NIGERIA STRATEGY SUPPORT PROGRAM Brief No. 1

Towards a Pro-poor Agricultural Growth Strategy in

By Shenggen Fan, Babatunde Omilola, Valerie Rhoe, and Sheu A. Salau

Agriculture remains a major sector for the Nigerian economy. The majority of Nigerians rely on for their livelihood. It is increasingly evident that improved agricultural development and growth can offer a pathway from poverty, but evidence-based policies and strategies are needed. Nigeria’s agricultural policies have been inconsistent, uncoordinated and ad hoc. Such agricultural policies have limited the realization of the sector’s full potential. A paradigm shift towards a sound evidence-based policymaking process is needed to promote a more equitable, gender sensitive and environmentally sustainable growth in the agricultural sector. The recent food price surge has made this paradigm shift even more important.

This brief overviews the recent performance of agriculture in Nigeria, reviews past key agricultural policies and strategies, and explores future options in promoting further agricultural growth.

Agriculture, Poverty, and the Nigerian Empowerment and Economic Development Economy Strategy (NEEDS 1) poverty reduction programme. However, this growth is largely derived from the Agriculture, despite facing a steady decline, is the expansion of cultivated land and is not sustainable single largest contributor to the well being of the in the long run. In addition, this growth has not rural poor, sustaining about 86 percent of rural been able to trickle down to the poorest of the poor, households in Nigeria. According to the Central and has not helped tackle the problem of Bank of Nigeria (2006),the sector accounted for unemployment and underemployment of rural 41.8 percent of the overall economy in 2006 youth. followed by the non-oil industry (26.1 percent), Another feature of the Nigerian agricultural sector is while crude oil only accounted for 21.9 percent. But its high level of differentiation regarding the gender until very recently, the sector had not performed as division of labor in production, marketing, and use well as it should have because of several decades of income. About 80 percent of the rural female of neglect. From 1970 to 2000, it grew at 1.7 population is engaged in agriculture and as percent per annum, very low when compared with family labor. Most of these women have poor its population growth of 2.7 percent (WDI, 2008). access to agricultural services and are living in This is a key reason why the country still has one of poverty. the highest poverty rates in the world. In order to achieve desired social and economic Agricultural growth began to accelerate after 2000, development in Nigeria through agriculture, and since 2003, the annual growth rate has been research-based evidence is required for above the 6percent, a target set under the National government and other stakeholders to prioritize and • Are they the optimum required to achieve sequence their policy and investment interventions. the Millennium Development Goals (MDGs)? • Are there enough financial resources to Agricultural Policies and Strategies pursue the set targets? Nigeria’s quest for reform and accelerated development in the agricultural sector, among other The NAP and NEEDS strategies also lack implicit reasons, led to the adoption of the New Agricultural and explicit monitoring and evaluation impact Policy (NAP) in 2001, along with the Integrated mechanisms that would ensure that lessons Rural Development Strategy. The pivotal learned from successes and failures of past contribution of agriculture to poverty reduction in development strategies are incorporated into future Nigeria was given priority in all the policy strategies documents, but many grey areas abound. A successful strategy should include evidence- The NAP outlined the role and functions of each tier based priority-setting, and sequencing of policy of government, but no guidance was given on the actions by relevant development actors such as sequencing and devolution of responsibilities state, private sector, and civil society organizations, between state and local governments. The private with clear indicators and a mechanism to monitor sector was also recognized as a prime mover of the and evaluate progress and impact. economy, and macroeconomic policy environments needed to accelerate private sector development Towards a Pro-Poor Agricultural Growth are being pursued. But the successes of these Agenda policies have been limited and need to be It is clear that more rapid and sustained growth in evaluated. the agricultural sector in the country is needed. But how to promote such growth is less straightforward. Nigeria launched its development strategy for While the Agricultural Policy Support Facility growth and poverty reduction in May 2004 under (APSF) will assist the Federal Ministry of the umbrella of the National Economic Agriculture and Water Resources and other Empowerment and Development Strategy (NEEDS stakeholders to improve their long term capacity in I), the state-level State Economic Empowerment policy analysis, we offer here some preliminary and Development Strategy (SEEDS), and the local thoughts on how Nigeria can move towards a pro- level LEEDS. The strategy is based on three pillars: poor agricultural growth agenda. empowering people and improving social service delivery; improving the private sector, focusing on Pro-poor Macroeconomic Policies non-oil growth; and changing the way government works and improving governance. Sound macroeconomic policies are important to achieve national development targets through The latest version of the programme, NEEDS II, agricultural development. Exchange rate regimes, includes matrices of objective, targets, trade policies and the concomitant inflation rate implementation timetables and responsible have implications for the competitiveness of organizations for specific actions. The role of agricultural commodities in the international market. agriculture in promoting the Nigerian economy, An overvalued exchange rate penalizes export and reducing poverty and generating for reduces competitiveness in the world market. Trade the rural youth has been highlighted. But key Import restrictions and trade barriers lead to less questions remain, including:. efficient use of scarce resources. Rising energy • Are these set targets desirable and and input prices impact the cost of production. sufficient to turn the fortune of the sector around? “Dutch disease,” an economic occurrence that can through a regime of deregulation, and market negatively affect other sectors of the economy due forces largely determined prices. Subsidies on to exploitation of a natural resource, has been agricultural inputs stopped. The private sector particularly severe in affecting the Nigerian responded but could not meet the short term agriculture sector since the oil boom of the 1970s. challenge. Oil exports have led to large foreign exchange inflows. In turn, the foreign exchange inflows have The International Centre for Soil Fertility and not only appreciated the value of Nigeria’s currency Agricultural Development (IFDC) has assisted but have also eroded the competitiveness of Nigeria in developing its agricultural input market domestically produced agricultural goods in through the pilot DAMINA (Developing Agri-Input comparison with low-priced imported goods, Markets in Nigeria) Project. However, challenges in leading to a reduction in agricultural activities in the input markets remain, including irregular and country. The World Economic Forum 2006 rated inadequate supply, and distribution inefficiency. Nigeria as the least competitive globally, even in Delays in the delivery of inputs to farmers are Africa. Nigeria was rated 88 out of 117 countries on commonplace. This inefficient distribution denies its Global Competition Indicators, far behind poor farmers access to inputs needed to raise their Ghana, South Africa, and Brazil. productivity and incomes.

More must be done to ensure a favorable Revolutionizing the input supply system in Nigeria macroeconomic environment for pro-poor requires a holistic approach that addresses, among investments and growth. A strategy for connecting other issues, access, affordability, availability, and agriculture to poverty reduction in Nigeria -- taking incentives. advantage of the recent gains in the Nigerian macroeconomic environment--needs to be better Increasing farmer’s access to is particularly articulated.. While many macroeconomic polices critical. Fertilizer use in Nigeria is the lowest in Sub- are out of the domain of agriculture, some specific Saharan Africa, at 7kg/ha per year. The polices related to agriculture require changing. For government currently has a strong presence in the example, export taxes of agricultural products and input market, with both federal (25%) and state (2- import tariffs of agricultural inputs should be 50%) governments subsidizing fertilizer. The use of gradually reduced and ultimately eliminated. In vouchers as an alternative distribution strategy for addition, special tax policies should be introduced fertilizer is ongoing, but under-delivery and black to attract foreign and domestic private investments marketing pose enormous challenges. In addition, in agriculture. The macroeconomic environment the price of fertilizer continues to increase, making must be closely monitored, as rising food prices it more difficult for poor farmers to access it, even may cause inflation. with subsidies. In response to these past challenges, the Government of Nigeria plans to Input Supply disengage from subsidizing the procurement and distribution of fertilizer in the near future. There is Increasing agricultural productivity requires therefore the need to identify best approaches to efficient, effective, and timely supply and support an efficient and effective fertilizer system distribution of inputs to farmers. To complement that reaches both men and women farmers. An this, appropriate technology transfer in the area of approach targeted to small holders, together with improved seed varieties, and the use of credit, would lead to both efficiency gains and more environmentally friendly agro-chemicals are equitable outcomes. imperative. High prices, unavailability and slow release of During the implementation of the Structural seeds have constrained farmers from harnessing Adjustment Programs (SAPs), the government the full potential of improved varieties. To meet the withdrew from procurement, supply, and distribution need for high-quality and disease-resistant improved seeds, the government, in partnership economic growth and poverty reduction. Analyzing with the Comprehensive African Agriculture the impacts of domestic investments on agricultural Development Program (CAAPD) of the New productivity growth, and using this knowledge to Partnership for Africa’s Development (NEPAD), has prioritize public spending is crucial to achieving launched three country-wide programs to promote development targets. the wider use of modern seeds. But more effort is needed to ensure that more smallholder farmers It is clear that the country needs to increase its have timely access to the use of these seeds. investment in agriculture, particularly agricultural Strengthening the National Agricultural Seed research and development (R&D), as current Council, increasing production of breeder seeds, investment is very low. The average federal public providing certified seeds through public-private expenditure in agriculture was 1.8 percent from partnerships, strengthening capacity for appropriate 2001 to 2005, and in 2000 only 0.38 percent of the use of distributed seeds, and ensuring timely agriculture GDP was publicly invested in agriculture delivery are top priorities. R&D. Evidence has shown that returns to R&D are potentially very high. Irrigation investment, Output Diversification and Value Chains particularly in northern Nigeria, has shown high Despite efforts directed at reducing its dependence impact on farmers’ income and poverty reduction. on oil,the Nigerian economy has remained Access to roads, electricity, and telecommunication undiversified.. It is important to diversify the must also be improved if the country is to shift its productive base of the Nigerian economy away production from traditional crops to high value from oil and to promote market-oriented, private commodities. sector-driven economic development through the direct promotion of agriculture. The activities of the Governance agricultural sector also need to be diversified to high value production, as the level of value addition The Nigerian government’s efforts at addressing activities in agriculture is low, due to inadequate governance issues have led to reforms in the public processing and post-harvest technology, low sector, decentralization and the establishment of capacity and --more importantly-- lack of access to anti-graft agencies. Private sector initiatives are credit.. Failures are evident along the value chain of also complementing government efforts. most agricultural commodities in Nigeria. This Consequently, confidence is being restored and the ultimately leads to a widening disparity between investment climate is supporting more private farm gate and retail price, leaving t poor farmers sector investment. Good governance is being with the least share from the value chain. In effect, seriously pursued. farmers do not get fair prices for their produce. Decentralization in governance is stipulated in the is a strategic crop with great potential to Nigerian constitution. To this effect, state and local gain higher value, due to its strong demand as a governments get financial allocations from the starch and feed from the international market. federal government to provide certain services at However, it is estimated that more than 50 percent the grassroots level. Local government is now of cassava is wasted in production and post- receiving allocations from excess crude oil. harvest activities. Improvements in its value chain However, the level of development of local through increased yield, improved rural roads, and governments does not justify the resources at the strengthened processing and marketing are disposal of both the state and local governments. crucial.. Their inefficiency in the delivery of those services, disregard for gender differences, and delivery Public Investment approach has continued to disenfranchise the poor from participating in the programmes that affect The pattern and efficiency in real government their lives. Clear procedures, regulations and expenditure on agriculture has implications for assignment of responsibilities will enhance delivery policies must take into consideration the agricultural of services. sector. Overvalued exchange rates, high inflation, and high interest rates will hurt the agricultural Rising Food Prices sector and the poor. The government also needs to allocate more financial resources to support the Since January 2005, international food prices have agricultural sector. Increasing the current spending risen 83 percent with the global price of , share on agriculture is a must for the country to and increasing by 80, 70 and 25 achieve the first Millennium Development Goal of percent, respectively. FEWSNet’s recent survey of halving the poverty and hunger rates by 2015. This the main northern markets showed that the retail spending must be prioritized and focused on public price for maize increased by 75 percent, goods that have greatest impacts on poverty by 30 percent, and by 50 percent since last reduction. year. (However, they remain lower than February 2005 prices.). Cassava prices in Nigeria have also The agricultural sector also needs to diversify its seen increases. activities to high value production. This will not come automatically. Policies and strategies are Nigeria should plan its initial actions to help farmers needed to improve farmers’ access to technologies, reap the benefits of the higher food prices, while credit, markets, and information and to encourage protecting those most vulnerable to high prices. private sector investment in processing and Development and implementation of appropriate marketing businesses. and timely short-term interventions will require close monitoring and analysis of food prices, Improved governance, equitable and well consumption, and production. Medium- and long- functioning markets, supplies of essential inputs term evidence-based agricultural strategies for such as seeds and fertilizer, access to sustainable Nigeria should be crafted and implemented to technologies and absence of conflict are likely to promote pro-poor agricultural development and make Nigerian agriculture flourish. Agricultural growth, taking the recent food price surge into policies and strategies in Nigeria must be carefully consideration. designed to prevent overlapping organizational roles and responsibilities. The APSF is committed Conclusion to working with the Government of Nigeria to ensure that evidence-based policymaking is The Nigerian agricultural sector has improved in institutionalized. Through APSF research efforts, recent years. But this improvement needs to be the policy environment landscape will be improved, sustained to achieve the development targets set agricultural growth options and the accompanying for the sector. The growth patterns must be pro- trade-offs explored, and the overall objective of poor, gender sensitive and environmentally friendly. poverty reduction achieved. The APSF is prepared to face the challenges and take part in Nigeria’s To achieve these goals, the Nigerian government history towards agricultural growth that is pro-poor, must double its efforts in reducing policy instability gender sensitive and environmentally sustainable. and inconsistency, and ensuring that policy formulation processes benefit from evidence and consultation with stakeholders. Macro and fiscal

This brief is intended to promote discussion; it has not been formally peer reviewed, but it has been reviewed by at least one internal and/or external reviewer.

The Nigeria Strategy Support Program (NSSP) of the International Food Policy Research Institute (IFPRI) supports the Agricultural Policy Support Facility (APSF), an initiative to strengthen evidence-based policymaking in Nigeria in the areas of rural and agricultural development. In collaboration with the Federal Ministry of Agriculture and Water Resources and funded by the Canadian International Development Agency (CIDA), APSF supports the implementation of Nigeria’s national development plans by strengthening agricultural-sector policies and strategies.

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