The agricultural sector comprises small, mostly subsistence farm operations. In the past few years, agricultural development programs have helped improved productivity.
Agricultural policy. The basic goals are food security, affordable prices and rural development to stem urban migration. But efforts to reach these goals have been inconsistent, either because policies are not implemented or poorly implemented.
Nigeria once was a major producer and exporter of tropical commodities such as cocoa and palm oil, but agriculture slipped in importance in the 1970s after oil became the dominant commodity. But domestic agriculture has been growing in the past two years as the sector regained a priority position among policy makers.
A six-year plan was adopted in 1994, followed by implementation funds in the 1995 budget. The plan contains a package of incentives designed to provide an enabling environment for a revival of agriculture after many years of neglect.
These include increases in capital allowances for equipment expenditures and reductions in import duties for agricultural machinery and chemicals.
Flour milling. Nigeria's milling industry, which boomed through the early and mid-1980s, suffered a devastating blow when wheat imports were banned in 1987; ironically, the government's announcement of the ban came at the 1986 dedication of a new flour mill. Nigeria's flour production plunged to fewer than 100,000 tonnes wheat equivalent in 1987, compared with an annual average of 844,000 the previous six years.
Although the import ban was lifted in 1993, millers have not had an easy time since. Foreign exchange shortages caused the government to enact strict controls, and millers were unable to obtain enough wheat to maintain adequate capacity utilization; in 1994, for instance, millers received only 7.5% of the foreign exchange requested to buy wheat.
After the foreign exchange regime was liberalized in 1995, expectations were that availability would increase. But exchange rates soared to 85 naira per U.S. dollar compared with the fixed rate of 22 naira, which translated into a 400% increase in wheat prices.
Flour millers raised wheat flour prices three times in 1995 to offset rising costs that were related not only to exchange rates, but also to higher international wheat prices and domestic inflationary pressures. From a price of about U.S.$7.90 per 50 kg in 1994, wheat flour prices increased to nearly U.S.$25 in 1995, and bread prices increased by more than 100% over the same period.
The increases came at a time when consumer purchasing power was under attack from stagnant incomes and spiraling inflation. Not surprisingly, bread sales declined in the wake of the price hikes, as many consumers substituted other dishes for bread.
These conditions caused havoc in the industry; capacity utilization in 1995 averaged only 10%, and many wheat flour millers were forced to move into maize milling.
Recent high prices have encouraged many farmers to return to wheat production. Millers, especially those in the north where wheat is grown, reportedly are encouraging this development with price guarantees.
Livestock: Nigeria was developing a modern commercial poultry industry during the oil boom years of the 1970s under a liberalized and supportive environment. The industry experienced phenomenal growth and became highly capitalized, with poultry population rising to a peak of 40 million birds in 1979. During this period, maize, an essential feed input; day-old chicks; and feed ingredients such as minerals were freely imported.
But the poultry industry virtually collapsed in 1983 following the ban on maize and day-old chick imports. Over the years, domestic maize available for feed use has become increasingly scarce because of competing demand for human consumption and ever-increasing industrial use; consequently, most poultry operators either already have gone out of business or continually hover on the edge of bankruptcy.
The 1995 budget made some provisions that, if sustained, could assist in the sector's recovery. The budget reduced import tariffs to 5% on all premix components, vitamins, micro-nutrients and antibiotics, and the ban on the importation of day-old chicks was lifted to increase supplies.
Even before these provisions were implemented, livestock production had begun to stage a come-back, growing by 4.8% in 1994, compared with 1.4% the previous year. The growth was based on a 17.9% increase in the poultry sector resulting from a research breakthrough in the area of parent stock production. Output of beef, lamb, goat meat and pork also increased slightly.
Trade. Nigeria's protectionist policies toward agricultural trade have eased slightly with the lifting of import bans on some products and cuts in import duties.
A 15% duty applies to imported wheat, and rice duties in 1995 were cut to 50% from 100%. Following complaints by importers that the computation of duties at the fixed exchange rate was too high, the government granted an across-the-board rebate of 35% for duties on all imports.