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Nigeria Agribusiness Report Q1 2013

Nigeria agribusiness market: New market research published

The 2012/13 cocoa harvest has suffered a serious setback as bad weather in September and October 2012 delayed harvesting of the main crop while also increasing the likelihood of a repeat of the outbreaks of black pod disease and mould that damaged the previous years harvest. Nevertheless, we still expect a slight increase in output for the 2012/13 season. Heavy autumn rainfall in October led to serious flooding in parts of the country, although the impact on the field crops covered in our report remains uncertain.

- Sugar production growth to 2016/17: 61.7% to 105,100 tonnes. Increased private sector investment as well as increasingly punitive tariffs on imports will provide the fundamentals for the pace of recovery in the sector to pick up.

- Cocoa production growth to 2016/17: 57.6% to 331,000 tonnes. Increased investment and the distribution of more resilient hybrid pods will spur the sectors revival.

- Wheat consumption growth to 2016/17: -10.3% to 3.2mn tonnes. Tariff hikes imposed by the government have already reduced imports from the US by 20%, and there is little prospect of demand recovering as long as this policy remains in place.

- Real GDP growth 2013: 7.1% year-on-year (y-o-y), up from 6.8% in 2012.

- Unemployment rate 2013: 23.6% (down from 24.4% in 2012)

- Inflation (annual average, % chg y-o-y) 2013: 10.3% (up from 12.1% in 2012)

Industry Outlook

The government has further developed its programmes to boost domestic production of commodities that are costly in foreign exchange. We have doubts regarding the wisdom of increasing tariffs on imports of wheat and rice at a time when food prices may well come under pressure from tightening global supplies on the back of drought in the US, since public disorder and increased smuggling are likely to be short term consequences of these policies. We would also question the workability of the policy to force flour mills to include increasing percentages of cassava flour within a very brief time period to meet a target of 40% inclusion by 2015.

There are signs that governments at local and national levels have stepped up efforts to link protectionist policies with genuine efforts to provide assistance to producers. In particular, tax breaks and waivers of duty on machinery are likely to help sugar to continue its recovery and begin to make inroads into the countrys overwhelming dependence on imports. Rice has also begun to receive more attention as a sector with the securing of a soft loan of US$105.2mn from the International Fund for Agricultural Development. Over the course of 2013 we will begin to receive a clearer picture of the governments level of resilience in maintaining politically unpopular tariffs and its willingness to follow through on good intentions and eye-catching initiatives with coherent and sustained support.

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