Brazil and Agriculture shining brightly; Africa sending a mixed message...

Dear Readers:

                        On August 31, 2015, I published an article on this blog titled: "Brazil and Nigeria with a cameo from Ethiopia..."  The original article is still available on this blog for your reference.  I advise you to read/reread it before completing your visit to the blog.      

On Saturday April 9th, I stumbled upon an article on page A12 in the weekend print edition of the Wall Street Journal (WSJ).  The article is titled: "Farms are Brazil's One Bright Spot."  The theme of the WSJ article is "Agriculture is the only sector growing as country faces political chaos and recession."  Brazil's economy contracted at its fastest pace in 35 years in 2015.  

Brazil's crop agency, Conab, recently said it expects a record soybean crop for 2016.  A similar feat is expected for sugar cane, coffee and corn.  Exports of poultry is also expected to reach new heights. Agriculture was the only sector of Brazil's economy to expand in 2015, by 1.8%, while overall GDP declined by 3.8%.  Brazil fortunately makes its living from agriculture despite having a strong comparative advantage in iron ore and crude oil (hard commodities.)  Nigeria unfortunately makes its living from crude oil despite having a strong comparative advantage in sorghum, cocoa, millet and oil palm (soft commodities.)  

Nigeria's currency declined 20% in 2015 to N200/$ by February, before the government put on the brakes by making the exchange rate inflexible.  Currency dealers say it should drop by another 40% (from N200) if the reins are released by the Central Bank.  This implies a 75% slide against the dollar in 2015 if the currency market was allowed to roam free.  Brazil's currency dropped by 30% in 2015 without the government putting in capital controls or limiting trading of the currency on the free market. This boosted exports (mainly agricultural) and helped to offset the global decline in commodity prices which have not yet reversed significantly in 2016.  This has helped generate more foreign reserves and reduce Brazil's current-account deficit.  Nigeria's foreign reserves are declining and its current account has moved from a surplus in 2014 to a deficit in 2015 in excess of 2% of GDP after oil exports declined by about 40% in 2015.  

Most hard commodity prices are holding steady at the bottom of their 2015 steep plunges or still on the decline in 2016.  Soft commodity prices for soybeans, sugar and Arabica coffee have risen in 2016; this benefits the Brazilian economy and has led to a 10% appreciation of the Real against the $ over the past two-and-a-half months.  Brazil's central bank is now intervening in the currency market to keep the Real from strengthening further (benefit to its farmers) while Nigeria's central bank is still intervening to keep the Naira from weakening further despite the protests of the IMF and foreign portfolio investors.  

Nigeria has been speaking aggressively about agriculture as the bedrock of the economy going forward while apparently paying more attention to business and commerce.  Patience is needed for a country to transform its agricultural sector.  Nigeria is committed to reaping (hence its die-hard romance with oil) and does not appear to have the patience to sow which is what the agriculture sector needs.  Brazil started its agricultural transformation in the 1990s and is reaping massively twenty years later.  In 2015, soybean exports from Brazil was $27.9B while iron-ore was $14.1B. Soybean is now the largest foreign exchange earner for Brazil (most valuable export) ahead of iron-ore for the first time in a long time.        

Nigeria's minister of agriculture said this month, that, the country has a seed supply/demand gap of about 231,000mt valued at $409m for 2016.  This gap is filled through the use of low quality seeds. The minister added that this unhealthy situation needs to be reversed in order to "increase the productivity and competitiveness of agriculture" and increase income for farmers through bumper yields.  The minister stressed that food security is the most important form of security for guaranteeing  the sovereignty of any nation.  Nigeria should know this better than any other given that the Nigerian civil war was won and lost on the agricultural field rather than the battle field.  

During desperate times, patience is rarely a man's best friend.  Agricultural research, expansionist policies and investments take time to sow and eventually reap.  Nigeria is sowing in hindsight while Brazil sowed with foresight.  Brazil has reaped a lot more than it has sown in agriculture and this was achieved after it sowed.  Nigeria needs revenue; without patience and consistent sowing, agriculture will not become Nigeria's bright spot as is the case in Brazil. Nature cannot be cheated; it can be sidelined with eventual dire consequences.    

Ethiopia and Kenya are already showing signs of economic progress through agricultural empowerment.  South America's largest economy is now heavily reliant on agriculture and is not resting on its oars.  Africa's largest economy knows that agriculture is the bedrock of its future growth and has for quite awhile.  Low prices of hard commodities may just be the agricultural blessing that African countries need to patiently till and enrich their land and people.  Agriculture is the largest employer of labor in sub-Sahara Africa.  The resultant export earnings are among the smallest, as hard commodities and the quick money generated, continue to distract successive African governments across the continent from the reality of how to truly be free.                         

P.S. Nigeria should exchange agriculture export earnings at the parallel market rate and not the official rate upon receipt of dollar inflows.  When agriculture is important to you, you need to encourage and not discourage farmers by your actions.  Agriculture requires selflessness and not selfishness.  Rent-seeking has no home here.

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          The TRUTH will set us FREE; I will remain steadfast and keep telling it.