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Nigeria Agribusiness Report Q2 2011


Nigeria Agribusiness Report Q2 2011

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Additional Information
Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Feb 17, 2011
Quick Overview
BMI View: Strong production growth is anticipated for most agricultural sectors in the five years to 2015. In the case of corn, sorghum, cocoa and sugar, growth is expected to be particularly high. Meanwhile, over our forecast period, we envisage positive consumption growth for all agricultural sectors. Growth in the consumption of pork, poultry, milk and sugar is expected to benefit from rising living standards and by an expanding population. Although Nigeria's agricultural industries have high growth potential, they continue to suffer from insufficient investment. The Nigerian government has expressed a commitment to further agricultural development in the quest for improved food security and economic diversification. However, actual investment has been acutely low in a sector which contributes almost 42% to Nigeria's GDP and employs around 70% of its workforce. Nigeria's challenging business environment remains a key factor shaping private sector investment levels.
Key Industry Forecasts
?? A revised cocoa production forecast anticipates 5.0% growth in 2010/11 and a 6.5% increase in output the following year. In the five years to 2014/15, a 31% rise in output is predicted. The higher production in 2011/12 will reflect increased plantings as farmers move to capitalise on the higher price of cocoa beans. Although long-term growth will benefit from government and private-sector investment, there remain several serious downside risks to our production forecast. They include the possible introduction of an EU ban on Nigerian cocoa exports.
?? Corn and sorghum are two of Nigeria's staple foods. We now predict that Nigerian corn output will increase 6.6% in 2010/11 to reach 9.28mn tonnes; this is notably up from last quarter's prediction of 4.4% growth for the 2010/11 agricultural year. According to recent reports the September flooding in Nigeria's north and north central regions had less of an impact on grain production than previously expected. Meanwhile, we predict that sorghum production will increase by 4% in 2010/11, up from 2.2% in the previous year. Our production forecasts for the 2009/10-2014/15 period envisage 26% growth for corn and 25% for sorghum. We believe that Nigeria's grains industry will benefit from improved acreage, high prices (in the case of corn), investment in higher-yielding seed varieties and demand from subsectors such as brewing and poultry feed.
?? Our core view for the production of poultry meat envisages a 23% increase in output to 2014/15. Meanwhile, we expect the production of pork meat to expand by a similar amount. Both sectors will benefit from increased government support, improved farming techniques and rising demand for meat. In consumption terms, pork will outperform poultry, expanding by 32% between 2010 and 2015. Our consumption forecasts for both pork and poultry will continue to be affected by the problems associated with product availability and affordability.
?? Our sugar production forecast continues to envisage growth of 7.8% in 2010/11 and 44% over the 2009/10-2014/15 period; strong growth will be supported by government production incentives, despite coming off a low base. Meanwhile, a 43% increase in sugar consumption is anticipated for the five years to 2015. Growth will be supported by rising disposable incomes and increased demand for sugar as an ingredient for food processing sectors - predominantly soft drinks, alcoholic drinks and confectionery.
?? Rice consumption is predicted to rise by 17% in the five years to 2015. Over the last 15 years, rice has emerged as a dietary staple for Nigerians. Despite steady output growth, total demand for rice is expected to remain well in excess of Nigeria's productive capacity; this will necessitate a continued reliance on imported grain.
Key Macroeconomic Forecasts
?? Nigeria Real GDP Growth 2011: 7.9% (up from 7.8% in 2010)
?? Nigeria Unemployment Rate 2011: 15.8% (15.5% in 2010)
?? Nigeria Inflation (annual average, % chg y-o-y) 2010: 13.8% (12.4% in 2009)
Key Trends Nigeria's agribusiness sector represents the best opportunity for the country to diversify its economy and reduce its dependency on oil. Key industries at the centre of government support initiatives include cocoa processing, sugar refining and poultry production. Nevertheless, although BMI has predicted strong growth for most agricultural subsectors in the five years to 2015, we emphasise numerous downside risks to our forecasts. Some of these risks were highlighted in a recent lecture by Professor Eric Eboh at the University of Nigeria. Eboh is a member of Farm Management Association of Nigeria (FMAN) and the Executive Director of African Institute for Applied Economics (AIAE). In his lecture, Eboh argued that although land expansion accounts for about 60% of agricultural growth, 40% of growth relates to productivity increases. Meanwhile, although average annual growth for the agricultural sector as a whole was around 7% over the 2002-2006 period, annual yield increases for most crops were less than 1%. This suggests that output growth was due to an expansion in the area under cultivation, rather than any significant increase in productivity.
Among the problems that contribute to low productivity in Nigeria's agribusiness industries are fluctuations in the level of public sector expenditure in agribusiness projects from one year to the next. Meanwhile, a high turnover of administrative and policy regimes is seen as having potential to hamper institutional memory and policy learning by policymakers and technocrats.
BMI also indentifies numerous sector-specific issues that present downside risks to production forecasts. For example, although the Nigerian authorities maintain 30% import duty on rice as part of an effort to promote local rice production, an inability to clamp down on rice smuggling serves to undermine such efforts. Disease outbreaks remain one of the biggest downside risks to poultry production, while in the grains and dairy sectors inadequate infrastructure irrigation and energy continue to have a negative impact on the production, storage and distribution of agricultural produce. Finally, the expansion of Nigeria's cocoa industry faces numerous structural hurdles, including the need to negotiate improved access for its cocoa products to European markets.
With regard to Nigeria's agribusiness sector in general, there is a need for the government to ensure that food production standards are adequately enforced. In some sectors, clearer regulations and standards are required to govern food production; in other sectors, existing standards need better enforcement, as well as the provision of assurance guarantees to potential agribusiness investors.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 8
Nigeria Agricultural SWOT .................................................................................................................................................................................. 8
Nigeria Political SWOT ........................................................................................................................................................................................ 9
Nigeria Economic SWOT ...................................................................................................................................................................................... 9
Nigeria Business Environment SWOT ................................................................................................................................................................. 10
Industry Forecast Scenario ........................................................................................................................... 11
Nigeria Sugar Outlook ............................................................................................................................................................................................. 11
Table: Nigeria – Sugar Production & Consumption, 2010-2015 ........................................................................................................................ 11
Table: Nigeria – Sugar Production & Consumption, 2006-2011 ........................................................................................................................ 13
Nigeria Grains Outlook ........................................................................................................................................................................................... 14
Corn .................................................................................................................................................................................................................... 14
Table: Nigeria – Corn Production & Consumption, 2010-2015 ......................................................................................................................... 15
Table: Nigeria – Corn Production & Consumption, 2006-2011 ......................................................................................................................... 15
Sorghum .............................................................................................................................................................................................................. 15
Table: Nigeria – Sorghum Production & Consumption, 2010-2015 ................................................................................................................... 16
Table: Nigeria – Sorghum Production & Consumption, 2006-2011 ................................................................................................................... 16
Wheat .................................................................................................................................................................................................................. 16
Table: Nigeria – Wheat Production & Consumption, 2010-2015 ....................................................................................................................... 17
Table: Nigeria – Wheat Production & Consumption, 2006-2011 ...................................................................................................................... 17
Nigeria Livestock Outlook ....................................................................................................................................................................................... 19
Table: Nigeria – Poultry Production & Consumption, 2010-2015 .................................................................................................................... 20
Table: Nigeria – Pork Production & Consumption, 2010-2015......................................................................................................................... 20
Table: Nigeria – Milk Production & Consumption, 2010-2015 ......................................................................................................................... 20
Table: Nigeria – Poultry Production & Consumption, 2006-2011 .................................................................................................................... 23
Table: Nigeria – Pork Production & Consumption, 2006-2011 ........................................................................................................................ 23
Table: Nigeria – Milk Production & Consumption, 2006-2011 ........................................................................................................................ 24
Nigeria Rice Outlook ............................................................................................................................................................................................... 25
Table: Nigeria – Rice Production & Consumption, 2010-2015 ....................................................................................................................... 25
Table: Nigeria – Rice Production & Consumption, 2006-2011 ........................................................................................................................ 27
Nigeria Cocoa Outlook ............................................................................................................................................................................................ 28
Table: Nigeria – Cocoa Production, Consumption & Trade, 2010-2015 .......................................................................................................... 29
Table: Nigeria – Cocoa Production, Consumption & Trade, 2006-2011 .......................................................................................................... 31
Competitive Landscape ................................................................................................................................ 33
Table: Agricultural Commodity Producers & Traders ....................................................................................................................................... 33
Table: Agribusiness Suppliers ............................................................................................................................................................................ 34
Table: Integrated Agricultural Producers........................................................................................................................................................... 35
Commodity Price Analysis ............................................................................................................................ 36
Monthly Softs Update ............................................................................................................................................................................................... 36
Cocoa.................................................................................................................................................................................................................. 36
Table: Cocoa ...................................................................................................................................................................................................... 36
Coffee.................................................................................................................................................................................................................. 37
Table: Coffee ...................................................................................................................................................................................................... 37
Milk ..................................................................................................................................................................................................................... 38
Table: Milk ......................................................................................................................................................................................................... 38
Sugar .................................................................................................................................................................................................................. 39
Table: Sugar ....................................................................................................................................................................................................... 39
Grains Update ......................................................................................................................................................................................................... 40
Corn .................................................................................................................................................................................................................... 40
Table: Corn ........................................................................................................................................................................................................ 40
Rice ..................................................................................................................................................................................................................... 41
Table: Rice .......................................................................................................................................................................................................... 41
Soybean .............................................................................................................................................................................................................. 42
Table: Soybean ................................................................................................................................................................................................... 42
Wheat .................................................................................................................................................................................................................. 43
Table: Wheat....................................................................................................................................................................................................... 43
Downstream Supply Chain Analysis ............................................................................................................ 44
Industry Forecast Scenario ...................................................................................................................................................................................... 44
Consumer Outlook .............................................................................................................................................................................................. 44
Food......................................................................................................................................................................................................................... 46
Food Consumption .............................................................................................................................................................................................. 46
Table: Food Consumption Indicators -- Historical Data & Forecasts ................................................................................................................ 47
Mass Grocery Retail ................................................................................................................................................................................................ 48
Table: Nigeria MGR Sales Value by Format -- Historical Data & Forecasts ..................................................................................................... 49
Trade .................................................................................................................................................................................................................. 49
Table: Nigeria Sector Trade Indicators -- Historical Data & Forecasts ............................................................................................................. 49
Macroeconomic Forecast ........................................................................................................................................................................................ 50
Table: Nigeria - Economic Activity, 2008-2015 .................................................................................................................................................. 52
Industry Trend Analysis ............................................................................................................................... 53
Consumer Sector Carries Huge Potential ........................................................................................................................................................... 53
BMI Forecast Modelling ................................................................................................................................ 56
How We Generate Our Industry Forecasts .............................................................................................................................................................. 56




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