NCX, Vehicle for premier value commodities Investors
By Zaheera Baba-Ari
Agriculture in Nigeria composed of four segments of crop production 87. 6%, Livestock 8.1%, fishery 3.2% and forestry 1.1% was impacted by the COVID-19 pandemic largely as a result of lockdown and restriction of movement that negatively affected agricultural production and farm management. Figures from Statista 2020 showed that there was no change in the production of milled rice at 5,040,000MT in both 2019 and 2020, there was however a marginal increase in the production of sorghum in 2020 at 6,900,000MT compared to the 6,665,000MT in 2019.
On a year-on-year basis, Q1 2020 growth rate in the agric sector slowed to 2.2% from 3.17% in Q1 2019, an indication that COVID-19 affected activities in the agric sector. On a quarter-on-quarter basis, agric sector growth rate declined by 0.11% from 2.31% in Q4 2019 to 2.2% in Q1 2020.
In terms of contribution to GDP, agric sector contributed 21.9% in Q1 2020 slightly higher than 21.8% in Q1 2019
A sectoral analysis of Nigeria’s trade according to the NBS showed that trade in agricultural goods sector stood at N387.7billion (or 4.67% of the overall trade), of which exported agricultural goods were valued at N126.3 billion, while the country’s imported agricultural goods stood at N261.4 billion in Q1 2020, indicating a deficit in agricultural goods trade of N135.1 billion in Q1 2020.
On a quarter-on-quarter basis, agricultural goods imported to Nigeria in Q2 2020 rose in value by 59.01% compared to Q1 2020, and on a year-on-year basis agricultural goods imported to Nigeria rose by 66.28% in Q2 2020 compared to Q2 2019. Export of agricultural goods dropped by 38.2% in Q2 2020. Nigeria’s total trade in agricultural commodities in Q2 2020 stood at N493.7billion, of which exports accounted for N78.1billion while import of agricultural commodities stood at N415.6billion in Q2 2020 indicating a deficit of N337.5billion in Q2 2020.
The import of the analysis is that Nigeria lags and the 2020 outlook does not reflect an improvement per se over the 2019 in terms of the indicators considered. Nigeria therefore needs to improve on its food production and food sufficiency and on the quality of the food produced. Nigeria’s agricultural policies are also expected to support the attainment of food production and food sufficiency.
New Government Policies Introduced and the Level of Acceptance
Some of the new government policies and programmes are:
Agriculture Promotion Policy – aims to improve access to international markets by:
Enhancing access to market information through a National Agricultural Information System
Creating specialised export market support teams to enhance export capacity
Nigeria–Africa Trade and Investment Promotion Programme (NATIPP) – is a programme jointly launched by the African Export-Import Bank, Nigerian Export-Import Bank and the Nigerian Export Promotion Council which aims to facilitate the expansion of Nigeria’s trade and investment into Africa
The Presidential Economic Diversification Initiative (PEDI) aims to enhance trade capacity in Agriculture by facilitating new investments in the Agricultural and agro-allied industries, reducing regulatory bottlenecks and enabling access to credit
The Zero Reject Initiative was launched to enhance the acceptability of Nigerian products internationally. It is aimed at improving Agricultural exports through the institution of global quality standards and product standardisation
Economic and Export Promotion Incentives – The Government has placed trade barriers on select agricultural goods to protect local producers and stimulate growth of the industry. In addition, several economic incentives are offered to investors in agriculture in Nigeria including income tax relief, zero import duty on equipment, VAT exemptions, etc
National Fertilizer Control Act – is a vital component of the agricultural policy which aims to safeguard and protect the interest of the entire fertiliser value chain players such as manufacturers, producers, blenders, importers, distributors and the end-users, the farmers. The regulatory framework aims at guaranteeing the supply and distribution of quality fertilizer and other farm inputs to farmers at the right time, right place and right prices
Setting up of Special Ago-Industrial Processing Zones (SAPZs) – aims at helping to develop competitive processing capacity through investment in public goods, policy interventions and the provision of desirable support services and skills development. It will boost value addition to agriculture, improve competitiveness and in effect reduce food imports, assure food sufficiency, create jobs for the youths and grow the nation’s economy by generating revenue. Agric mechanisations is the main vehicle for strategically implementing the SAPZs on an intense scale and are to be located around brown-fields areas with developed and existing infrastructure such as rail, roads, power and irrigation system.
2B. Level of Acceptance
Stakeholders are enthusiastic and supportive of the government policies and programmes as they are aimed at improving the farming business environment, enhancing the contribution of the agricultural sector to the GDP and improving the livelihood of the farmers and actors in the agro commodities value chains as well as the farming input producers and suppliers in a positive sum game.
Plans for 2021 and What Nigerians Should Expect in the Area of Commodity Exchange
The Nigeria Commodity Exchange is a Special Purpose Vehicle (SPV) that is central to the attainment of government policies and interventions in agriculture sector, and it provides a transparent market platform for price discovery and quality assurance of trades in agricultural commodities which is necessary for sustainable agricultural commodities production.
The NCX has developed requisite infrastructure that supports seamless trades on its platform including a state-of-the-art Trading System, Warehouse Management System and Mobile App, and has equipped warehouses across the country for professional inventory management. The NCX is backed by the CBN as a majority shareholder; the CSCS is the Exchange’s depository which ensures prompt clearing and settlement of trades.
The NCX will take advantage of the AFCTA in 2021 to improve on its operations particularly trading activities for the benefit of the Nigerian farmers. Thus, we would upscale on sensitisation and public enlightenment on the benefits of buying and selling on the Exchange.
The NCX would collaborate with trade points in selected states of the Africa continent to have a fair share of the Africa and Regional commodities market.
The NCX would also introduce innovative products that would stimulate the appetite of investors and actors in the agricultural commodities value chain to onboard them on the Exchange and increase their participation in trading activities.
Mrs. Zaherea Baba-Ari is the Managing Director/CEO of Nigeria Commodity Exchange.
