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Economy

Kenya’s GDP growth of 6.3% shows what Nigeria can do with Agriculture

GDP performance of Kenya presents Nigeria with an example of how a country can either decide to deliberately leverage its natural resources such as Agriculture to create shared prosperity for citizens or sit back, pay lip service and watch them descend into poverty.

Just like Nigeria, Kenya, East Africa’s richest economy, is one of the fastest growing areas on the continent but its performance is often hit by drought as missed revenue targets, rising public debt and uncontrolled expenditure were main concerns for investors in recent years.

While Nigeria still continues to play to the gallery when it comes to driving Agriculture or boosting its GDP contribution to the economy, for Kenya the reverse is the case as the Agriculture sector, which accounts for close to a third of Kenya’s annual economic output grew by 6.6 percent leading to GDP growth of 6.3 percent.

Data from Kenya’s statistical agency showed Kenya’s economy grew by 6.3 percent in 2018, helped by an impressive growth in agriculture, manufacturing and transport sectors which was a rebound from the 4.7 percent growth in 2017, the slowest growth in five years.

The performance of the Agriculture sector had a multiplier effect on other sectors of the economy as Transport and storage services sector also grew to a five-year high of 8.8 percent while ICT sector posted an increased growth by 11 percent.

Manufacturing sector grew at a faster rate of 4.2 percent in 2018, compared with 0.5 percent in 2017 although new Jobs generated slowed to 840 600 in 2018, compared with 898 000 a year earlier while Inflation was 4.7percent in 2018 from 8 percent a year earlier.

Kenya’s central bank targets price growth of 5percent with a margin of 2.5percent on either side. The deficit on the current account narrowed to $4.1 billion at the end of last year. Also, about 2.02 million tourists visited the country last year while tourism is still the country’s largest source of foreign exchange after agriculture.

Gbolahan Ologunro research analyst at CSL Stockbrokers, a subsidiary of FCMB Group Plc said Kenya’s usage of mechanized farming using modern equipment and agglomeration of farmers rather than individual farming is resulting in improved GDP performance unlike Nigeria.

“Nigeria has not being able to change its system of production as the country still uses crude implement and subsistent farming unlike Kenya, while other problem such as Lack of storage facility, poor road network and security are still major challenges which will need holistic solutions,” Ologunro told us.

Abimbola Omotola, Analyst at Chapel Hill Denham management limited said the reason behind Kenya’s 2018 GDP agricultural sector performance, is because it was coming from a low base which will reverse to the mean after the above normal growth recorded last year, once the base effect clears off.

Adetola Adelu financial Analyst at Fides Capital partners said unlike Kenya, Nigeria agricultural sector is faced with a backlog of peculiar challenges affecting productivity like insecurities and poor infrastructural facilities which is resulting in lower GDP performance.

“Also, corruption and politics are other major challenges facing the sector as there are always concerns on government programs on subsidies or fertilizers getting to the final consumer,” Adelu told us.

Despite the current government’s effort to boost agriculture output and diversify the economy, Nigeria‘s agriculture sector slowed from 4.2 percent in 2017 to 2.1 percent in 2018.

Nigeria’s agricultural potential is evident. The country has highly diversified agro-ecological conditions with total agricultural land of 80 million hectares (of which less than half has been utilized), surface water running into billions of cubic metres, and a large potential irrigable area.
Despite these numbers and the potential of the agricultural sector to change the fortunes of the Nigerian economy, the sector is still plagued with a number of issues as farming still remain subsistent and rain-led despite the prominence of irrigation farming in most countries around the world.

“The problem with agriculture is infrastructure. It is not that we do not grow enough but the infrastructure to move, store and process what is harvested are not there,” said Aboidun Olorundenro, operations manager, Aquashoots Nigeria.

“Without critical infrastructure, agriculture will continue to suffer and our diversification through the sector would only be a dream,” Olorundenro said.

Over the years, government has mouthed support for agriculture, saying it is serious with making agriculture one of the largest employers of labour and foreign exchange earners.

But this is yet to go beyond the talking stage as the sector is still largely limited by lingering issues.

The Anchor Borrowers Programme (ABP) has made considerable progress, without addressing fundamental issues of mechanization, irrigation, seeds, extension service, insurance, research and development, among others.

As a result, yields have continued to remain low and progress made initially is now on a downward trajectory. This is evident in the country’s Gross Domestic Product (GDP) report.

Data from the National Bureau of Statistics (NBS) GDP report shows that growth in the sector has been on the decline since the first quarter 2017, with marginal growth recorded only in the fourth quarter of the same year.

The GDP report shows that growth in the sector contracted from 3.06 percent in q3 2017 to 1.91 percent in q3 2018 year on year.

Similarly, critical infrastructure to aid growth for the agricultural sector is lacking.

Farmers continue to suffer low levels of agricultural productivity due to infrastructure deficit across the country, which reduces their profit and impact their capacity to expand

Source: By Oladipo Oladehinde

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