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Nigeria Agribusiness Report Q2 2009
Business Monitor International, April 2009, Pages: 46
The Nigeria Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Nigeria's agribusiness service.
In the Nigeria Agriculture Q209 report, we follow on from the content given in the Q109 report and look at the efforts made to redress the balance in agricultural production. We also introduce our new Business Environment Overview, which gives a more comprehensive feel to the entire outlook. Prior to the rise of the domestic oil industry as the country's most important sector, Nigerian agriculture was able to keep the country self sufficient in many important food and cash crops. However, as oil revenues have poured in, the farming sector has been neglected, resulting on the need for net food imports.
Fuel prices have taken a battering since record highs recorded in 2008 as the world economy continues its downward trajectory, thus Nigeria's ability to fund imports has waned; a dynamic that has been exacerbated by domestic financial market woes and production cutbacks in major exporting countries, such as Brazil, on which Nigeria are reliant for staple consumption. This has resulted in the Yar A'dua administration focusing on efforts to breathe life back into the local industry so that the nation can again rely on its own community to cater to its staple needs.
The government recently invested 15% capital in a public private partnership (PPP) venture with African Chicken Farm, a renowned Syrian agribusiness specialist, to substantially expand poultry production in the northern state of Kwara. The project will cover 700 hectares and around US$400mn will be used to build the largest chicken farm in Africa. The initiative should get underway by the end of 2009 with the aim of producing 3mn poultry per year at full capacity. This will not only enable Nigeria to easily feed local demand but would give a real boost to export orientation.
We believe the efforts made by Nigeria to enhance agricultural productivity will translate as solid supply and demand growth for almost the entire range of commodities covered throughout the forecast period. Only beef consumption is predicted negative growth between 2009 and 2013, while the majority of goods are forecast to show double-digit year-on-year expansion.
The growth of PPPs in agriculture may enable a greater spread of investment over the longer term, as well as helping to better align private entrepreneurism with state developmental objectives. However, a serious caveat to future investment presents itself in the form of Nigeria's recent financial market difficulties. As an economy highly dependent on fossil fuel exports, Nigeria is particularly vulnerable to external shocks, such as the oil price slumps which began in the latter half of 2008. Moreover, a depreciating currency juxtaposed with lower levels of capitalisation - as investors pull their money out of the local economy - may serve to reduce the bullishness of the author’s outlook.
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