Constraints to increasing agricultural productivity in Nigeria: a review

Executive Summary

This paper reviews the constraints hindering growth of agricultural productivity in Nigeria by

- providing an overview of the policy environment that affects agricultural productivity,

- establishing how the policy environment affects productivity improvement, and

- proposing lessons relevant for future research and policymaking to promote

productivity growth in Nigeria.

Agricultural Policy in Nigeria

To attain agricultural sector goals, several policies were formulated and implemented during the years following independence. Some macroeconomic and sectoral policies implemented from 1970 to 1985 promoted economic distortions. For example, domestic prices and exchange rates were largely dictated by the government, generating large deviation between them and their market-determined equivalents. Appreciation of exchange rates cheapened imports, hurt exports, implicitly taxed farmers' incomes, and subsidized consumers. Government also directly participated in the provision of many farm inputs and services, and in the production, processing, and marketing of farm commodities. The need to correct the resulting distortions to the Nigerian led to adoption of the Structural Adjustment Programme (SAP) of 1986.

After SAP was introduced, there was general improvement in agricultural production and external trade from 1986 to 1989. Thereafter, growth indices of agricultural production fluctuated between stagnation and decline, a situation blamed mainly on three policy reversals and inconsistencies. First, the devaluation of the naira led to higher domestic prices of imported goods, including farm inputs (principally agrochemicals and fertilizers). Thus, some subsidies were retained on fertilizers, the benefit of which went unintentionally to large-scale farmers. Second, neither the interest-rate nor the exchange-rate liberalization was implemented to its logical conclusion. As a result agriculture could not sustainably derive the inflow of credit that it so badly needed. Third, the agricultural trade reforms were interrupted by import and export restrictions or outright bans or both. All of these factors limited long-term private-investment decisions in agriculture.