Agricultural Expenditures: Budget Tracking/Investment Analysis of Agricultural Sector in Nigeria ( )

Transcription

1 Agricultural Expenditures: Budget Tracking/Investment Analysis of Agricultural Sector in Nigeria ( ) REPORT SUBMITTED TO VOICES FOR FOOD SECURITY by Civil Society Coalition for Poverty Eradication CISCOPE [Ujah Oliver Chinedu and Dom Okoro] November 2009

2 Page 2 of 55 Abbreviations and Acronyms ACCOMEX ACGS ACGSF ACSS AfDB A PSF BOF CAADP CACS CBN CBGA CBOs CDD CIC CIDA CISCOPE COFOG CWIQ DARPS DFA DF&A DFID DMBs DMO EU FAO FCT FEAP FGN FIRS FMA & WR FMF GDP Ha IBRD/WB ICTs IDP IFAD IFPRI ITCZ MARKETS MCF MDA(s) MDGs MDPT MFBs MFIs Mt Agricultural Commodity Exchange Market Agricultural Credit Guarantee Scheme Agricultural Credit Guarantee Scheme Fund Agricultural Credit Support Scheme African Development Bank Agricultural Policy Support Facility Budget Office of the Federation Comprehensive Africa Agriculture Development Programme Commercial Agriculture Credit Scheme Central Bank of Nigeria Centre for Budget and Governance Accountability Community Based Organizations Centre for Democracy and Development Central Implementation Committee Canadian International Development Agency Civil Society Coalition for Poverty Eradication Classification of Functions of Government Core Welfare Indicators Questionnaire Developing Agricultural Policy and Regulatory System Director Finance and Accounts Department of Finance and Accounts UK Department for International Development Deposit Money Banks Debt Management Office European Union Food and Agriculture Organization of the United Nations Federal Capital Territory Family Economic Advancement Programme Federal Government of Nigeria Federal Inland Revenue Service Federal Ministry of Agriculture and Water Resources Federal Ministry of Finance Gross Domestic Product Hectare(s) International Bank for Reconstruction and Development/The World Bank Information and Communications Technologies Interest Drawback programme International Fund for Agricultural Development International Food Policy Research Institute Inter Tropical Convergence Zone Maximizing Agricultural Revenue in Key Enterprises Micro Credit Fund Ministries, Departments and Agencies Millennium Development Goals Ministerial Due Process Team Microfinance Banks Microfinance Institutions Metric ton(s)

3 Page 3 of 55 MTEF MTSS NACB NACRDB NAIC NAIS NAPEP NBS NDE NEEDS NEPAD NFRA NFSP NGOs NNPC NPC NSPFS ODA PARP PAT PBN PEFA PMC PPP RAISE RBDAs RUFIN SHGL SICs SMEDAN SMEIES SMEs TFM TOR USAID Medium Term Expenditure Framework Medium Term Sector Strategies Nigerian Agricultural and Cooperative Bank Nigerian Agricultural Cooperative and Rural Development Bank Nigerian Agricultural Insurance Corporation Nigerian Agricutural Insurance Scheme National Poverty Eradication Programme National Bureau of Statistics National Directorate of Employment National Economic Empowerment and Development Strategy New Partnership for Africa s Development National Food Reserve Agency National Food Security Programme Non Governmental Organizations Nigerian National Petroleum Corporation National Planning Commission National Special Programme for Food Security Official Development Assistance Policy Analysis and Research Project Profit After Tax Peoples Bank of Nigeria Public Expenditure and Financial Accountability Project Management Committee Public Private Partnership Raising Agricultural Income with Sustainable Environment River Basin Development Authorities Rural Finance Institution Building Programme Self Help Group Linkage State Implementation Committees Small and Medium Enterprises Development Agency Small and Medium Enterprises Equity Investment Scheme Small and Medium Scale Enterprises Trust Fund Model Terms of Reference United States Agency for International Development

4 Page 4 of 55 Table of Contents 1 OBJECTIVES OF THE STUDY METHODOLOGICAL APPROACH GENERAL FRAMEWORK AND INTRODUCTION Nigeria s agricultural endowments Significance of Agriculture in the Nigerian Economy Domestic Agricultural Policy Overview Nigeria s agricultural performance OTHER ANALYSIS Understanding of National Budget Process of Nigeria National Agricultural Budget Formulation Process National Public Spending in Agriculture Agricultural Finance and Insurance Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) Agricultural Credit Guarantee Scheme Fund (ACGSF) Agricultural Credit Support Scheme (ACSS) Micro Credit Fund (MCF) Rural Finance Institution Building Programme (RUFIN) Nigerian Agricultural Insurance Scheme (NAIS) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Agricultural Investments and Non State Actors in Nigeria Banking Sector Credit to Agriculture Interventions by International Development Partners Ongoing and Pipeline Investments RECENT (2009) DEVELOPMENTS IN NIGERIA S AGRICULTURAL SECTOR LANDSCAPE Point Agenda for Agriculture Commercial Agriculture Credit Scheme (CACS) 200 Billion Naira Fund $50 Million Microfinance Fund for Nigeria and Ghana CONCLUSIONS AND RECOMMENDATIONS REFERENCES Table 1: Percentage distribution of working population by activity Table 2: Crops, livestock and fishery targets ( )... 17

5 Page 5 of 55 Table 3: Cost implication to Government in Table 4: Funding required ( periods) to achieve food security in Nigeria Table 5: Broad budget stages or cycle Table 6: Size of agric. capital budget vis a vis agric. recurrent budget and total federal capital budget Table 7: Sector distribution of total number of development assistance projects ( ) Table 8: Sector distribution of development assistance grants ( ) Table 9: Sub sector distribution of development assistance to agriculture Table 10: Profile of project investments in agricultural development and food security Figure 1: Map of water control in Nigeria Figure 2: Growth rates of aggregate (total) GDP and Agric. GDP Figure 3: Agriculture working population vis a vis total working population ( ) Figure 4: Growth rate of total working population vis a vis growth rate of agriculture working population ( ) Figure 5: Nigeria's average productivity (Naira per worker) profile by economic activity (2007) Figure 6: Trend in percentage distribution of agricultural working population by gender Figure 7: Trend in total agric. import value vis a vis export value Figure 8: Nigeria's annual budget cycle Figure 9: Budget formulation/preparation stage in the budget cycle Figure 10: Total federal government spending vis a vis agricultural spending ( ) Figure 11: Trend in capital budget implementation (%) in Nigeria Figure 12: Capital budget performance (%) in agriculture ( ) Figure 13: Trend in total agriculture credit guarantee scheme fund (ACGSF) in Nigeria Figure 14: Bank credit to private sector as % of GDP in Nigeria and other countries Figure 15: Trend in total commercial bank's loan and advances (trillion naira) to Nigeria's economy ( ) Figure 16: Sectoral distribution of commercial banks' loans and advances ( ) Figure 17: Trend in loans and advances of microfinance banks to the different sectors in Nigeria ( ) Figure 18: Trend in foreign private investment in Nigeria by activity... 42

6 Page 6 of 55 Executive Summary This study is aimed at reviewing the investment policy environment of Nigerian agriculture and how it addresses farmers concerns. This study, therefore, is essentially an agricultural budget tracking exercise focusing on the national level investment policy. It is guided by the general objective of reviewing the investment policy landscape of Nigerian agriculture with a view to gaining some insights on relative and absolute public expenditures on agriculture at the national level. The methodological approach of the study was hinged on the assemblage of relevant data and information on budget (including expenditures) and budget processes from a wide range of sources. Data gathered were subjected to critical analyses. Based on the analyses, the following critical conclusions were reached and policy options proffered: 1. The current functional system of Nigeria s budget does not segregate budgetary provisions into small scale and commercial categories. Nigeria should immediately adopt/adapt and follow the international standards of functional classification as developed by the United Nations in addition to having categories like small scale agriculture and commercial agriculture. 2. There is incongruence between federal government budget allocation (especially the capital budget allocation) and agricultural challenges facing the country. However, increased funding should be supported by increased absorptive capacity of agricultural policy implementers in terms of welldefined and problem solving pro small scale agricultural programming and projects. 3. Capital budget execution in agriculture is poor. The situation calls for an urgent need to improve internal system for tracking, recording and disseminating information about public spending in the agricultural sector. Such information is very critical for undertaking evidence based policy analysis, programme planning and impact assessment. 4. There is the need for transparency and effective inclusion of non state actors (civil society in particular) in the design, implementation, and evaluation of government policies, programmes, projects and budgets. This can be facilitated by the promulgation of formal rules for stakeholder listening in agricultural budget and implementation process. Moreover, ICT can be leveraged to enshrine due process and transparency in the execution, monitoring and evaluation of budget heads and projects for easy appraisal of implementation choices and strategies.

7 Page 7 of There is the need to enhance the targeting, flows and impact of micro credits to small scale farmers in Nigeria. Government and private led micro credit initiatives (NACRDB, ACGSF, MFBs, DMBs, etc) need to be reformed and scaled up (for new vigour and capacity to lend to rural farmers), and attention must be paid to providing innovative types of small scale agricultural finance for agricultural development. One consolidated and efficient financing arrangement should replace the multiplicity of institutions currently in place. 6. There is the need to incorporate gender perspective in agricultural policy formulation, implementation and programming, and in national data and statistical systems, hence the need for gendering microfinance in Nigeria. This demands detailed research and analysis. Gendered microfinance is not about providing credit to women. It is about making microfinance gender sensitive. This can be done by taking into accounts the needs and constraints of both men and women when designing and delivering finance. The objective of a gender sensitive approach is to ensure that the finance provided is just as attractive to women as it is to men, and inclusive rather than exclusive. Designing an inclusive microfinance institution means finding the lowest common denominator of the target customers. This is critical in view of the large number of women believed to be involved in small scale farming.

8 Page 8 of 55 1 OBJECTIVES OF THE STUDY This analysis takes place in the context of the global Economic Justice Campaign focusing on agriculture in Nigeria and aimed at enhancing the livelihoods of small scale farmers. This global campaign emanates from Oxfam International through its affiliates in Nigeria (Oxfam Novib and Oxfam GB) in collaboration with their civil society partners. As mentioned in the terms of reference (TOR), three related priority campaign issues have been identified. These are inadequate farmers support systems, inadequate public investment and problems associated with national food security. According to the TOR, available evidence indicates that there has been a plethora of public policy instruments targeting agriculture in Nigeria over the years on one hand, while on the other, there is strong belief that public investments in the agricultural sector have routinely ignored the needs and concerns of the small scale farmers as they lack the needed capacity to compete for public investment services against the more powerful and privileged interests. Based on this premise, this study is aimed at reviewing the investment policy environment of Nigerian agriculture and how it addresses farmers concerns. This study, therefore, is essentially an agricultural budget tracking exercise focusing on the national level investment policy. It is guided by the general objective of reviewing the investment policy landscape of Nigerian agriculture with a view to gaining some insights on relative and absolute public expenditures on agriculture at the national level. Specifically, the study will describe, review and analyze the following: i. agricultural budget formulation; ii. total public investment to agricultural sector; iii. share of total agriculture investment to small scale farmers; iv. agricultural budget expenditures; and v. agricultural investments and non state actors in Nigeria. 2 METHODOLOGICAL APPROACH To realize the study objectives, we embarked upon content analysis (desk work) and field work. They were conducted through the following steps, some of which ran concurrently: General documentation and pre inquest; Identification of actors in the preparation of national budgets, with special emphasis on national agricultural budgets; Development of interview guide; Visits to relevant institutions or their websites including ActionAid Nigeria, CDD, the CBN (ACGS), NACRDB, NAIC, SMEDAN, NDE, NAPEP, FMOF (Budget Office), FMOA & WR, SMEDAN and SMEIES;

9 Page 9 of 55 Interviews with relevant actors (desks) in the budget process; Data collation and analysis; and Formulation of conclusions and report writing. In doing this analysis, agriculture expenditure is taken to mean all budgetary and investment provisions relating to crops, livestock and fishery, forestry and water resources. The budget data used are Appropriation Bills ( ) for Agriculture and Natural Resources ( ) and Agriculture and Water Resources (2008). These reflect the changes in the nomenclature of the Ministry of Agriculture at various times. Data on actual expenditures are impossible to find, and are therefore proxied by the rate of capital budget implementation. 3 GENERAL FRAMEWORK AND INTRODUCTION 3.1 Nigeria s agricultural endowments Nigeria s agricultural resources and potentials are tremendous and its development is one of the central tenets of the current poverty reduction strategy of the present Federal Government of Nigeria. Out of a land area of about 98.3 million hectares, Nigeria is believed to have 74 million hectares that are good for farming. Although Nigeria s agriculture is largely characterized by rain fed production, the wide variation in agro climatic conditions across the country allows a wide range of crops and animals to be grown and reared respectively. Staple food crops include cassava, yam, cocoyam, maize, cowpeas, sweet potato, millet, plantains and bananas, rice, sorghum, and a variety of fruits and vegetables. Also, livestock (including cattle, poultry, pigs, goat and sheep) is important in the country, but is generally a household rather than a commercial enterprise. The leading cash crops are cocoa, citrus, cotton, groundnuts, palm oil and kernel, benniseed and rubber. Nigeria is also blessed with abundant water resources. The nation s climate is governed by the seasonal movement of the inter tropical convergence zone (ITCZ). Under the governance of the ITCZ, rainfall occurs between the months of June and September over the more northerly latitudes, lengthening to April November further south; while the annual rainfall varies from over 4000mm in the South East to below 250mm in the extreme North East (FGN, 2008). The resultant surface runoff, estimated at about 250 billion cubic meter per year, is drained across the country through a network of river basins comprising four principal surface water basins the Niger and Benue basin, the Lake Chad basin, the Eastern littoral made up of Cross River and Imo River, and the Western littoral which consists of a number of smaller catchments such as Ogun, Oshun, Benin and Owena basins (FAO, 2004) see fig. 1 below.

10 Page 10 of 55 Figure 1: Map of water control in Nigeria Source: FGN, Significance of Agriculture in the Nigerian Economy Agriculture is a significant sector in the Nigerian economy. There are four sub sectors of agriculture in Nigeria. These are arable crops (including food crops), livestock, fishery and forestry (including tree crops). Although she depends heavily on the oil industry for her revenues, Nigeria is predominantly an agricultural society with the sector contributing about 42% 1 of real GDP in In 2007, the contribution of agriculture to economy totalled some $132.2 billion (Economist, Sept. 2008). Eboh, Ujah and Nzeh (2009) show that the contemporary economic significance of the agricultural sector is even more remarkable. In the past half a decade, the impressive growth rate of the nation s economy has been driven by the non oil sector, particularly agricultural sector. Fig. 2 below confirms the high correlation between aggregate GDP growth rate and agriculture GDP growth rate. In other words, the growth rate of the overall economy is to a large extent dependent on the growth rate in agricultural GDP. 1 Calculated by the authors with data from CBN (2008)

11 Page 11 of 55 Figure 2: Growth rates of aggregate (total) GDP and Agric. GDP 70 Growth rate of total GDP at 1990 Constant Prices in Naira 60 Growth rate of total Agric. GDP (including Crops, Livestock, Forestry and Fishing) at 1990 Constant Naira 50 Prices Source: Eboh et al There are, however, doubts about the sustainability of the current growth rate. The recent upsurge in agricultural growth rate has been driven mainly by production increases resulting from the expansion in area planted to staple crops, while productivity has remained low and internationally uncompetitive, and yields of most crops have actually declined over the past two decades (Mogues et al., 2008; Eboh et al., 2006). Approximately 70% of the Nigeria s population engages in agricultural production at subsistence level, while agricultural holdings are generally small and scattered (FGN, 2008). Smallholder farmers constitute 81% of all farm holdings and their production system is inefficient. Small scale ( ha), medium scale ( ha) and large scale (>10 ha) are the three broad categories of farm holdings in Nigeria, with the small scale farm holdings predominating the country s agriculture and accounting for about 81% of the total farm area and 95% agricultural output (Shaib et al., 1997; FMAWR, 2009). The estimated average operational holding is 2 ha per farm family. Data from NBS (2008) indicate that agriculture (including hunting, forestry and fishing) has always contributed the largest chunk to the total working population (Fig. 3 below). The sector contributed 27, 840, 000 workers out of the total working population of 46, 800, 000 in Furthermore in 2007, the sector contributed 31, 277, 967 workers out of the total working population of 54, 030, 000. This represents 57.89% of total working population as at 2007.

12 Page 12 of 55 Figure 3: Agriculture working population vis a vis total working population ( ) Total working population Agricultural hunting, forestry and fishing population Thousands Source: Authors with data from NBS (2008). Further analysis of the working population data indicates that growth rate of agriculture working population seems to be the driver of the growth rate in total working population (Fig. 4 below). The growth rate of agriculture working population dropped from 3.73% in 2003 to 1.94% in 2007, while that of the total working population dropped from 4.46% in 2003 to 3.25% in The high correlation (0.99) between growth rates of total working population and agriculture working population seems to suggest that agriculture holds the potential for tackling unemployment in the country at least in the short run. Figure 4: Growth rate of total working population vis a vis growth rate of agriculture working population ( ) Total working population Source: Authors with data from NBS (2008). Agricultural hunting, forestry and fishing population Despite the significance of agriculture in the nation s economy, the sector is clearly the least productive when compared to other sectors as at 2007 (Fig. 5 below). The productivity of the sector was N0.66 million per worker in the sector in 2007, while

13 Page 13 of 55 the productivity for the mining and quarrying sector was N million per worker in that sector also in Figure 5: Nigeria's average productivity (Naira per worker) profile by economic activity (2007) Agriculture Mining and Quarrying Manufacturing Industries Commerce and repairs of Auto and domestic arts Hotels and Restaurants Real Estate, Renting and Business activities 1.98 Education Health and Social Work 3.87 Public Admin and Defensee Source: Authors with data from NBS (2008). According to Idachaba (2000), the small scale farmerr will continue to be the backbone of Nigerian agriculture for the next 25 years. This implies that Nigeria s agricultural policy thrust in the next decade and beyond should have the small scale farmerr as its center piece. The average age of farmers in the country is high and increasing, thus reflecting low inflow of younger entrepreneurial labour force into agriculture (Eboh et al. 2004) and signifying the urgent need for the renewal of the farming population by making agriculture very attractive and qualitative. Table 1 below shows the distribution of working population by activity in Nigeria as It can be seen thatt in most states of the nation, agriculture constitutes a greaterr percentage of the working population 2. Apart from Lagos State where agriculture constitutes just about 2.5% of the working population, agriculture constitutes between % of the working population in other states of the Federation. On the average, agriculture constitutes about 43.1% of the working population across the states. Table 1: State Abia Adamawa Akwa Ibom Percentage distribution of working population by activity Agriculture (including fishing) Trade Other (manufacturing, construction, transport, public administratio on, education, health and social work, services, etc) Note that data on State GDP is not available currently. It would have been insightful to see the contribution of these sectors to State GDP.

14 Page 14 of 55 State Agriculture (including fishing) Trade Other (manufacturing, construction, transport, public administration, education, health and social work, services, etc) Anambra Bauchi Bayelsa Benue Borno Cross River Delta Ebonyi Edo Ekiti Enugu Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nassarawa Niger Ogun Ondo Osun Oyo Plateau River Sokoto Taraba Yobe Zamfara FCT, Abuja Source: Authors calculation with data from 2006 NBS/EU Core Welfare Indicators Questionnaire (CWIQ) Survey. Moreover, in terms of employment through a gender lens, female presence and participation in agricultural production, processing and marketing is becoming very significant in recent years as can be observed in Fig. 6 below. Data from the National Bureau of Statistics (NBS) in 2006 show that while agricultural employment for males

15 Page 15 of 55 has decreased from 86.14% in 1999 to 78% in 2005, participation by females has increased from 13.86% in 1999 to 21.76% in This calls for a gender based approach to budgeting, not just for agriculture and water resources, but also for other sectors of the economy. Agriculture and food security have strong bearing on women, and national budgets should therefore reflect the increasing significance of women in this sector. It is necessary to remember that overall policy impact on social sectors, agriculture, employment generation and poverty alleviation is far more critical from the point of view of women, and thus any assessment of the impact of budgets on women has to be positioned in this context (CBGA 2007). Agriculture, most especially, is the sector where women (particularly rural and illiterate women) readily find employment and income for survival. Therefore, making agriculture very effective especially for women is pathway out of poverty, not just for women, but also for the millions of households which they represent. Agricultural governance reforms if implemented in a gender blind way can increase gender inequalities. The right agricultural governance reform needs to be sensitive to gender differentials and specificities. Figure 6: Trend in percentage distribution of agricultural working population by gender Male Female Source: NBS (2006) 3.3 Domestic Agricultural Policy Overview There seems to be an understanding that a strong and efficient agricultural sector has the potential to enable Nigeria feed its growing population, generate employment, earn foreign exchange and provide raw materials for industries. It is believed that the vibrancy of the agricultural sector has a multiplier effect on the nation s socioeconomic and industrial fabric due to its multifunctional nature. In other words, the agricultural sector remains an important engine of growth in a developing economy like Nigeria.

16 Page 16 of 55 The current agricultural policy in Nigeria is situated within the framework of the 7 point Agenda/NEEDS II. The present federal government of Nigeria adopted the 7 point Agenda as the broad policy priorities for implementing economic reforms and development programmes in Nigeria on assumption of office in May The agenda describes the key policy imperatives, directive principles and instruments in promoting sustainable economic growth for the achievement of the MDGs by 2015 and Vision 20:2020. It is being implemented within the enabling platform of the successes and lessons of precursor programmes, i.e. the NEEDS I and the experiences in the design of the NEEDS II. The main agricultural goals enunciated under the 7 point agenda are diversified economy, food security, employment generation, economic linkages, exports and poverty reduction. The 7 point Agenda acknowledges the often mentioned challenges in Nigeria s agricultural development as follows: low productivity, low quality of private sector investment, lack of domestic and international competitiveness, weak domestic policies and institutions, inadequate funding and lack of organised land titling and tenure. These issues are analogous to those identified under NEEDS II, as constituting critical gaps in the agricultural development process. Specifically, NEEDS II identifies the key challenges as follows: finance and access to credit, land reform, agricultural extension, commercialisation of agricultural production and post harvest management, agricultural industry linkage, research and training, market oriented subsidies, appropriate technologies and entrepreneurship and agribusiness development. In addition, the NEEDS II stipulates the targets of agricultural progress as follows: 10% annual increase in crop production, 2.5% annual increase in livestock production, 8.0% annual increase in forestry and 9.0% annual increase in fishery production. Other targets include the reduction of agricultural population in poverty by half each year; achieve 5% employment generation in the agricultural sector, generate up to $3 billion in agricultural exports by 2011; reduce food import from 5% of total imports to zero by 2011, increase cultivable arable land by 10% annually. The key elements of the 7 point Agenda strategy are land reform, commercial agriculture, irrigation development, institutional support and market stabilisation. Land reform would bring about legislative and administrative review of the Land Use Act 1978, to make land more accessible, secure and easily titled. The land reform will also promote land use planning, productivity enhancing public interventions and systematic land development. Commercial agriculture will accelerate resource flow from private investors, good quality human capital and technology driven production systems. It is intended to promote market based production systems that are driven by efficient and sustainable technologies. Under the commercial agriculture programme, arable land will be developed in the states for use by well trained motivated commercial farmers, who will cultivate carefully selected ecologically suitable, commercial market responsive crops. It will involve the federal, state and

17 Page 17 of 55 local government, each playing complementary and reinforcing roles. Market stabilisation is aimed at reducing price instability and market fluctuations through the application of price floors and guaranteed price regimes. It has the effect of discouraging capital flight from agriculture and giving market incentives to agricultural producers and economic agents in agricultural value chains. Within the framework of the 7 point Agenda, the National Food Security Programme whose current base document was published in August 2008 specifies the food security crops as follows: cassava, rice, millet, wheat, maize, sugar, cowpeas, soybeans, tomato, cotton, cocoa, oil palm and rubber. Other agricultural commodities mentioned include: livestock poultry, goat, sheep, cattle and pig; fishery fish and fish products. The programme targets a total of 454,021 ha of irrigated land in addition to the existing 220,000 ha currently under irrigation. Examples of the targeted irrigation coverage include: rice 60,000 ha, sugar 60,000 ha, wheat 50,000 ha and cotton 40,000 ha. The National Food Security Programme (NFSP), developed by the Federal Ministry of Agriculture and Water Resources, is designed to ensure sustainable access, availability and affordability of quality food to all Nigerians, and is targeted at making Nigeria a significant exporter of agricultural commodities. In the short term, the outlook of agricultural growth has been set within the context of projected productivity of the various crops, under the National Food Security Programme. The productivity targets for the different crops are given as follows (Table 2 below). Table 2: Crops, livestock and fishery targets ( ) Crop Targets: % Increase Cassava Yield: Increase from 15mt/ha to 30mt/ha Production: Increase from 49 million mt to 100 million mt annually Attain 10% cassava flour in bread making 100% 104% 10% Rice Increase production from 2.8 million mt of paddy to 5.6 million mt rice p. a. 100% Millet Attain 6.5 million mt of millet, and irrigation from 4.0 million mt/annum 62.50% Wheat Attain 500,000 metric tonnes of local production to replace excessive 614% dependence on wheat importation from the current 70,000 mt/annum Sugar National demand for sugar is 2.2 million mt. Current local production is 194, % mt per annum. With a current 10,000 ha commercial plus 50,000 ha under local production of sugarcane, the country needs to increase cultivation of sugar cane by 230,000 ha to attain self sufficiency. Tomato Attain production potential of 20 mt per hectare and from 1.1million mt to % million mt annually. Cotton Attain increase in cotton production from 350,000mt to 1 million mt 186% Cocoa Attain 700,000 mt of production by 2011 from current 380,000 mt per year 84% Oil Palm Attain 1.26million metric tonnes of oil palm and 600,000mt of palm kernel from 50% current 840,000mt palm oil and 400,000mt palm kernel per year Rubber Attain 300,000mt of rubber from the current 200,000 mt per annum 50%

18 Page 18 of 55 Crop Targets: % Increase Livestock & Fisheries Poultry Attain a population of 249 million from current 166 million 50% Goat Attain a population of 67.6 million from the current 52 million 30% Sheep Attain a population of 42.9 million from the current 33 million. 30% Cattle Attain a population of 20 million from the current 16 million 25% Pig Attain a population of 8.25 million from the current 6.6 million 25% Fisheries Attain production target of 1.6 million mt from the current 0.68 million mt 135% Source: Federal Ministry of Agriculture and Water Resources, Achieving these targets (productivity increases) would be heavily dependent on sound policies, appropriate interventions and increases in investments in the agricultural sector. The projected investments in the agricultural sector area are given in the tables below. Table 3 below shows the cost implication to the federal government in Table 3 shows that the Federal Government is interested in a PPP led strategy as cost of public private partnership (PPP) makes up a larger share of cost implication. Table 3: Cost implication to Government in 2008 S/N Description Cost (N billion) 1 Cost of PPPs 90 2 Completion of 25 Silos 4 3 Construction of 25 warehouses Implementation of guaranteed minimum price 10 5 Training of Extension Workers 4 6 Fertilizer Subsidy 23 7 Seeds, chick, bulls & Fingerlings Support for Donor Assisted projects 4 9 Commodity Board Reform 5 10 Small scale rural infrastructure Development of Boreholes, earth dams 4 12 Crop Development 4 13 Agriculture Development Fund (year) 50 Total 319 Source: Federal Ministry of Agriculture and Water Resources, On the other hand, Table 4 below shows the funding required over a four year period, It shows that projected federal government funding for agriculture and food security is about N1, billion within the four year period, and an average of N billion annually. Analysis by this study indicates that a funding gap of 59% exists by the very fact that the total (recurrent and capital) federal budget for agriculture and water resources in 2008 was about less than N billion, as against the projected funding needs of about N billion.

19 Page 19 of 55 Table 4: Funding required ( periods) to achieve food security in Nigeria S/No Description Total Project Cost (N billion) Required Government Funding (N billion) 1 PPP INITIATIVES TOTAL PPP COST 30% OF PPP COST a. Rehabilitation of Irrigation Facilities b. Increased Production of Selected Commodities Rice Sugar Wheat Tomatoes Cassava Livestock Fisheries c. Tractor Service Scheme N5m) d. Agro Industrial Parks N30b) e. Cottage Industries N25m) f. Agro Service Centres N20m) Sub Total of PPP Costs 1, Completion of 25 silos (2008) (capacity MT per Silo) 3 Construction of 100 Ware houses (2,000MT per warehouse) 4 Implementation of Guaranteed Minimum Price Research & Development Training of 10,000 Extension workers per Annum Subsidy to Farmers for fertilizer & other farm input Seeds & Fingerlings Support to Donor assisted projects Commodity Boards Reform & Establishment Agricultural land cadastral mapping & certification Soil testing/national water Base Conditioning Centres Cooperatives Development/Aggressive awareness programme 15 Setting up of Agricultural Development Fund Sub Total for Other Costs (100% Government funding) Grand Total 2, , Source: Federal Ministry of Agriculture and Water Resources, Nigeria s agricultural performance At independence in 1960, Nigeria s agriculture was characterized by high production achieved by mobilizing small scale farmers, provision of infrastructure (roads, railways) geared towards developing crops required for export, and foundation laid

20 Page 20 of 55 for research and export. After independence, government interventions in agriculture were realized within the framework of development plans and annual budgets. Food was abundant and demand met without resort to import. Using a broad classification, the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS) documents the import and export agricultural products in the following categories live animals and animal products; vegetable products; animal and vegetable fats and oil; foodstuff, beverages, spirit and vinegar, tobacco; and raw hides and skins leather, furskins, and saddler. The agricultural exports of significance include cocoa beans and products, rubber, fish/shrimp, cotton, processed skin, etc (Okoro and Ujah, 2009). These agricultural products account for about 39.7% of the total non oil exports in 2007 (CBN, 2007). According to Soludo (2006), agriculture has been growing at about 7% per annum in the last three years and has been driving the non oil growth, and will continue to hold the key to growth, employment and poverty reduction. In terms of value of import vis à vis export, Nigeria is a huge net importer of agricultural products (see Fig. 7 below). The import export gap has been widening since 1999 and this puts the agricultural policy of the nation to question. This situation, however, provides a unique opportunity for closing up or eliminating this agricultural deficit through functional policies and budgets (Okoro and Ujah, 2009). Figure 7: Trend in total agric. import value vis a vis export value Billions Total Agric Import Value/Volume (Naira) Total Agric Export Value/Volume (Naira) Source: authors with data from (NBS 2006) and CBN (2007)

21 Page 21 of OTHER ANALYSISS Understanding of National Budget Process of Nigeria Budget process as a procedure, through which a government (Executive) identifies its priority areas for development and sources of revenue generation, estimates how much to be generated and how much to be spent on the priority areas identified; gets approval of the law makers (legislatures National or State or Local) to generate money from sources identified and spend money as allocated to the priority areas for development; and allows for monitoring and evaluation as to how well the money was generated and spent (Actionaid, 2007). This process (budget cycle) can be decomposed into four broad budget stages (Table 5). Table 5: Broad budget stages or cycle Stages Formulation or preparation Outcome(s) Identify priority areas for development and sources of revenue; money allocated to priority areas Approval or enactment Gets the approval of the law makers to generate revenue from sources identified and to spend money on priority areas identified Implementation Money is generated and spent as approved Monitoring evaluation or audit and Allows for monitoring and finding out as to how well the money was generated and spent Source: Authors creation Nigeria s budget process can be broken down into 14 stages/steps. The annual budget cycle starts with the preparation of a mediumm term revenue framework detailing sourcess (stage 1) see Fig. 8 below. This is followed in stage 2 with the preparation of a medium term expenditure framework ( MTEF) showing aggregating spending over a few years. In stage 3, prospective envelopes are set for (ministries, departments and agencies, MDAs), while in stage 4 the medium term sector strategies (MTSS) are annually updated and stakeholder consultation is held in stage 5. In stage 6, MDAs envelopes are agreed upon leading to the development of a fiscal strategy in stage 7. Figure 8: Nigeria's annual budget cycle Source: Budget Office of the Federation (BOF) [2009], Federal Ministry of Finance.

22 Page 22 of 55 In stage 8, the Federal Ministry of Finance (FMF) issues a budget call circular and instructions for preparing MDAs envelopes, while MDAs comply by submissions in stage 9. Stage 10 involves the evaluation and consolidation of submissions by the Budget Office of the Federation (BOF). This leads to the presentation of a draft budget to Mr. President for approval (stage 11). Mr. President transmits the draft budget to the National Assembly (stage 12). In stage 13 the National Assembly approves and passes the appropriation bill. In stage 14, Mr. President assents to the bill. As can be observed from Fig. 8 above, the scope for civil society participation is limited to stage 5 of the budget process. This is unacceptable as even the input of CSOs can easily be ignored especially when MDAs begins to allocate resources at stage 9. Therefore, stage 9 is far more critical for CSOs than other stages of the budget process assuming they cannot be accommodated in almost all the stages of the process. On the other hand, the MDAs can initiative steps to seek partnership with relevant stakeholder CSOs in determining priorities and plans for action as concerns the MDAs MTSS, MTEF, etc. Furthermore, the Federal Ministry of Finance, through the Budget Office of the Federation (BOF), can make the draft budget available to the public (for at least 2 months) for criticisms and inputs just before stage 11. Better still, CSOs can push for appreciable and significant inclusion in the budget process through persistent advocacy visits to all the government institutions/arms involved in the budget process. 4.2 National Agricultural Budget Formulation Process During the budget formulation/preparation stage (see Fig. 9 below), the Presidency, Federal Ministry of Finance, representatives of Ministries, National Planning Commission (NPC), Central Bank of Nigeria (CBN), Nigerian National Petroleum Corporation (NNPC), Federal Inland Revenue Service (FIRS), and the Revenue Mobilization, Allocation and Fiscal Commission meet to discuss macroeconomic parameters and draw up revenue estimate parameters with regards to oil revenue, non oil revenue and independent revenue. These actors also discuss the medium term expenditure framework specifically in terms of aggregate spending, spending by major MDAs, debt transfers, and deficits.

23 Page 23 of 55 Figure 9: Budget formulation/preparation stage in the budget cycle Source: Actionaid (2007) Following this, prospective MDA envelops are set and fixed by the Ministry of Finance which issues call circular to MDAs on revenue and expenditure estimates for the MDAs. The call circular sets out instructions and seeks to provide guidance to Ministers, Accounting Officers and other officers charged with the responsibility for budget preparation, formulation and submission of their respective MDAs. Following the issuance of call circular by the Ministry of Finance, all Ministers, Accounting Officers and other officers responsible for budget preparation are expected to comply with the instructions and stipulations contained therein. At the ministerial level, for instance the Federal Ministry of Agriculture and Water Resources (FMA&WR), the Department of Finance and Accounts (DF&A) has responsibility for providing day to day financial services in the ministry. This Department is headed by the Director, Finance and Accounts (DFA), who reports directly to the Permanent Secretary. The Permanent Secretary of the Ministry is the Accounting Officer and the Director, Finance and Accounts is sub Accounting Officer. The functions of the department include the following: i. Overall responsibility for the keeping of accounts for the funds (receipts/payments); ii. Management of finances including the receipt of statutory funds allocation, collection of revenue and disbursement of funds as approved by the approving authorities; iii. Maintenance of appropriate books of accounts and prompt rendition of statutory periodic returns to the Accountant General of the Federation as required by the regulations; iv. Provision of financial and economic information to the top management of the ministry for decision making; v. Attendance at the meeting of Committee of Directors and other top management meetings; vi. Participation/membership of the Ministerial Tenders Board, Funds Allocation, Budget Committee and Ministerial Due Process Team (MDPT); and

24 Page 24 of 55 vii. Liaising with the offices of the Accountant General of the Federation, Auditor General of the Federation, Central Bank of Nigeria (CBN) and other financial institutions on issues relating to the Ministry s finances, audit queries and public accounts. However, at the Ministry of Agriculture and Water Resources, a budget committee is in place to assist the Minister on budget matters. Based on the projected aggregate expenditure level and the MDA expenditure set out in the federal budget proposal, an expenditure envelop is approved for each Department. The Minister for Agriculture and Water Resources is Envelop Holder for his ministry. Although the call circular received by the Minister contains envelop with sub allocations to the Personnel and Overhead Expenditure heads of MDAs, the Minister is responsible for sub allocating the Capital Expenditure Envelope to their main departments and all the parastatals and agencies under his supervision. The sub capital envelope provided to all departments, units, parastatals and agencies within the ministry must be accommodated within the overall capital expenditure envelope of the Ministry. So, upon the receipt of the call circular, the Minister causes a copy of the call circular to be made available to all departments and parastatals under his supervision, and cause the MDA s Capital Expenditure Envelope to be sub allocated to all such departments, parastatals and units under his supervision. It is expected that capital sub allocations must reflect MDA s Medium Term Sector Strategy (MTSS) and key initiatives of the President which the MDA wants to pursue. At the sub levels of departments, agencies, parastatals and units, the directors and unit heads are responsible for completing their capital expenditure in the draft budget, within their sub envelope, and returning it to the main Ministry with hard copy of the nominal roll signed verified and signed on all pages by their Chief Executive. Then, the Minister (the Envelope Holder) is responsible for collating the submission of departments, agencies, parastatals and units under the Federal Ministry of Agriculture and Water Resources. The Minister ensures that the summation of the draft budget is within the prescribed capital envelope. Thereafter, the Minister (Envelope Holder) and his Accounting Officer must initial every page of the hard copy of the draft budget proposal of the MDA for onward transmission to the Federal Ministry of Finance. 4.3 National Public Spending in Agriculture Public spending is one of the most direct and effective instruments used by governments to promote agricultural growth and poverty reduction. Public spending at the Federal and sub national levels in Nigeria follow a basic structure recurrent spending and capital spending. This spending structure is characterized by different

25 Page 25 of 55 expenditure categories depending on the ministry, department or agency. Fig. 10 below shows the trend in total federal budget, total federal capital budget, total federal recurrent budget, total agricultural recurrent budget and total agricultural capital budget in the last nine years. Figure 10: Total federal government spending vis a vis agricultural spending ( ) Trillions Total Federal Budget Total Federal Capital Budget Source: Authors with data from Appropriation s Allocation Bills Total Federal Recurrent Expenditure Total Agric Recurrent Expenditure It seems instructive to note that while total federal budget has increased nominally by 263.5% from , total federal recurrent budget increased by 427.2%, and total federal capital budget increased by 150.3%. For the agriculture and water resource sector, within the same period, total recurrent budget increased by 326.8% and total capital budget increased by 317.5%. In real terms, total agriculture capital expenditure increased to an all time high of approximately N0.06 billion (2001) from N0.02 billion in the year 2000 before unstably declining to N0.03 billion in In 2008, total federal recurrent budget represented 51.32% of total federal budget, while total federal capital budget was 25.87% of the total federal budget. Furthermore, total agriculture recurrent budget represented 0.97% of total federal budget, while total agriculture capital budget accounted for only 3.67% of total federal budget in On the other hand, while total agriculture capital budget accounted for 14.2% of total federal capital budget, total agriculture recurrent budget accounted for 1.9% of total federal recurrent budget in Moreover, the total federal agriculture budget (recurrent plus capital) in 2008 represented only 4.6% of total federal budget. This is below the CAADP s (Comprehensive Africa Agriculture Development Programme) recommended threshold of 10% of budgetary spending on agriculture. Fan, Mogues and Benin (2009) noted that in recent years, many sub Saharan African countries have pledged to increase government support to agriculture in other to achieve the goal of 6% annual agricultural growth set by the New Partnership for Africa s Development (NEPAD) through CAADP. As part of the Maputo Declaration of 2003, African heads of state and governments had agreed to allocate 10% of their national budgets to