Boosting Nigeria’s agricultural output

Anytime soon, when the National Bureau of Statistics (NBS) releases the rebased GDP, the contribution of agriculture will shrink to 25-30 percent. In aggregate terms this is not a problem. However, economists are concerned that productivity growth in agriculture, a sector with the potential to generate millions of jobs, is not encouraging.

Nigeria is yet to exploit labour-intensive industrialisation. On aggregate, not enough youth are being employed in manufacturing. Rather, retail and distribution are absorbing most of those migrating to the cities. Agriculture, the major contributor to Nigeria’s GDP, is not growing as fast as the wholesale and retail, and telecommunications sectors. In the third quarter of 2013 their respective share of GDP was 42 percent, 19 percent and 8 percent. But the growth rates of trading (24 percent) and telecommunications (9 percent) outpaced farming’s 5 percent in the same period.

In essence, structural transformation in Nigeria is primarily about how to increase productivity in the agricultural sector. As productivity rises it makes labour available for factories and service industries, assuming they have the necessary skills.

Economists and analysts say growth in sub-Sahara Africa (SSA) is not mirroring East Asia’s replication of Industrial Revolution; that is, farmers turned factory workers. These East Asian countries experienced rapid structural transformation. That is, a quick change in the pattern of economic activity across sectors (from agriculture to manufacturing to services) and space (migration from rural to urban areas). Since it involves the shift of workers from low to high productivity sectors, changes in agricultural productivity, the number of people employed as farmers and urban migration are ways to measure the extent of structural transformation. In Nigeria, the economy is growing decently but transforming slowly.

Economists say the below average productivity growth in agriculture has been due to fertiliser use and extension of farming into non-arable land. Add to that our over-reliance on oil and gas, erratic electricity supply, poor roads and rails networks, lack of finance, minimal intra-regional trade etc.

To turn potential into reality, Nigeria has to boost productivity in the agricultural sector. Increasing productivity, according to UNDP, requires wider use of fertilizer and better seeds, stronger research and development efforts, improved extension services, improved water management (including irrigation), improved access to markets.

Furthermore, policymakers must note that the informal sector still holds sway; it can’t and won’t jumpstart productivity growth. What can be done? Small businesses have to be nurtured to start small but formal. The finance ministry says that 75 percent of small and medium businesses are not currently in the tax system.

Boosting productivity in the agricultural sector is one of several other factors that cannot be ignored. Research by Credit Suisse, an investment bank, notes that few countries succeed to transit from an era of cheap labour and abundant natural resources.

According to the investment bank, “successful transitions require a unique blend of several interrelated factors”. These factors consist of a ready pool of high quality human capital; innovation and R&D; high quality physical infrastructure; improved business climate (regulatory and legal) and favourable demographics.

Nigeria is stupendously blessed with the last factor but this demographic dividend risks becoming a disaster as youths’ expectations for a better future are dashed by their stark reality: most are uneducated, unemployed and under-employed.

Along with investors, economists and well-meaning Nigerians, we worry that these factors, left unaddressed, can fuel social protest and political instability.

Thus, we call on major stakeholders to draw inspiration from Brazil’s transformation into an agricultural superpower. Brazil has combined its abundant natural resources – land, water and favourable climate – with public and private investment in R&D, professional management and farming practices to become a top global supplier of beef, orange juice, ethanol, cotton, soybean oil and cellulose.