BMI View : The presence of Boko Haram in northern Nigeria- the country's major cereal crops region- will continue to disrupt output in 2014/15. This will lead to greater imports of staple grains, as stocks remain low and consumption grows strongly.
We maintain our estimate that Nigeria's corn production reached 7.7mn tonnes in 2013/14, as high domestic prices resulted in a greater planting area than the previous year. Corn is the most important cereal crop in the country, though Nigeria is also a major producer of cassava, sorghum and millet. We believe that these three crops all recorded yearly output growth in 2013/14. In our view, this growth is attributable to greater planting areas owing to high domestic prices, rather than the government's Agricultural Transformation Act (ATA) initiated in 2012. Distribution of government-subsidised inputs such as fertiliser and seeds has been scarce due to corruption and inadequate infrastructure. Indeed, local USDA reports have said that farmers have generally felt little to no impact from the ATA.
|Reliance On Staples|
|Select Crops - Production ('000 tonnes)|
We also maintain our forecast for no corn production growth in 2014/15 on the back of political disturbance in the north of the country. Reports of terrorist activity from Islamist militant group Boko Haram has increased in recent months, which we believe will continue to result in output disruption. Our Country Risk team believes that the situation on the ground has not drastically declined, and that the group's actions will have a limited effect on economic growth (see 'Re-election Prospects Dimming For President Jonathan', May 13). However, the UN's FAO has reported instances of agricultural workers leaving their farms, and with the main cereal-growing region in the north of the country (where Boko Haram has the greatest presence), we believe the agricultural sector will be disrupted over the next several months. In our view, the agricultural output will be affected in the north for several reasons.
First, violence is driving some groups away from their homes. The FAO reports instances of farmers abandoning their livelihoods in the north. This will reduce the area devoted to grains. Second, such disturbance will likely reduce the amount of inputs used, which will reduce yields. Capital will continue to be hard to obtain in the politically tense environment. Similarly, distribution of inputs via the government's ATA scheme could become more inefficient as Boko Haram spreads its influence. Third, the distribution network in the north is likely to become more chaotic at harvest time, which will increase wastage of cereals and drive domestic prices higher. In April, the USDA said that agricultural produce prices in Nigeria were already 20% higher than last year as a result of Boko Haram's effect in the north.
|Northern States Under Threat|
|Nigeria - Map|
Imports To Grow In 2014/15
We therefore believe that Nigeria will increase its agricultural imports for many of its cereals in 2014/15. Stocks of key grains are already extremely low; the national balance of the country's food and grain reserve stands at just 35,500 tonnes in 2014. It is therefore likely that Nigeria will have to increase corn and wheat imports, as consumption increases on the back of higher incomes and a growing population. Between 2012/13 and 2017/18, we forecast wheat consumption to grow by 10.1% to reach 4.4mn tonnes, and corn consumption to grow by 19.5% to reach 9.3mn tonnes. The consumption of both of these grains will outpace production.
|More Sufficient Later On|
|Nigeria - Select Crops Production Deficit ('000 tonnes)|
We believe that grain production will post stronger growth further down our forecast period to 2017/18. Our Country Risk team believes that Boko Haram's presence will remain elevated in the run-up to Nigeria's elections in February 2015, though will continue to pose a threat thereafter. In this scenario, we believe that there will be less instability for agricultural workers from H215.
Furthermore, we believe that the government's ATA scheme (which follows an import substitution system) will increase domestic output. Though this scheme has faced headwinds since its adoption in 2012, we believe it will increase domestic agricultural production towards the end of our forecast period to 2018. Higher domestic prices will also incentivise farmers to plant key staple grains. In particular, we believe that wheat production will post the strongest growth from a low base. Currently, wheat requires irrigation, which is unaffordable for many Nigerian farmers. As farmers achieve greater access to credit following the ATA scheme, better institutions and greater stability, we believe that wheat output will grow significantly.
|Wheat Production, '000 tonnes||80.0||70.0||70.0||75.0||80.0||90.0|
|Wheat Consumption, '000 tonnes||3,980.0||3,920.3||4,020.3||4,100.7||4,236.0||4,380.0|
|Corn Production, '000 tonnes||7,630.0||7,700.0||7,700.0||7,931.0||8,287.9||8,619.4|
|Corn Consumption, '000 tonnes||7,800.0||e||8,152.8||8,484.9||8,792.2||9,071.1||9,318.0|
|e/f = BMI estimates/forecasts. Sources: USDA.|