Nigeria Agribusiness Report Q1 2009 - new market and company analysis

The Nigerian agricultural sector can expect to see some major changes over the coming year. The mainly subsistent sector has failed to keep pace with the growth in population over recent years and has been hampered by energy-supply disruptions and public sector inefficiency. The country, once a net food exporter, must now import large amounts of foods such as staple
rice. In the Nigeria Agribusiness Report for Q109, we look at how the industry is striving to recover and banish its negative image, in order to achieve food self-sufficiency and boost export potential.

The sector should benefit from a robust stream of local demand; only beef and corn are expected to experience negative consumption growth over our forecast period. We believe that rising disposable income and subsequent demand for luxury goods and confectionery will see milk and cocoa accruing the sharpest gains in demand, with 56.86% and 49.80%, respectively. Improvements in cocoa processing capabilities will enable the country to partake in value-added production locally instead of shipping out the raw cocoa and then buying it back at hugely inflated prices.

Oil revenues rose sharply in the last year as world prices soared, which, in turn, has allowed the Yar´Adua administration to focus on its efforts in improving the infrastructural inadequacies that have blighted the economy and thwarted the development of a sustainable agricultural sector. With GDP projected to experience year-on-year (y-o-y) growth of 8.8% by the end of 2008, the private sector is in a great position to help facilitate production gains by way of extra investment, alongside government incentives to help develop specific sectors such as sugar and cocoa.

The sugar industry is an exciting area of opportunity, with the potential to expand output exponentially over the next five years. We forecast consumption to grow by 21.75%, fuelled by the growth in confectionery and soft drinks. However, we believe that the real developments will be made in sugar production. The Federal Government of Nigeria has set a goal of being virtually self-sufficient in sugar by 2011, thus alleviating the massive import burden. It has taken steps to reform the running of the sector, such as privatising the previously inefficient government-owned estates and providing incentives as a way of stimulating local investment and development. Providing the country sustains the efforts made so far to revitalise the industry, we foresee a massive output in production of over 300% to 465,000 tonnes by 2012.

We feel that the efforts undertaken by Nigeria to try and diversify production away from oil reliance are good news for agricultural production, and food security will benefit as a consequence. While GDP growth has been solid, income disparities remain only too evident, so the focus on agricultural selfsufficiency will enable greater job creation thus increased socio-economic well-being. The most pertinent potential caveats to sustained growth are the amounts of corruption and patronage that are still associated with business in the country and the investment instability exacerbated by political turmoil in the oil-rich region of the Niger Delta. Visible efforts to deal with these issues would surely accelerate the development process going forward.

Source:pr-inside