbetween2.8percentand3percent.ThistrendisanindicatoroftheworseningpovertyinNigeria.Inflationhasremainedmoderatethankslargelytoasustainedincreaseinfoodproductionandthetightfiscalandmonetarypolicyregimesofthefederalgovernment.Theeffectsofincreasesinfoodproductionarelowercostoflivingand,consequently,lowerconsumerpricesformanufacturedproductsthatdependonagriculturalrawmaterials.Effortsatstimulatingrealsectoractivitieshavebeendampenedbyhighinterestrates,poorinfrastructureandimportcompetition.
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.
Thesectorrecordedmoderategrowthof6.1percentand6.5percentin2004and2005respectively.Thegrowthofthestaplecropproductionindexhasbeenoscillatingbetween3and3.6percent.Allthemajorstapleshaverecordedsignifi-cantincreasesinoutputwiththeexceptionofmaize.Inspiteofthedeclineininternationalmarketprices,cashcropproductionhasbeengrowingtoo,atleast3percentforcocoa,coffeeandrubberbetween1999and2004.Theindexoflive-stockproduction(1984=100)hasbeenrisingbyatleast2.4percentannually,whilefisheriesoutputhasbeenrisingbyatleast3.6percent.
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).
Therehasbeensomerecoveryinafewnon-traditionalexports,forexamplecocoabeanexportsgrewatcloseto8percentannuallybetween1999and2004.Inaddition,afewnon-traditionalexports,suchasshrimps,havealsoexperiencedrapidgrowthinthelastfewyears.Instabilityandverysluggishgrowthhavechar-acterizedtheoutputofNigeria’sdominantagriculturalexportcommodity,asitu-ationthattypicallyreflectstheproductiontrendofotheragriculturalcrops(seeTable2).
1.2 Structureofagriculturalexports
In the 1950s and 1960s, agriculture accounted for 60–70per cent of total ex-ports.Nigeriawasthenamajorexporterofcocoa,cotton,palmoil,palmkernel,
Table 1 Structureofeconomy,1974–2004(percentageofGDPatcurrentfactorcosts)
1970 1980 1990 2000 2003 2004
Oilsector 6.0 29.1 39.3 48.2 44.6 48.2
Non-oilsector 94.0 70.9 60.7 51.8 55.4 51.8
Agriculture 41.3 20.6 29.7 26.3 26.4 16.6
Industry 7.8 16.4 7.4 4.5 4.8 8.7
Services 45.0 33.8 23.6 21.0 24.2 26.5
Source: NationalBureauofStatistics/IMF.
Agricultural Export Potential in Nigeria �
groundnutsandrubber.Averageannualgrowthratesof3–4percentwereachievedforagriculturalandfoodcrops.Governmentrevenuesdependedheavilyonagri-culturalexporttaxes,andboththecurrentaccountandfiscalbalancesdependedtosomeextentonagriculture.Between1970and1974,agriculturalexportsasapercentageoftotalexportsfellfromabout43percenttoslightlyover7percent.Fromthemid-1970stothemid-1980s, theaverageannualgrowthrateofagri-culturalexportsdeclinedby17percent.By1996,agricultureaccountedforonly2percentofexports.Asagriculturalexportsshrankfromthetraditional12–15commoditiesofthe1960s,Nigeriabecameanetimporterofsomecommoditiesthatitformerlyexported.Also,themarketforNigeria’sagriculturalexportsdidnotincreaseappreciablyasroughlyallofitstillgoestotheEuropeanUnion,andalmostinitsprimaryformwithoutanyappreciablevalueaddition.
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.
Oneconsequenceofthefailureofthispolicyregimetocopewiththenegativeoilpriceshockwasitssubstitutionbyanoutward-lookingexternalpolicystanceundertheStructuralAdjustmentProgramme(SAP)introducedin1986.UndertheSAP, theemphasiswasondiversifyingNigeria’sexportbaseaway fromoilandincreasingnon-oil foreign exchange earnings.To achieve theobjectivesof theprogramme,thegovernmentputinplaceanumberofpolicyreformsandincen-tivestoencouragetheproductionandexportofnon-oiltradablegoodsaswellasbroadeningNigeria’sexportmarket.
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.
Beforethepresentdemocraticregimewasre-electedin2003andaneweco-nomicreformagendawasintroduced,evidence-basedpolicy-makingwaslimited.Therewaslittleresearch,analysisorevaluationandanabsenceofin-depthknowl-edgeandunderstandingofthetechnicalissueswithinthepublicsector.Researchinstitutesanduniversitieswereisolatedfrompolicy-making.Engagementbythe
Agricultural Export Potential in Nigeria �
privatesectorconcentratesongainingaccesstothepresidencyforspecialfavoursratherthanpressingforbroadimprovementsinpolicy.Theconcernamongpri-vateagentsaboutgovernmentnotkeepingitswordislegitimate,andtheircon-cernaboutpolicydiscontinuitiesisvalid.
1.3.2 Trade
Anotherdetrimentalpolicyhasbeenthegovernment’semphasison localagri-culturalprocessing.Localvalueadditionasapolicyisdesirabletotheextentthatitpromotes employment andenhances foreignexchange earnings.TwomajorproblemshavecausedthispolicytofailinNigeria.First,poorinfrastructureandhighinputcosts (forexampleenergyandcredit)putNigeriangoodsatacom-petitivedisadvantage.Second,importingcountriesoftenimposebarriersthataresometimes insurmountable for exporting countries. (Personal communicationswithmembersofvariousbilateralchambersofcommerce,minesandagriculturerevealthistrend.)
1.3.3 Inputs
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.
BeforethederegulationofinterestratesinJuly1987,lendingtoagriculturewaslargelyconcessional.Between1980and1986,itwasheldbeloworinlinewiththeCBNminimumrediscountrate.Between1987and2000,thenormalmarketratechargedonallloanswasapplicabletoagriculture.In2000,bankssubmittedtheirproposalsforalowerinterestratetofarmersundertheAgriculturalCreditGuaranteeScheme(ACGS)totheCBNinviewofthehighrateofdefaultbyben-eficiariesoftheACGS.Theproposalwasrejected.Thus,thehighcostofcapitalcontinuedtoposeaconstrainttoagriculturegrowth,includingexports.
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.
Theschemedidlittletoprovidecredittosmallholders.In1978,thefirstyearofoperation,only10.4millionnairawasguaranteedasloans.In1981and1984,thefigureswere32.2millionnairaand24.7millionnairarespectively.Moreover,largefarmersandcooperativesreceivedthebulkoftheguaranteedloans,whileloansreceivedbysmallfarmerswereinsignificant.Specificallyformajorexportcashcrops,intheearly1990s,thosereceivingguaranteeforloansof20,000nairaandaboveformedthegreaterproportionofbeneficiaries.Fromthemid-1990s,
Agricultural Export Potential in Nigeria 1�
guaranteedloansforagriculturalexportsbecamereallyinsignificant.Withsuchdevelopment,commercialbanks,beingnaturallyriskaverse,wouldbehesitantintheirlendingtosmallholderfarmerswhodonotusuallyhaveadequatesecuritytocoversuchloans.
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.
1.3.5 Ruralinfrastructureandextensionservices
Theseareconstraintstoexportsandoutput.Lackofbasicruralinfrastructure,es-peciallyroads,raisesthecostoffarminputsforsmallholdersandreducesoutputpricespaidtothem.DirectorateforFood,RoadsandRuralInfrastructure(DFRRI)andagriculturaldevelopmentprojects(ADPs)wereintendedtoaddresstheprob-lemofruralinfrastructure.ThefailureofDFRRItomakemuchimpactonruralinfrastructureiswellknown,althoughthecausesmayincludethepoliticizationofitsadministration.Similarly,theADPshavehadlittlesustainedimpactonruralinfrastructure.
Provisionofextensionserviceshasbeenlikenedtoafactorofproductioninthatitenhancesentrepreneurialskillsinpeasantfarmers.Itperformedthisfunc-tionreasonablywell inthe1960s.Withrapiddevelopmentofnewvarietiesofmostcropsbyresearchinstitutessincethe1980s,theneedforextensionservicestoinformfarmersontheiruseismorepressingthaneverbefore.However,mostADPswereunabletoprovideextensionservicestofarmersintheirzonesbecauseoflackoffunds.Thisdevelopmenthasbeenattributedtothephasingoutofthe
1� Daramolaetal.
WorldBank’sADPloanfacilities,asthefederalandstategovernmentswerenotabletocontributematchingfundsfortheirsustainability.
1.4 AgriculturalpolicyinNigeria
ThelastsectionidentifiedsomedomesticagriculturalpoliciesamongthevariousconstraintspreventingtherealizationofthepotentialofagriculturalexportsinNigeria.Thissectionexplainsthepolicyfailuresingreaterdetail.
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.
AgriculturalpolicyinNigeriacanbediscussedinfourperiods:1960–69,1970–85,1986–98and1999todate.
Agricultural Export Potential in Nigeria 1�
1.4.1 Pre-andcivilwarperiod(1960–69)
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.
1� Daramolaetal.
Theperiod1970–85witnessedmoredirectgovernmentinterventioninagri-cultureinthefaceofthenoticeabledeclineinagricultureperformance.Avari-etyofpolicieswere introduced.Macroeconomicpoliciesbecameexpansionary,includingdirectgovernmentinvolvementinagriculturalproduction;incentiveswereintroduced,includinglowtariffsonagriculturalinputs.
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.
1.4.3 StructuralAdjustmentProgrammeperiod(1986–92)
Thedeclineinworldoilpricesintheearly1980s,coupledwithmismanagementbythecivilianadministration,gaverisetotwindeficitsinNigeria:fiscalandcur-rentaccounts.Increasingimportbills,coupledwithdecliningforeignexchangereceiptsfromoil,madeNigeriaunabletofinancehercurrentaccountdeficit.Mis-managementofthebudget,coupledwithdecliningfiscalreceiptsfromoil,causedthefiscaldeficittogrow.Nigeria’screditorscompelledthecountry’spoliticallead-ershiptosubmittothemacroeconomicpoliciesof theInternationalMonetaryFund(IMF)asaconditionofnewcredit.Foradetaileddiscussionofthiseraanditseffectonagriculture,seeDaramola(1989).
Therewasaconsensusthatthemilitaryleadershadmismanagedtheeconomyandthatradicalreformswereneeded.Aftersomelengthydebatesastothedesir-abilityof takingadditional loans,andagainstpublicopinion, thegovernmentdecidedtoaccepttheIMFconditionsin1986,culminatingintheSAPera,whichwaslargelycontrarytonationalpublicopinion.
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.
Economictheorysuggeststhatexchangeratedevaluationisgoodforexportsasitmakesexportpricesmorecompetitivebecauseitleadstoahigherfarmgate(domestic)price.Atthesametime,devaluationmakesimportsmoreexpensive.So,foraneconomydependentonimportedinputs,devaluationhasadualim-pact.Anassessmentoftheeffectofthetradepolicyreformssuggeststhatthesehave indeedbeenbeneficial toagriculturalexports.Whiledevaluationboostedexports,liberalizationofexportandpricingmechanismsbroughtaboutconver-genceofdomesticpriceswithworldexportvalues.Forexample,theratioofpro-ducerpricestoexportpricesforcocoaandpalmkernelconvergedsignificantlyandsometimeswentabove100percent,indicatingthatexporterswerepayingfarmerspricesthatwereaboveworldmarketprices.ThispracticewascommonamongAsianswhowantedtobeatforeignexchangerepatriationregulationsinNigeriauntil1994.From1995to1999,pricesbegantodivergenoticeably,totheextentthattheimplicittaxwasabove50percent(thatis–0.56to–0.80),particu-larlyforrubber,cotton,groundnutandpalmkernel.SomemayattributethelattertrendtothereversalineffectiveimplementationoftheSAPfrom1994(AdubiandOkunmadewa,1999).
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.
1� Daramolaetal.
Figure 1 Averagedomesticproducerpricesofagriculturalexportcrops.
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
Year
Pri
ce
Ground nut
Benniseed
Soya Bean
Cotton Seed
Palm Kernel
Palm Oil
Cocoa
1.4.4 Post-SAPperiod(1992–99)
Theannulledpresidential elections inNigeria in1993causedapolitical crisis,whichhaltedthenationaleconomy.ThemilitaryregimesofGeneralsBabangidaandAbachaheldswayduringtheseperiodswiththeexceptionoflessthanoneyeareachofChiefSonekanandGeneralAbdulsalam.Intermsofeconomicpoli-ciesandagriculturalexports,theperiodwasuneventfulasthesuccessivegovern-mentswerejusttryingtofindacceptablesolutionstothepoliticalcrisesinthecountry.Theperiodcoincidedwithvariouseconomicsanctionsfromwesternna-tionsthathappenedtobetheimportingnationssuchasCanada,theUKandtheUSA.Therewereforeignexchangerestrictionsandimportlicensing,andthefoodbillwasgrowingfromyeartoyear.Productionandproductivitydidnotgrow.Inthisperiod,theoilwindfallfromthe1991GulfWarhadbeenfritteredaway,andtheonlythrivingbusinesswasgovernment.
1.4.5 Currentdemocraticregime(1999todate)
ThreedocumentsthatclearlyspelloutNigeria’svisionforagriculturaldevelop-mentaretheNationalEconomicEmpowermentDevelopmentStrategy(NEEDS),National Agricultural Policy (NAP) and Rural Sector Strategy (RSS), 2004. TheoverallstrategicobjectiveoftheNEEDSandNAPis todiversifytheproductivebasefromoilandtopromotemarket-orientedandprivatesector-driveneconomicdevelopmentwithstronglocalparticipation.NEEDSprovidestheoverallframe-workofnationallycoordinatedsectors’strategies,whileNAPaimsatlayingasolidfoundationforsustainablegrowthinagriculturalproductivity.Thelatterisawell-thought-outdocumentthatprovidesaroadmapforthetransformationofbothagriculturalproductivityandexports.
Theperiodofdemocracyhascoincidedwithanotheroilboomasthepriceofcrudeoilhaswitnessedunprecedentedgainsinrecenttimes.Therehasbeenmas-siveinflowandinjectionofcapitalintotheagriculturalsectorthroughbudgetaryallocations,donoragenciesandforeigninvestments.Acombinationofthesefac-torscoupledwithimprovedinputssuchasfertilizers,seeds,creditandsoonhas
Agricultural Export Potential in Nigeria 1�
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
Figure 2 Internationalaveragepricesofagriculturalexportcrops.
20 Daramolaetal.
Table � Summaryofgovernmentincentivesandexportperformanceinagriculture
Nameofincentive Purposeofincentive
RefinancingandRediscountingFaculty(RRF)andForeignInputFacility(FIF)
Toprovideliquiditytobanksinsupportoftheirfinancebusinessdirectedonexportpromotionanddevelopment.RRFtookoffin1987andFIFin1989
Currencyretention Allowsexporterstoholdexportschemeproceedsinforeigncurrencyintheirbank.Tookoffin1986
Taxreliefoninterestsearnedbybanksonexportcredit
Toencouragebankstofinanceexportsbyreducingtheirtaxburden.BecameeffectiveinSeptember1986
ExportCreditGuaranteeandInsuranceScheme
Assistsbankstobeartheriskinexportbusiness,therebyfacilitatingfinancingandexportvolumes
DutyDrawbackScheme ToreimbursecustomdutypaidbyexportersonimportedinputsusedforbanksandCBNexportproduction.Thishasnotbeenwidelyusedbyexportersduetothecumbersomeproceduralrequirementsinvolved,althoughthefundwasincreasedtoN50millionin1988
ExportExpansionGrant Toencouragecompaniestoengageinexportbusinessratherthandomesticbusiness,especiallyexporterswhocanexportN50,000worthofsemi-manufacturedormanufacturedproducts
ExportPriceAdjustmentScheme
Thisisaformofexportsubsidydesignedtocompensateexportersofproductswhoseforeignpricesbecomerelativelyunattractivetoexportersduetofactorsbeyondtheexporters’control
ExportDevelopmentFund Toassistexportersinpartlypayingthecostsofparticipationintradefairs,foreignmarketresearch,andsoon.Thisisanoldscheme
Accelerateddepreciationtocapitalallowance
Toextendsupplementaryincentivestoindustrialorganizationsforexportoftheirproducts.Startedin1986
Manufacturing-in-BondScheme
Toassistpotentialexportersofmanufacturedproductstoimportduty-freerawmaterialsfortheproductionofexportableproducts
Presidentialinitiatives Awiderangeofsub-sector-basedinitiativessince1999toachieveacceleratedinvestmentandgrowththroughacombinationofassuredprotectioncombinedwithothersupportinstruments,basedonactivepublic–privatepartnerships.Sectorswithinitiativesincludecassava,fish,riceandfurniture
hasledtotheavailabilityoflongertermcreditfacilitiesandareductioninthecostoffinancethroughalowerinterestrate.
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.
1.5 Effectsonagriculturaloutputandproductivitygrowth
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.
Thepresidentialinitiativecommitteesmeetatregularintervalstobriefthepres-ident,andthecompositionofeachisusuallystakeholders;meaningfulprogressisbeingrecordedonallfronts.OneofthemostsuccessfulinitiativesistheNationalCocoaDevelopmentCommittee(NCDC),whichismadeupofpowerfulrepre-sentationthroughoutgovernment.ThecommitteeishavingapositiveimpactonthecocoaeconomyofNigeria.Theonlyconcernofscholarsandplannersishowtoinstitutionalizesomeoftheseinitiativessuchthat,whenthecountryelectsanon-farmeraspresident,theseinitiativeswillnotbediscontinued.
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
22 Daramolaetal.
underinvestmentinothers.Farmershavehadlimitedinfluenceovertheorienta-tionofresearch,leadingtothedevelopmentoftechnologiesthatdonotaddressfarmers’problems.
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.
Allovertheworld,producerpricesarenormallyanincentivefor farmerstoproducemore.However,fortheexportsectorinNigeria,becausetheexportcom-moditiesareintheirprimaryforms,internationalpriceshavegenerallybeenonthedeclineandunattractive.UnderNigeria’softenvolatileforeignexchangere-gimes,thefarmers’incomes(producerprices)fromexportwillbestaticatbest,ifnotdropping;hence,itbecomesfairlydifficulttosustainproduction.Thisis
Agricultural Export Potential in Nigeria 2�
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.
Totalfactorproductivity(TFP)growthhasbeenlowandappearstohavefallenconsistentlybetween1970and2000(WorldBank,2006b).Increasesinproductiv-itypercapitahavebeennegligible.Inagriculture,yieldshavebeenfallingand,inmanufacturing,thereisconsiderableunusedcapacity(WorldBank,2006b).Itisinstructivethat,overthedecades,countriessuchasIndonesiahadbothincreasesincapitalperworkeraswellasincreasesinTFP,whileNigeriahaddeclinesinTFPandnegligibleincreasesincapitalperworker.Infact,itevenlooksasiftherewere30yearsinwhichTFPfell,althoughthereissomeindicationthatthishasbeenchangingmorerecently(Table6).
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
2� Daramolaetal.
Table � Contributionstototalfactorproductivity(%)inNigeriaandIndonesia,1961–2004
Outputperworker
Humancapitalperworker TFP
Capitalperworker TFP
Capitalperworker
5%depreciation
Nigeria
1961–1970 2.8 0.1 2.2 0.5 2.7 –0.1
1971–1980 2.1 0.2 –0.5 2.4 –0.1 2.0%
1981–1990 –1.8 0.3 –1.4 –0.7 –1.3 –0.7
1991–2000 –0.5 0.2 –0.9 0.2 –0.9 0.2
2000–2004 2.2 0.2 1.4 0.6 1.4 0.6
Indonesia
1961–1970 2.2 0.5 1.4 0.3 1.9 –0.2
1971–1980 5.2 0.4 1.9 2.9 2.4 2.5
1981–1990 3.6 0.1 1.1 2.4 1.2 2.3
1991–2000 2.2 0.6 0.2 1.4 0.2 1.4
2000–2004 2.9 0.6 2.0 0.4 2.0 0.3
10%depreciation
Nigeria
1961–1970 2.8 0.1 3.3 –0.6 3.9 –1.3
1971–1980 2.1 0.2 –0.5 2.4 –0.2 2.1
1981–1990 –1.8 0.3 –0.8 –1.3 –0.8 –1.3
1991–2000 –0.5 0.2 –1.0 0.3 –1.0 0.3
2000–2004 2.2 0.2 1.3 0.7 1.3 0.7
Indonesia
1961–1970 2.2 0.5 2.5 –0.8 3.1 –1.4
1971–1980 5.2 0.4 1.8 3.1% 2.2 2.7
1981–1990 3.6 0.1 1.2 2.3 1.2 2.3
1991–2000 2.2 0.6 0.5 1.1 0.5 1.0
2000–2004 2.9 0.6 2.4 0.0 2.4 0.0
TFP,totalfactorproductivity.Source:authors’calculationsfromWorldDevelopmentIndicatorsdata.
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.
1.6.1 Globalization,competitivenessandinternationaltrade
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
Figure � Trendinproductionofagriculturalexportcrops.
2� Daramolaetal.
factthatAsianscometoNigeriatobuyrawcashewnutsforprocessinginIndia,whileconsumptiontakesplaceinNorthAmericaandEurope.
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.
Giventheimportanceofagricultureinthenon-oileconomy,thecurrentlowanddeclining levelofproductivity inagriculture isaclear threat tosustainingNigeria’srecentnon-oilgrowth.While impressive,growthinagriculture inthelastfewyearshasnotbeendrivenbyproductivityimprovementsandisthereforeunlikelytobesustainedoverthemediumterm.Improvedagriculturalproductiv-ityisnecessaryfortransformingthesectorfromsubsistencetocommercialagri-cultureinordertosupportamodernagribusinessindustryandgrowingnon-oilexports.Thisisessentialforsuccessfullydiversifyingtheeconomyawayfromoil.Moreover,withlowagriculturalproductivity,jobcreationintheruraleconomyandinrelatedindustrieswillremainlimitedbothinnumbersandinlevelsofre-muneration.Nigeria’spovertyreductionobjectiveswillbehardertoachieve.Rais-ingagriculturalproductivityandcompetitivenessthereforeneedstobeacentralelementofNigeria’seffortstoachievesustainedgrowth.
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.
Insummary,allenterprisescompeteonthebasisofcosts,althoughcostsarenottheonlybasisforcompetition.InconsideringNigeria’scompetitiveness,thequestionofcostsisaveryimportantone;thecostsofdifferentgoodsandserv-icesthatanenterpriseuseswilldeterminethepriceatwhichtheycanoffertheirgoodsorservicesonthemarket.Ifthispriceishigherthanthatofacompetitor,theywilllosemarketshare.ItisthereforeessentialthatcostsdonotgetoutoflinewiththoseofNigeria’scompetitors.Thisstatementneedstobeelaboratedupon,asthereareanumberofcomponentsofcostsinanenterprise.Aslabourcostsareusuallythegreatestsingleelementoftotalcosts,itfollowsthatcountriesinwhichlabourcostsarelowwillalwayshaveacompetitiveadvantage,otherthingsbeingequal.Intheend,however,itisthetotalcoststructureofanenterprisethatde-terminesitsprofitability.IfinNigeriasomecostsareoutoflinewiththoseofourmaincompetitors,suchasthecostofinfrastructure(likeelectricityandwater),Nigeriacanstillcompensateforthesehighcostsbyhavinglowercostsforotherinputs(suchaslabour)totheproductionprocess,providedthatthetotaleffectofthecostsallowstheenterprisestilltobeprofitable.Productivity,whichisoftenacombinationofyieldandtechnology,isalsoverycrucial,andthesearetheissuesrequiringappropriatepolicy.
1.7 ModellingthegrowthpotentialofagriculturalexportsinNigeria
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
TheanalysisinthischapterisbasedonaggregateddataandparametersderivedfromthecurrentGTAPdatabase,version6.0(DimarananandMcDougall,2005).Thebaseyearis2001.Ourdatahavefiveprimaryfactors:land,unskilledlabour,skilledlabour,naturalresourcesandcapital.Thisanalysisisbasedondataconsist-ingof19regionsand31sectors/commodities.Nigeriaand12othereconomiesrepresentsub-SaharanAfrica(SSA);othereconomiesareNorthAmerica,theEu-ropeanUnion,Japan,Indonesia,therestofAsiaandtherestoftheworld(ROW).Twelvesectorscoverprimaryagriculture,ninesectorscoverprocessedfoods,andtherestofnaturalresourceindustries,manufacturesandservicesarecoveredbytensectors.
Weranaseriesofsimulationstoassesstheimpactofproductivityimprovementsandpolicychangesonselectedsub-sectorsinNigeria.Investmentinagricultureisassumedtoleadtoincreasesintheproductivityofagriculturalsub-sectors,whichthenleadtoeconomy-widebenefits.Inparticular,wemodelproductivitygainsinagricultureasHicks-neutraltechnologicalchange.5Weassesstheimpactofbiasedtechnologicalchange,thattechnicalchangethatiseitherlandsavingorcapitalsaving.6Wetakethesimulatedwelfareeffectsfromtheappliedgeneralequilib-riummodelasanindicatorofreturnstoinvestmentinagriculture.Thescenariosmodelledare:
sector-specificHicks-neutraltechnicalchange(augmentingthereturnstoallproductivefactorsequally);
•
Agricultural Export Potential in Nigeria 2�
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.
Theeconomy-wide(aggregate)effectof1percentinternationaltransportationimprovementsisthatNigeriagains0.06percentinwelfare,around$21million.Exportsandimportscontributeequallytothewelfaregains.Theeconomy-wide
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Nig
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Tabl
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Wel
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Paddy rice
Wheat
Other grains
Fruits, vegetables
Oilseeds
Sugar cane
Plant fibers
Other crops
Cattle
Other livestock
Dairy farms
Wool
Forestry
Fishing
Coal
Oil
Gas
Other Mnrls
Red meats
Other meats
Veg Oils
Dairy Prods
Proc Rice
Sugar manuf.
Other foods
Bev., Tobacco
TCF
Other Manuf
Utilities
Trade Trasnport
Services
Sector
100*Welfare gains/Value of output
IndonesiaN
igeriaU
gandaZim
babwe
Figu
re �
Wel
fare
gai
ns
from
1p
erc
ent
sect
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ific,
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1 pdr
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4 v_f
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6 c_b
7 pfb
8 ocr
9 ctl
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11 rmk
12 wol
13 frs
14 fsh
15 coa
16 oil
17 gas
18 omn
19 cmt
20 omt
21 vol
22 mil
23 pcr
24 sgr
25 ofd
26 b_t
27 TCF
28 OManuf
29 EGWC
30 TT
31 Serv
Se
cto
r
100*Welfare gain/Value of output
Capita
lU
nskille
dLabor
Land
Skille
dLabor
Figu
re �
Wel
fare
gai
ns
from
1p
erc
ent
pri
mar
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ctor
-bia
sed
tech
nol
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rogr
ess
inN
iger
ia,b
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ctor
.
Agricultural Export Potential in Nigeria ��
% million $ % million $
Paddy rice -0.01 -0.03 0.00 0.01
Wheat -0.07 -0.01 0.29 0.02
Other grains 0.00 -0.03 0.05 0.50
Fruits, vegetables 0.00 0.17 0.01 0.69
Oilseeds -0.03 -0.04 -0.11 -0.16
Sugar cane -0.05 0.00 0.13 0.01
Plant fibers -0.11 -0.07 -0.10 -0.06
Other crops -0.09 -0.18 -0.50 -1.00
Cattle 0.03 0.08 0.22 0.65
Other livestock 0.06 0.48 0.23 1.91
Dairy farms -0.03 -0.02 0.26 0.14
Wool -0.03 0.00 -0.62 -0.01
Forestry 0.14 0.26 0.07 0.12
Fishing 0.02 0.11 0.13 0.54
Coal -0.10 0.00 0.37 0.00
Oil -0.01 -1.23 0.01 2.04
Gas 0.09 1.26 -0.04 -0.57
Other Mnrls -0.09 -0.13 0.22 0.34
Red meats 0.17 0.06 0.17 0.07
Other meats -0.14 -0.07 0.07 0.03
Veg Oils -0.31 -0.12 0.04 0.02
Dairy Prods -0.30 -0.03 -0.02 0.00
Proc Rice -0.49 -0.10 -0.13 -0.02
Sugar manuf. -0.14 0.00 -0.10 0.00
Other foods -0.02 -0.06 -0.01 -0.04
Bev., Tobacco -0.03 -0.04 0.22 0.34
TCF -0.14 -1.19 0.39 3.25
Other Manuf -0.10 -5.07 0.37 19.26
Utilities 0.00 0.08 0.20 4.64
Trade Transport 0.01 1.23 -0.33 -29.12
Services 0.00 0.16 0.08 7.81
Output Output
international transportation domestic transportation
Table � Output effects from 1% cut in international and domestic transport costs inNigeria
effectof1percentdomestictransportationimprovementsisthatNigeriagains0.17percentinwelfare,around$63million.Inpracticalterms,thisincludesbet-terroadnetworks,especiallyruralroads.
The agricultural sub-sectors that benefit the most from transportation im-provementsarefruitandvegetables,cattleandotherlivestock.Othermanufac-turingisthesectorthatbenefitsthemostfromdomestictransportationimprove-mentsthroughmoreefficientsupplyofbothrawmaterialsandoutput.This is
�� Daramolaetal.
notunexpectedgiventhefactthattransportationisoneofthehighestcostsinprocessingandmanufacturing.
Table9showstheoutputandtradeeffectsoftradeliberalizationinNigeria,inotherwordsremovalofallNigeriantariffsintheGTAPmodel.Theeconomy-wideeffectofthispolicychangeisthatNigeriagains0.9percentinwelfare,around$342million:theallocatedefficiencygainsare$391million,whilethetermsoftradedeteriorateby$51million.Theagriculturalsectorsthatexpandthemost,indollarterms,areothercrops,cattleandotherlivestock.Exportsofothercropsincreaseby$12million,whileimportsoffruitandvegetablesincreaseby$22mil-lion.Thelatter isduelargelytotheabsenceofcompetitivenessonthedomes-ticfront.Inconclusion,Nigeria’sparticipationinaglobalfreetradeagreement
% million $ % million $ % million $
Paddy rice -2.2 -7 25.5 1 163.2 0
Wheat -17.0 -1 51.4 0 -0.7 -2
Other grains -2.3 -21 6.0 0 9.3 0
Fruits, vegetables -0.9 -47 10.1 1 139.2 22
Oilseeds 0.2 0 9.4 2 27.1 0
Sugar cane -9.1 -1 19.2 0 -12.4 0
Plant fibers -9.0 -6 18.9 6 -9.3 0
Other crops 5.8 12 6.2 12 -3.3 -1
Cattle 2.3 7 14.5 0 9.0 5
Other livestock 2.7 23 4.8 0 40.1 4
Dairy farms -8.7 -5 36.6 0 -29.8 0
Wool 32.0 0 32.7 0 -22.1 0
Forestry -0.7 -1 0.7 0 3.7 0
Fishing -7.3 -31 5.3 0 -8.0 0
Coal -14.3 0 0.0 0 0.0 0
Oil 1.3 192 2.8 370 -15.6 0
Gas -1.4 -21 -3.9 -34 87.8 0
Other Mnrls -1.8 -3 2.9 3 2.3 1
Red meats 3.9 1 141.0 0 -4.3 -1
Other meats -59.4 -29 29.4 0 116.0 26
Veg Oils -61.0 -24 41.0 0 54.1 20
Dairy Prods -11.9 -1 32.8 0 2.1 4
Proc Rice -66.0 -13 13.4 0 2.8 11
Sugar manuf. -0.7 0 11.4 0 -0.9 0
Other foods -6.9 -23 14.7 18 7.0 30
Bev., Tobacco -26.1 -41 13.0 4 28.0 34
TCF -34.3 -283 66.0 108 39.7 348
Other Manuf -14.3 -744 51.9 155 15.0 1,271
Utilities 6.0 142 30.6 79 -6.9 -1
Trade Transport 3.7 327 11.9 45 -5.0 -64
Services -0.5 -55 10.6 64 -3.6 -84
Output Exports Imports
Table � OutputandtradeeffectsfromtradeliberalizationinNigeria
Agricultural Export Potential in Nigeria ��
wouldraiseNigeriawelfaregainsto1.15percent,around$434million.So,itisinNigeria’soverallinteresttocontinuetradeliberalization.
1.7.3 Policyimplications
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.
3 Improveirrigationcapacity.ProductivityinNigerianagricultureislow,inpartbecauseofthelowyieldlevelsandthehighyieldvariabilityassociatedwithrain-fedagriculturethatdiscouragefarmersfrominvestingininputssuchasimprovedseed,fertilizersandcropprotectionchemicals.Irrigationcanserveasapowerfulstimulustoagriculturalgrowthbyraisingbiologicalyieldpotentialandincreasingreturnstoinvestmentsincomplementaryinputs(WorldBank,2006a).
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).
1.8 Conclusion
Exportsareanimportantdriverofeconomicgrowthatthemacroeconomiclevel.Thereisstrongempiricalevidenceofapositiverelationshipbetweenfirm-levelproductivityandexportsat themicroeconomic level.Between2000and2005,thevalueofnon-oilexportsdeclinedatanannualaveragerateofabout9percentdespitethefactthattotalexportswere53percentofGDPin2005,largelyasaresultofoilandgas.Theseverereductioninagriculturalexportsisfurtherindica-tionoftheweakcompetitivenessofNigerianagriculture.Agriculturalexportsfellfrom2.5percentto0.2percentoftotalexportsbetween1980and2005.Nigeriahaslostmarketshareforexportssuchascocoa,palmoilandrubber.Non-tradi-tionalagriculturalexportsarelimited.Whileagriculturalexportshavestrength-enedsince2000,performanceisstillfarbelowtheeconomy’spotential.
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.
ItisalsoveryclearfromNigeria’spastexperience,generationofemployment,infrastructureconditionsandlessonsfromotherdevelopingcountriesthatitsag-riculturalexportgrowthshouldbepredicatedonefficientsmallfarms.Thesmallfarmcanlaterdevelopintomedium-andlarge-scalecommercialfarmsbywhichtimethebusinessenvironmentwillbeinabetterpositiontosupportthem.Theexperiencesoflarge-scaleoperationsthathavefailedinNigeriaareinstructiveinthisrespect.
ThischaptersupportsthethesisthatagriculturalexportsinNigeriawereadir-ectvictimof,initially,thecivilwarand,later,theoilboom.Theagriculturalsec-torsufferedseriousdiscriminationandneglectfromsuccessiveadministrations,andnocourageousorcoordinatedeffortstoreviveorresuscitatethesectorweremadeuntil1999whenthecurrentadministrationembarkedonfar-reachingre-forms.Empiricalevidencefromouranalyseshasshownthatagriculturalexportscanbeas lucrativeandprofitableasanyothersectoroftheNigerianeconomywithrespecttoreturnsoninvestment.Therefore,thediscriminationagainstag-ricultureshoulddisappear,andinvestmentshouldbechannelledtoagriculture
Agricultural Export Potential in Nigeria ��
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).
3 TheGTAPframeworkisfullydocumentedinChapters2–5ofHertel(1997)andinDi-marananandMcDougall(2005).FurtherdetailsontheGTAPmodelcanbefoundinwww.gtap.org.
4 TheGTAPmodelissolvedusingtheGEMPACKsuiteofsoftware(HarrisonandPearson,1994).
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
�� Daramolaetal.
labour‘laboursaving’andthosedesignedtofacilitatethesubstitutionofotherinputsforland‘landsaving’.AccordingtoHeady(1949)andHayamiandRuttan(1985:75)biological–chemical innovations,suchashybridseeds,fertilizersandpesticides,alltendtobeyieldincreasingandthussubstituteforland.InHicksterminology,theyarelandsaving.Mechanical technologycanalsohaveayieldeffectwhenitpermitsmoretimelycultivationandanextensionofmultiplecropping,cultivationofsoilsortheuseofir-rigationpumps,butmostmechanicaltechnologyisdesignedtomakeagriculturalworklessphysicallyburdensomeandtosavetheamountoflabourneededtoproduceaunitofoutput;thatis,itsubstitutesmachinesforlabourandisthereforelaboursaving.
7 SeeEhuiandTsigas(2005)foranattempttoprioritizeinvestmentsinageneralequilib-riumframework.
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