Agriculture GDP contracts for first time in over 7 years

Article summary

• Nigeria’s agricultural sector contracted by 0.90% in the first quarter of 2023, contributing to a decline in the overall GDP. Crop production, the largest sub-sector, grew by only 1.93%.
• The contraction in Nigeria’s agricultural sector in Q1 2023 marks the first negative growth rate recorded in the sector since at least 2016 and the first under President Muhammadu Buhari’s administration, despite significant government investments in agricultural interventions.
• The poor performance of the agricultural sector has serious implications for food security, employment, and poverty reduction.

Nigeria’s agricultural sector experienced a sharp decline in the first quarter of 2023, as the Gross Domestic Product (GDP) contracted by 0.90% (year-on-year) in real terms.

This was disclosed by the National Bureau of Statistics on Wednesday in the first quarter report for 2023.

The sector contributed 21.66% to overall GDP in real terms in Q1 2023, lower than the contribution in the first quarter of 2022 and lower than the fourth quarter of 2022.

What the data reveals: The report stated that the agricultural sector in the first quarter of 2023 contracted by 0.90% (year-on-year) in real terms.

• This is a decrease of 4.06% points from the corresponding period of 2022 and a decrease of 2.95% points from the preceding quarter which recorded a growth rate of 2.05%.

The agricultural sector comprises four sub-sectors: Crop Production, Livestock, Forestry, and Fishing. Crop Production remained the dominant sub-sector, accounting for 86.85% of the total nominal value of the sector in Q1 2023.

• Crop production which is also the largest contributor to Nigeria’s GDP in real terms grew by just 1.93% compared to 2.01% in Q4 2022.
• Crop Production GDP has been tepid for about 8 years despite trillions of naira spent by the government to help boost farm yields.
• Meanwhile, Livestock which contributes just 1.25% to GDP, contracted by about 30.57%. The subsector is now in recession after it also shrunk by 1.59% in Q4 2022.

Why the contraction:  This was the first negative growth rate recorded in the sector since at least 2016, and also the first under President Muhammadu Buhari’s administration, despite the injection of trillions of naira into various agricultural interventions.

• One of the main reasons for the poor performance of the sector was the scarcity of foreign exchange, which affected the importation of inputs and machinery.
• Another major reason for the poor performance was the naira scarcity experienced in the first quarter of 2023 which affected businesses across the country, especially farmers.

What this means: The dismal performance of the agricultural sector has serious implications for Nigeria’s food security, employment generation, and poverty reduction.

• Despite the damage Covid-19 brought to the economy in 2020, the Agriculture sector avoided a contraction. Yet, it has contracted in 2023 Q1 in what can be described as self-inflicting.
• The sector employs about half of the labor force and provides livelihoods for millions of Nigerians, especially in rural areas.
• The contraction of the sector could worsen the already high levels of unemployment, underemployment, and poverty in the country.

What needs to be done: To reverse this trend and boost the productivity and competitiveness of the agricultural sector, Nigeria needs to address the structural and institutional challenges that hinder its development.

• These include inadequate infrastructure, poor access to finance and markets, low adoption of technology and innovation, weak extension services, insecurity and conflicts, climate change, and environmental degradation, among others.
• Nigeria also needs to diversify its export base and increase its non-oil revenues by promoting value addition and processing of agricultural products.
• This would reduce its dependence on oil earnings and foreign exchange inflows, which are volatile and unpredictable.