Crude oil prices dropped in 2016 to below $30 per barrel, and ever since there have been a significant deal of uncertainty in the oil and gas industry, especially whether crude prices may ever return to the 2014 levels of $100 per barrel.
Although the prices currently average within $70 to $73 per barrel, the apprehension about its continued sustainability is still substantial.
The major cause that leads to decline in oil prices is the comparative increase in its supply relative to demand.
Since the decline in crude oil revenue, Nigerian government has begun to seek for alternatives to diversify the economy in light with the recent economic recession.
Following the trend of the continuous decline in the oil sector, many oil and gas companies are equally considering investment in the non-oil sectors.
Nigeria has an estimated population of 200 million people, with abundance of other natural resources including arable land and a dynamic workforce, Nigeria presents a huge potential of untapped or under-tapped market.
According to the Nigeria Bureau of Statistics, the non-oil sector grew by 0.76 percent in real terms during the reference Q3 2017. This is lower by 0.79 percent point compared to the rate recorded in the Q3 of 2016 and -1.20 percent points lower than in the Q2 2017.
This non-oil sector was driven mainly by agriculture, in real terms, the non-oil sector contributed 89.96 percent to the nation’s GDP in 2017, lower than the share recorded in the Q3 2016, 91.91 percent and in the second quarter of 2017, 90.96 percent.
Four sub activities make up the Agricultural sector: Crop Production, Livestock, Forestry and Fishing.
The agriculture sector grew by 12.50 percent year-on-year in nominal terms, showing an increase over the Q3 of 2016 by 5.13 percent points but a slight decline by -0.03 percent points when compared to the preceding quarter’s growth rate of 12.53 percent.
Crop Production remains the major driver of the sector as it accounts for 91.97 percent of overall nominal growth of the sector.
In the third quarter of 2017, Agriculture contributed 24.44 percent to nominal GDP. This figure is higher than the rates recorded for the Q3 of 2016 and Q2 of 2017 at 24.11 percent and 19.28 percent, respectively.
The agricultural sector in the third quarter of 2017 grew by 3.06 percent y-o-y in real terms, a decrease of -1.47 percent points from the corresponding period of 2016 and an increase of 0.05 percent points over the preceding quarter.
The sector in the current quarter contributed 29.15 percent to overall GDP in real terms higher than the contributions in the third quarter of 2016 and second quarter of 2017, which stood at 28.68 percent and 22.93 percent, respectively.
The agriculture sector experienced a 48.74 percent growth in the last 12 months to March 2018.
According to PricewaterhouseCoopers, the Agricultural activities currently contribute to more than 21 percent of Nigeria’s GDP and provide employment to 70 percent of the Nigerian working population, which is comparatively higher than the contribution from the oil and gas sector.
The oil and gas industry by its nature is generally capital intensive, high risk and subject to tougher regulatory requirement. Likewise, the agriculture value chain also possesses the same attributes but in different contextual frameworks, yet, with potential for better returns on investment.
With the recent global oil crunch it is a major wake-up call for oil and gas industry players to explore the agricultural value chain and identify opportunities that exist.
As interest grows in agriculture, funding from international partners are expected to increase, reducing investment risks.
Jonathan Aderoju
Aderoju is a journalist/sports analyst