Challenges and Opportunities Facing Agriculture,Key Policy Documents,Key Government Targets,Data and Modelling

1. Nigeria Country Strategy Support
Program
Agriculture Growth and
Investment Options for Poverty
Reduction in Nigeria
Xinshen Diao, Manson Nwafor, Vida Alpuerto

2. Research Background
• Part of a wider effort to increase the use of
research evidence in agriculture policy
making in Africa.
• Part of a wider advisory program launched
around 2003 by the World Bank and other
agencies.
• A collaborative effort between ReSAKSS
WA, IITA and the Agriculture Policy
Support Facility (APSF), IFRPI-Nigeria.

3. Purpose of The Seminar
• To obtain feedback on the analysis in
general
• To discuss the assumptions of the model
• To discuss the adequacy of experiments
done
• To discuss the results obtained

4. Challenges and Opportunities Facing
Agriculture (1)
• High poverty rate, particularly in the rural areas (54.4%
for the country and 63.3% in rural areas in 2004)
• Rising poverty between 1980 and 1996 (from 27.2% in
1980 to 65.6% in 1996) and slow decline after 1996
• High growth rates in recent periods (6.6% annual growth
rate for GDP in 2002-2006 period, but poverty is still
higher than the 1980 level.
• Agriculture is the single most important engine of recent
growth, accounting for 47% of growth (oil for 39%).
• Agriculture is the single largest employer of labor and the
largest share of the poor are farmers.

5. Challenges and Opportunities Facing
Agriculture (2)
• However, recent agricultural growth is still led by area expansion without enough
productivity increase. Possible increases in productivity show that there are
supply opportunities in the sector. Increasing food imports show that there is
local unsatisfied demand for agricultural output – this is a demand opportunity
(ReSAKSS WA [2009]).
• To improve outcomes, numerous goals and targets have been articulated by the
government in many policy documents. However, there is little analysis which
assesses the ability of these intermediate targets to lead to the ultimate targets
of sectoral and national growth as well as poverty reduction.
• An economy-wide, computable general equilibrium (CGE) model for Nigeria is
developed in order to:
1. analyze synergies and trade-offs between economic growth and poverty
reduction
2. Identify priority products for investment and growth.
3. Evaluate the expected poverty and growth outcomes of present government
targets.

6. Key Policy Documents
• The National Food Security Programme
(NFSP) – released in 2008
• The National Economic Empowerment
and Development Strategy (NEEDS) II
• The national medium term investment
Programme under the Comprehensive
Africa Agriculture Development Program.
• Presidential initiatives and Medium term
sector strategy documents.

7. Key Government Targets I : NFSP
Targets defined in NFSP
Current level Level by 2011 Total increase annual growth
Million mt Million mt % (08-11, %)
Crops
Cassava 49 100 104.1 19.5
Rice 2.8 5.6 100 18.9
Millet 4 6.5 62.5 12.9
Wheat 0.1 0.5 614.3 63.5
Sugar 0.2 2.2 1034 83.5
Tomato 1.1 2.2 100 18.9
Cotton 0.4 1 185.7 30
Cocoa 0.4 0.7 84.2 16.5
Palm Oil 0.8 1.3 50 10.7
Palm Kernel 0.4 0.6 50 10.7
Rubber 0.2 0.3 50 10.7

8. Key Government Targets II
• Other specific targets for crops, livestock and
fisheries
• 6% agriculture growth (Comprehensive Africa
Agriculture Development Programme , CAADP)
• 10% agriculture growth in 2008 – 2011 (NEEDS
II)
• Halving of poverty by 2015 (NEEDS II) and
MDG1. Also supported as ultimate goal by
CAADP.

9. Data and Modelling I
• The Social Accounting Matrix (SAM) is the basic data set used by the
Computable General Equilibrium Model.
• A SAM for the year 2006 was built for the study. A SAM is a table which shows
the incomes and expenditures of production factors, firms, households, the
government and the rest of the world.
• It is built such that every income to one agent/institution is an expenditure to
another. It is designed to show the inter dependence between agents and
institutions which we observe in everyday life. It uses figures to document the
circular flow of income in an open economy.
• The SAM documents how the economy functioned in the year 2006. This base
year is then used to assess possible future outcomes given the structure of the
economy and economic relationships between agents and institutions (firms,
government etc) in 2006. On their own, SAMS provide useful insights into the
income and expenditure priorities and constraints of firms, farms, households
and the government.
• Most of the data for the SAM came from the National Bureau of statistics, the
Federal Ministry of Agriculture and Rural Development and the Central Bank of
Nigeria.

10. Data and Modelling II
• A CGE model is a simultaneous equations model which replicates the
functioning of the economy in a way that allows equilibrium to be achieved
in major markets in the economy. It is therefore a good indicator of the
eventual impacts of policies or uncontrollable events after markets adjust.
• They are used to analyze a wide range of policies - fiscal, trade, agriculture
, income, energy, technology and investment amongst others.
• Unlike other models they capture how changes in one market may lead to
changes in others due to forward and backward linkages in the production
process. It also captures how low supply can reduce demand and vice-
versa as it they track both total supply for commodities and total demand for
them.
• They are therefore ideal for analyzing the impacts of policies which can
affect many sectors or whose success depends on the reactions of other
sectors. They also analyze the impacts of these interactions on household
incomes and expenditure levels. This allows assessments of the poverty
impacts of policies/uncontrollable events to be captured.

11. Data and Modelling III
• The CGE model and SAM have 62 sub-sectors, more than half in
agriculture, but also include agro-processing sectors in detail and the
most important nonagricultural sectors in both industry and services
• In agriculture: (i) 5 cereal crops; (ii) 5 root crops; (iii) 7 other food crops;
(iv) 10 higher-value export-oriented crops; (v) livestock products; (vi)
forestry; and (vii) fisheries
• Agricultural production disaggregated across six zones
• Dynamic model: 2006 – 2017.
• Two types of capital – agriculture capital and non-agriculture capital
• 3 types of labour – farm labour, unskilled labour and skilled labour.
• Models the behavior of firms and farms, households, the government
and the rest of the world (goods and services trade, income and
transfers- remittances etc- to and from the world)

12. Data and Modelling IV– Assumptions
• The targets articulated by the government are unlikely to be met by 2011
• Population growth rate for 2008 – 2017 remains the same as for 1991 –
2006 (3% p.a)
• Rural farm labour supply grows at 2% p.a. while other unskilled and skilled
labour grow at 3.3% and 3.4% respectively.
• Land expansion rate (area cultivated) which was 5.2% p.a. in 2001-2006 is
maintained for 2007-2011 but is reduced to 4.2% for 2012 – 2017
• In a given year factors are fully employed
• The exchange rate is the numeraire
• The current account balance is fixed in each year but grows initially by 3.5%
and then by 2.8% each year to reflect changes in the international oil market
• Real government expenditure and transfers to households increase by 5%
each year.
• Real foreign payments to the government from assets abroad etc increases
by 3.5% each year.
• The model is savings driven: total investment in the economy adjusts to the
level of available savings of the government, firms, households etc.

13. Yield Gaps
Current yield Yield Gap % (Potential -
(mt/ha) Potential yield (mt/ha) Current)
Rice 1.9 7 268
Cassava 12.3 28.4 131
Maize 1.6 4 150
Sorghum 1.1 3.2 191
Millet 1.1 2.4 118
Yam 12.3 18 46
Irish Potato 7.6 10.5 38
Soybean 1.2 2 67
Beniseed 0.6 1 67
Melon 0.4 0.5 25
Cocoa 0.2 2 900
Cowpea 0.5 2.3 360
Okra 3.1 5.5 77

14. Data and Modelling V – Targeted
Crop Yields
Crop yields
Initial level Baseline Target CAADP
mt/ha growth % mt/ha growth %
Cereals
Rice 1.5 1.1 2.4 5.1
Wheat 1.1 0.1 1.3 1.8
Maize 1.4 0.3 1.8 2.9
Sorghum 1.4 0.6 1.7 2.8
Millet 1.5 0.3 1.9 2.6
Root crops
Cassava 13 1.1 18.2 3.8
Yams 8.3 1.2 11.2 3.4
Cocoyam 0.6 2.5 0.8 3.4
Potato 8.9 5.7 18.8 8.7
Sweet potato 3.4 0.7 4.3 2.7

15. Data and Modelling VI – Targeted Crop
Yields
Crop yields
Initial Baseline Target CAADP
level
mt/ha growth % mt/ha growth %
Other food crops
Plantain 6.9 2 9.7 3.7
Beans 0.5 1.5 0.7 3.4
Groundnuts 1.2 1.3 1.6 3.6
Soybeans 0.7 1.2 0.9 3.4
Other oilseeds 1.8 0.9 2.2 2.1
Vegetables 7.6 1.2 10 3
Fruits 5.2 1.6 6.8 3.2

16. Data and Modelling VII – Targeted Crop
Yields
Crop yields
Initial level Baseline Target CAADP
mt/ha growth % mt/ha growth %
High-value crops
Cocoa 0.3 5.3 0.5 6.5
Coffee 0.5 1.7 0.6 3.2
Cotton 0.8 0.4 0.9 1.5
Oil palm 1.4 2.5 2 4.1
Sugar 19.2 1.4 30 5.1
Tobacco 8.7 1.9 11.8 3.4
Nuts 0.8 1.3 1 2.7
Cashew nuts 4.2 2 5.5 3.1
Rubber 0.6 -0.1 0.6 0.4
Other crops 0.5 1.8 0.7 3.3

17. Scenarios I
• Considering changing global environment a modest annual
GDP growth rate of 6.5% is targeted in the next 9 years
(2009 – 2017) in the base-run, while agriculture grows at
5.9%
• Growth is driven by increases in land, labor and capital
accumulation, as well as by productivity changes
• A series of agriculture-led scenarios are considered, and in
these scenarios, additional growth is led by productivity.
• Growth in different crops/crop groups are considered while
an aggregate scenario (CAADP) considers a simultaneous
increase in the different agriculture products‟ yield and
productivity.

18. Scenarios II
Base Run CAADP
Rural farm labour grows at 2% p.a. Rural farm labour grows at 2% p.a.
Labour Supply while other unskilled and skilled while other unskilled and skilled
labour grow at 3.3% and 3.4% labour grow at 3.3% and 3.4%
growth respectively. respectively.
Land expansion which was 5.2% p.a. Land expansion which was 5.2% p.a.
Land growth (area in 2001-2006 is maintained for 2007- in 2001-2006 is maintained for 2007-
2011 but is reduced to 4.2% for 2012 2011 but is reduced to 4.2% for 2012
cultivated) – 2017 – 2017. Additional expansion where
the government targeted it.
Based on 1999-2006 growth rates Modest increases in yield up to 2017.
Yield growth 2017 yields are still much lower than
potential yields.
Levels consistent with 5.9% Levels consistent with the agriculture
Total factor agriculture growth and 6.5% economy output targets in the National Food
growth. Security Programme (2008) and other
Productivity growth government policy documents

19. Table III.1 GDP growth rates in the Base-run and CAADP scenario (1)
Results – economic growth I
Annual growth rate 08-
Share of GDP 17 (%)
In 2006 Baseline CAADP scenario
Total GDP 19,909 billion Naira 6.5 8
Agriculture 29.7 5.7 9.5
Cereals 7.7 5.4 9.5
Rice 2.6 5.1 10.2
Wheat 0 5 25.9
Maize 2.2 7.3 12
Sorghum 1.6 4 5.7
Millet 1.3 4.2 5.7
Root crops 9.4 6 8.9
Cassava 4.4 5.6 8.7
Yams 3.9 6.4 9.3
Cocoyam 0.2 4.7 6
Potato 0.3 8.8 12.4
Sweet potato 0.6 4.7 7

20. Results – economic growth II
Annual growth rate, 08-17
Share of GDP (%)
In 2006 Baseline CAADP scenario
Total GDP 19,909 billion Naira 6.5 8
Agriculture 29.7 5.7 9.5
Other food crops 7.6 5.7 8.1
Plantain 0.6 3.8 4.9
Beans 1 5.3 7.6
Groundnuts 1.1 5.5 7.7
Soybeans 1.1 5.7 8.5
Other oilseeds 0.1 4.5 6.3
Vegetables 1.8 6.1 8.6
Fruits 1.6 6.4 8.7

21. Results – economic growth III
Share of GDP Annual growth rate, 08-17 (%)
In 2006 Baseline CAADP scenario
Total GDP 19,909 billion Naira 6.5 8
Agriculture 29.7 5.7 9.5
High-value crops 1.5 5.6 17.6
Cocoa 0.1 3.9 4.9
Coffee 0.2 6.1 8.8
Cotton 0.1 5.2 11.2
Oil palm 0.5 3.8 5.7
Sugar 0.3 7.3 33.1
Tobacco 0.1 6.8 10
Nuts 0 5.7 7.9
Cashew nuts 0.004 5.7 7.7
Rubber 0.2 6.1 6.1
Other export
crops 0.017 8.5 12.8

22. Results – economic growth IV
Annual input and TFP growth rate (%)
Baseline CAADP
Land 4.8 5.7
Labor 3 3
Ag labor 2.2 2.1
Nag labor 3.7 3.7
Capital 4.6 4.7
Ag capital 6.7 7.1
Nag capital 4.5 4.6
TFP 2.5 3.8
Ag TFP 2.3 5.6
Nag TFP 2.5 3

23. Baseline Results – National Poverty
Reduction
%
64 Poverty Rate in Base-run Scenario
60
56
52
48
44
40
36 National
32 Rural
Urban
28
2008 09 10 11 12 13 14 15 16 2017

24. Figure III.2:
Baseline Results – Poverty Reduction
Across Six Zones
%
73 Regional Poverty Rate in Base-run Scenario
63
53 Southsouth Southeast
Southwest North center
43 Northeast Northwest
33
23
13
2008 09 10 11 12 13 14 15 16 2017
Source: Nigerian CGE model results

25. Agriculture-Led Growth – Poverty Reduction
under Different Growth Scenarios
52 National Poverty Rate (%) under Alternative Agricultural
50
Growth Scenarios
48
46
44
42
40
38
36 Base Cereal-led
34 Root-led Pulse-led
32 Export-led Livestock-led
CAADP
30
2008 09 10 11 12 13 14 15 16 2017

26. Results
• Achieving 5.7% growth in agriculture will leave the population
in poverty slightly increased by 2017. The estimated 1990
poverty level of 44% would not be halved by 2017.
• high growth target in agriculture will lift 16.5 million people out
off poverty by 2017. The 1990 poverty rate would still not be
halved as poverty would drop from 44% (1990) to 30.8%
(2017). With 10% of agricultural growth, the national poverty
rate of 1996 can be halved by 2017 – 2018.
• Food security is improved considerably with additional
kilograms of cereals root products available for each person
by 2017.
• dependence on imported cereals will not be eliminated, but
cereal imports will much less under the high growth scenario.

27. Table IV.5: Regional level poverty reduction with CAADP growth
Source: Nigerian CGE model results
Poverty Reduction at the Zone Level
S imulation results by 2017 Additional reduction
(% ) (percentage points) % change
C AADP from base
1996 2004 Base-run growth from 1996 2017 from 1996 from base 2017
National 65.6 54.4 39.7 30.8 -34.8 -8.9 -53 -22.4
Rural 69.8 63.3 47.9 37.3 -32.5 -10.6 -46.6 -22.1
Urban 58.2 43.2 29.4 22.6 -35.6 -6.8 -61.1 -23.1
Southsouth 58.2 35.1 21.5 14 -44.2 -7.4 -75.9 -34.6
Southeast 53.5 26.7 13.4 8.5 -45 -4.9 -84.1 -36.5
Southwest 60.9 43 30 24.7 -36.2 -5.3 -59.4 -17.6
North central 64.7 67 51.5 41.9 -22.8 -9.6 -35.2 -18.7
Northeast 70.1 72.2 55.6 42.2 -27.9 -13.4 -39.8 -24.1
Northwest 77.2 71.2 55.4 43.7 -33.5 -11.7 -43.4 -21.1

28. Results – impacts on other sectors
• Agricultural growth has backward and forward
linkages (multipliers) with other sectors, and this
induced growth in other sectors also impacts on
poverty
• In terms of poverty impacts we find cereals-led
growth strategies are highly pro-poor
• In terms of linkages, we find negative effects on
other sectors of export-led growth, and large
positive effects of pulses

29. Table VI.6: Poverty-growth elasticity and growth multipliers
Results – impacts on other sectors
Growth multipliers
Poverty-growth elasticity Increased GDP/
(Change in poverty rate/change increased sector Increased AgGDP/ increased
in GDPpc per year) output sector output
Base -0.851
Growth is:
Rice-led -0.928 1.033 1.036
Wheat-led -0.853 1.013 1.037
Maize-led -0.914 1.282 1.146
Millet-led -0.915** 3.642 2.786
Cereal-led -1.024 1.305 1.184
Cassava-led -0.893 1.286 1.12
Root-led -0.923 1.246 1.088
Pulse-led -0.892 1.857 1.518
Export-led -0.814 0.7 0.974
Livestock-led -0.858
Fish-led -0.896 1.084 1.027
Forestry-led -0.861
CAADP -1.144
Nonagr-led -0.73 1.012

30. Price Effects
Level of selected agricultural prices in CAADP scenario
(normalized by prices in 2008 and deflated by CPI)
1.30
1.20
1.10
1.00
0.90
0.80
0.70 Rice Maize
Cassava Cocoa
0.60
Cotton Sugar
0.50 Poultry Fish
CPI
0.40
2008 09 10 11 12 13 14 15 16 2017

31. Results
• However, broader market opportunities do exist for
agriculture by developing agro-processing industries
in the country and by expanding export market.
• eg-1. Cassava - accounts for largest land allocation
and highest agricultural value-addition, an input for
both feed and agro-processing and highly
demanded in international markets.
• Thailand produces 10% of world cassava output, but
captures 70–80% of world exports
• Clearly there are opportunities for Nigeria to capture
larger share of world market

32. Results
• eg-2. Poultry – price is artifically high because of
import restrictions. A productivity surge in poultry
would make these restrictions unnecessary
• In fact, there are good export opportunities to
regional neighbours
• A poultry „boom‟ would also boost domestic
demand for maize and other feeds, which will
further enhance the linkage and multiplier effects

33. Messages from the Model
Negative price effect
Size in the economy Growth multiplier Pro-poorness
Qualitative Qualitative Qualitative Qualitative
assessment Ranking assessment Ranking assessment Ranking assessment Ranking
Growth led by
Cereals Large 2 Large 3 Large 1
Rice Large 4 Large 8 Large 2 Small 7
Maize Large 7 Large 5 Large 5 Large 2
Millet/sorghum Large 5 Large 1 Large 4 Small 6
Wheat Small 13 Small 9 Large 11 Large 1
Roots Large 1 Large 6 Large 3
Cassava Large 3 Large 4 Large 7 Small 5
Pulses Large 6 Large 2 Large 8
Export-oriented
crops Small 9 Small 10 Small 12 Small 9
Livestock Small 8 NM Large 9
Poultry Small 12 NM NM Large 3
Fishery Large 10 Large 7 Large 6 Large 4
Forestry Small 11 NM Large 10 Small 8

34. Messages from the model
• Agricultural growth targets should take into account:
1. Initial conditions: size, yields, poverty profile.
2. Multiplier effects
3. Market potential: price effects, domestic demand
(consumers, agro-processing), exports
4. Productivity levels: ag productivity growth has to
double
• All these 4 factors depend on policies, but market
potential and productivity levels depend heavily on
policies that are often “outside” agriculture: trade,
investment, energy, land tenure …

35. Messages from the model
• Ideally, we should also consider state-
level policies
• We need to be aware of tradeoffs
between growth & poverty, but also that
there are lots of win-win strategies within
agriculture, as this study demonstrates

36. Thank You For Your
Attention