Nigeria Content Online

Agriculture, that
ineffable bit of the domestic economy. Still rain-fed, and (I would
imagine) still managed pretty much the same way our forebears used to
before the first encounter with the Caucasian slave-trader/would-be
colonialist. In spite of this, today, agriculture accounts for
two-thirds of domestic employment (most who have a view on this put its
share of rural employment a lot higher); and almost half of domestic
annual output growth. Based on these latter numbers, policy people, and
indeed any government that wants to positively affect the lives of the
greatest number of Nigerians in the shortest time possible, cannot but
focus on the agriculture sector. China’s example since 1979 bears this
position out. Incidentally, one of the major benefits of the reforms
that have driven the rapid growth in China – the rise in rural incomes
– is a major, unrealised, goal of agriculture policy here.

Between 1978 and
1985, rural GDP grew in China on the back of the dismantling of the
agriculture collectives previously run by the Peoples’ communes.
Expectedly, post-reform, the prospects of enhanced income growth as
household earnings became contingent on each homestead’s output had
multiplier effects on the larger economy. The contract responsibility
system, which replaced the old land-ownership structure, had another
major boon: a richer countryside drove its own supply for meat, and the
increased cereal production levels required to grow the beef. According
to one source, on the strength of these reforms alone, the portion of
the population in China living below the poverty line fell during this
period by 17.86 million annually, from 250 million in 1979 to 125
million in 1985. Or, put differently, the incidence of poverty in a
country of well over a billion people, dropped to 14.8% from 31% over
the same period.

All of China’s
experience notwithstanding, and despite a lot of talk to the contrary,
we have not been able as a nation to change the fortunes of the
agriculture sector, and by extension of our rural communities. Truth be
told, government policy has not altered the fortunes of any sector of
the economy, bar the serendipitous outcomes from the GSM license
auctions. In part, this is the result of a major policy failure. To
date, government policy at all levels has focussed on setting financial
and input targets for its intervention in the sector. According to a
recent Mckinsey survey, the former targets lack the precision proper
for both monitoring and measurement, while the latter target suffers
from an even greater failing. Despite the huge government outlays on
subsidising fertilizer use on the continent, the report, “Four Lessons
for transforming African Agriculture” estimates the continent’s use of
fertilizers (24 kilogrammes per hectare) at “only one-quarter of the
world average”.

Obviously, a part
of this dismal number is because official subsidies for supply-side
inputs (fertilizers, seeds, etc.) were privatised and never got to the
intended beneficiaries. However, a larger part of the policy riddle has
been the failure of past interventions to factor in demand-side
considerations. Were policy to have succeeded in securing the increases
in agricultural output that was aimed at, where would this have ended
up? No warehouses close enough to farm gates to store extra production.
No roads to evacuate produce to consumers in the urban areas. And
lastly, the problems with power supply over the last twenty years have
limited processing possibilities. Apparently, without due thought to
demand-side responses, the increase in farm output which our
governments’ policies have aimed at over the years would probably have
failed “to produce economic gains and (would have made) it hard to
carry on with the” programmes.

Building on these
insights, Mckinsey’s four lessons turn out to be pretty obvious ones:
focusing on high-impact initiatives; developing markets to complement
supply measures, creating clear roles for the private sector in the
design and implementation of the preferred strategy, and ensuring that
implementation capacity is a key part of whatever intervention
strategies are designed.

Clearly, there is a
dialectic relationship between the theoretical basis on which
interventions in the agriculture sector are constructed, the design and
analysis of options for reaching the desired goals, and how we
eventually manage the preferred options. The problem, however is that
we have failed as a country to understand this relationship across the
entire economy; not just in the agriculture sector.

The Nigerian naira is seen strengthening in the week, lifted by
dollar flows from the energy sector, and the Ugandan shilling is expected to
weaken if food and fuel price protests persist, traders said. Nigeria

Nigeria’s naira could strengthen on expectations of large dollar
inflows from energy companies and the conclusion of presidential elections that
saw President Goodluck Jonathan retain his position.

The naira was trading at 154.65 to the dollar last week but
dealers said the election of Mr Jonathan was a positive signal that there would
not be any major policy shift. “We see confidence returning to the economy and
possible foreign investors gradually considering some level of investment in
the country with the successful completion of the presidential election,” one
currency trader said.

Dollar demand has been persistently high in the run-up to the
elections as businesses and wealthy Nigerians took long positions to hedge
against the risk of instability around the polls. “Now we are not expecting any
significant shift in policy. That is good for planning and also confidence in
the economy,” another trader said. The state-run energy company and some multinational
firms are also expected to offload dollars as part of their month-end sales
cycle, which would boost supply and help support the local currency, traders
said.

Kenya

The Kenyan shilling is seen easing marginally against the
greenback next week with anticipated dollar demand from the energy sector,
while inflows were not expected to offer a major boost to the local currency.
Vimal Chudasama at Chase Bank said he expected dollar demand to pick up and
weaken the shilling slightly. “I don’t see inflows from agriculture and tourism
sector from the Easter period affecting the shilling much,” said Mr Chudasama.

Some traders see the shilling getting some reprieve from rising
local interest rates, which typically attract offshore investors seeking
relatively better returns by holding Kenyan government securities. Dickson
Magecha, a senior trader at Standard Chartered Bank, said yields were expected
to continue rising, boosting the local currency.

Uganda

The Ugandan shilling was slightly weaker against the dollar on
Thursday, and traders said it could ease further if protests over rising food
and fuel prices persist.

Commercial banks quoted the shilling at 2,373/2,378 to the
dollar, weaker than last Thursday’s close of 2,353/2,358. Protests over rising
food and fuel prices erupted in the country’s capital for the fourth time on
Thursday, and opposition leader Kizza Besigye was remanded until April 27 for
participating in an unlawful assembly. “If the protest persists, I see the
shilling weakening further because it could deter any major (dollar) inflows,”
said Peter Mboowa, a trader at Kenya Commercial Bank Uganda. “I expect it to go
to 2,400 next week if the protest persists. We have very minimal inflows at the
moment.”

Traders said demand from the oil and telecom sectors could
further weigh on the local currency next week. “Business demand will normally
come from the energy sector and telecoms sector,” said Ali Abbas, a trader at
Crane Bank. Traders expected the shilling to trade in the 2,370-2,400 range
against the greenback in coming days.

Tanzania

The Tanzanian shilling is expected to hold steady and to
strengthen in coming months as export proceeds from coffee and cashew nuts
start coming in. Commercial banks quoted the shilling at 1,510/1,515 to the
dollar, the same as last week’s close. “There is some demand but the central
bank has been providing support to stabilise the market,” said Hakim Sheikh, a
trader at Commercial Bank of Africa, Tanzania.

Traders said the shilling will likely trade around the 1,510
levels in the coming week. “Looking forward, we expect the shilling to remain
firm and strengthen in June and July when dollar inflows from coffee and cashew
nut exports come in,” said Msafiri Absolom, a trader at Tanzania Investment
Bank. In the week to Wednesday, the central Bank of Tanzania traded $21.25
million on its Interbank Foreign Exchange Market, according to statistics on
its website.

Ghana

The cedi strengthened 0.89 percent against the dollar for the
week-to-date, pushing it to three-month highs, driven by bank and offshore
investor demand for local currency ahead of a 320 million cedi bond issue set
for April 27.

The cedi was quoted at 1.4965/90, from Wednesday’s close of
1.4985/1.5010. “We see immediate support at $1.4900, a breach of it will
quickly expose the 2011 open levels of $1.4800 in the coming sessions,” Jacob
Brobbey, a trader at Barclays Bank Ghana, said in an email.

Analysts expect the bond to be oversubscribed, with over 90
percent soaked up by foreign investors. But, the short-term gains will not
diminish underlying policy concerns, said Sampson Akligoh from investment house
Databank. “I think that the gains will be inevitable during the bond season,
but as the inflows on the back of the bond dries up, the intra-day losses and gains
will re-emerge,” Mr Akligoh said by email.

Christopher Nettey from Stanbic Bank said the yield on the bond
to come in at 12.5-13 percent.

Zambia

The kwacha is expected to remain stable against the dollar in
the week to next Thursday due to balanced demand and supply for the local unit
and the United States (US) currency.

Commercial banks on Thursday quoted the kwacha at 4,685 from
4,695 a week ago.

“We expect this to hold because demand and supply is balancing
and we see nothing significant to tip this balance,” one trader said. Zambia’s
currency met firm resistance around 4,600 during 2010. On the few occasions it
breached that level, it went on to test but failed to breach 4,550.

REUTERS

Nigerian interbank lending rates climbed to 10.25 percent on
average last week, from 9.66 percent the week before, on the back of large cash
outflows to foreign exchange and bond purchases, traders said last weekend.

The secured Open Buy Back held stable at 9.50 percent, 200 basis
points above the central bank’s 7.50 percent benchmark rate and 4.5 percentage
points higher than the Standing Deposit Facility rate.

But overnight placement climbed to 10.50 percent from 9.75
percent, while call money rose to 10.75 percent from 9.75 percent last week.

Dealers said outflows to foreign exchange and other transactions
in the week drained liquidity in the system and pushed up the cost of borrowing
among banks.

Nigeria sold over $600m at its central bank foreign exchange
auctions last week, while a total of N70bn was sold in 3-year and 5-year
sovereign bonds.

“There was inflow from personnel costs to government agencies in
the week, which helped reduced the impact of outflows on the cost of fund in
the market,” one trader said.

The market opened with a balance of about N86bn ($555m) on
Thursday but the market is expected to be short this week because of the impact
of major outflows to foreign exchange and other transactions.

“We see the market becoming short this week and the cost of
borrowing inching up a bit until the next round of budgetary disbursements,”
another dealer said.

The Nigerian market will be closed until Wednesday for the
Easter public holiday and governorship and state assembly elections on Tuesday.

The indicative rates for the Nigeria Interbank Offered Rate
closed higher in tandem with short-term funds, with the 7-day fund rising to
11.15 percent from 10.91 percent a week earlier.

The 30-day fund inched up to 12.33 percent from 12.12 percent,
the 60-day was up to 13 percent from 12.91 percent, while the 90-day dropped to
13.45 percent from 13.60 percent.

REUTERS