Why agricultural sector drove Nigeria’s Q4 GDP growth

Nigeria's agricultural sector saw a significant growth of 3.5% in the fourth quarter of 2021, contributing about 26.8% to the overall GDP, primarily driven by crop production. Kala Masha, the Managing Director at Babban Gona, provided insights into the key drivers of this growth in a recent interview with CNBC Africa. Masha highlighted several factors that fueled the expansion of the agricultural sector in 2021. One of the notable trends was the substantial increase in prices for key commodities, leading to enhanced economic opportunities for farmers. This surge in prices drove more farmers to cultivate additional land, resulting in a surge in supply. However, Masha cautioned that this could lead to a potential moderation in prices in the near future as supply catches up with demand. Furthermore, the sector benefited from increased investments in agricultural inputs and favorable weather conditions in 2021. Despite these positive developments, Masha also raised concerns about the rising inflation in agricultural inputs, particularly fertilizer prices, which have reached historic highs. The escalating costs could pose challenges to productivity in the upcoming season, with farmers likely to face double the expenses compared to the previous year. Crop production emerged as a significant driver of the sector's performance, contributing 91.2% to overall growth. However, Masha emphasized that while crop production has seen substantial growth over the years, low levels of farm productivity remain a challenge. Farmers struggle to access the capital needed to purchase high-quality inputs, leading to lower yields per hectare compared to global standards. The lack of access to financing for crucial inputs like seeds and chemicals hinders farmers from achieving optimal yields. Addressing these persistent challenges in the agricultural sector requires a shift in policy approach, according to Masha. While acknowledging the government's efforts to support the sector through direct financing to farmers via commercial banks, Masha advocated for a more sustainable solution that mobilizes private sector investment. He cited the need for policies that incentivize private investors to channel significant capital into agriculture, similar to successful models in other countries like the United States. Masha proposed a shift towards leveraging government support to de-risk investments for commercial actors, enabling them to access larger funding and address the substantial financing gap in the sector. By catalyzing private sector involvement and facilitating access to substantial capital, Nigeria's agricultural sector could unlock its full growth potential and contribute significantly to the nation's economic development.