Nigeria Agribusiness Report Q3 2009

We believe that the government's recent attempts to stimulate agricultural production through a mix of public-private partnerships have brought a reasonable degree of initial success, contributing to positive growth forecasts in all categories covered in BMI's latest Nigeria Agribusiness Report; barring beef, we forecast double-digit supply and demand growth across the board.

The Nigerian Federal Government's efforts to revitalise the high potential of the domestic agricultural industry seems to be reaping positive developments. A recent World Bank funded US$150mn assistance package is stirring official sentiment that substantial levels of private-led investment can be attracted to the industry, thus helping the major food-importing country become both self-sufficient and an exporter of dietary staples.

The Commercial Agricultural Development Project (CADP) will be piloted in five states across the country enabling farmers to receive support in the production of staples such as corn and rice, in order to help alleviate the food crisis. It is also hoped that the domestic supply chain in goods like palm oil, cocoa, poultry and aquaculture can be developed with around US$50mn of the fund, which would stimulate local employment opportunities, as well as reduce the amount of food purchased from overseas.

The first part of the project will entail bolstering agricultural production systems to stimulate staple crop production. Following this, support to value-added goods will be implemented, before the final two stages aimed at facilitating market access and building infrastructure. The government also plans to launch a marketing initiative, promoting the industry to graduates as a profitable alternative to city-based employment in the industrial and services sectors. As such we see strong potential for solid output growth in grains production which should, in turn, feed through into the livestock outlook.

Indeed, poultry production is one of the areas where we are particularly optimistic for 2009; 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 what will be 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 robust local demand but may also provide a chance for exporters to expand profit margins.

With poultry demand solidly reliable among Nigeria's population, production is set to grow by nearly 18% during the course of the outlook window.

Meanwhile, sorghum will remain the most popular crop due to its versatility and hardiness, although high domestic consumption leaves little scope for export revenues.

The main caveats to Nigerian agriculture growth for 2009 (and possibly 2010) are presented in the form of domestic financial woes; oil revenues are substantially lower than in previous years, while the effects of a depreciating naira have been exacerbated by lower levels of market capitalisation as some worried investors have been quick to pull their money out of the economy.

However, a string of Multi-National Companies are unfazed by such sentiment and seem intent on further rooting themselves in the local agricultural industry. If anything, the comparatively lower costs of acquisitions may actually serve as incentives to take advantage and expand in advance of future price recovery. Africa's largest economy will undoubtedly benefit from their presence, particularly during a period of indefinite state austerity.