Rising Input Costs Threaten Nigeria's Food Security as Dangote Commits $400M to Industrial Expansion
Nigeria's agricultural sector faces mounting pressure from escalating farm input costs while industrial giants like Dangote Group deploy hundreds of millions in infrastructure investments, highlighting the divergent trajectories within Africa's largest economy.
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Nigeria's agricultural sector confronts an escalating crisis as farm input costs surge to levels the federal government now acknowledges as the primary threat to affordable food production, even as major industrial players pour hundreds of millions of dollars into expansion projects that underscore the economy's uneven development trajectory.
The federal government's admission that rising input costs represent the greatest challenge to food affordability marks a critical acknowledgment of structural vulnerabilities in Nigeria's agricultural value chain. According to Business Day analysis, the cost pressures extend across fertilizers, seeds, agrochemicals, and mechanization equipment—inputs essential for maintaining production levels in an economy where agriculture contributes approximately 23% to GDP and employs over 35% of the workforce.
The inflationary environment affecting agricultural inputs reflects broader monetary policy challenges confronting the Central Bank of Nigeria. Recent economic analysis published in Business Day highlights the tension between real inflation—driven by supply-side constraints including insecurity and infrastructure deficits—and technical inflation metrics that guide policy decisions. This disconnect complicates efforts to address food security through conventional monetary tools, as interest rate adjustments prove ineffective against cost-push inflation rooted in structural bottlenecks.
"Every economy is honest—not in its speeches, but in its outcomes," Business Day noted in its assessment of Nigeria's economic optimization patterns. The observation gains particular relevance when examining the contrast between struggling smallholder farmers and thriving industrial conglomerates operating within the same macroeconomic environment.
While agriculture wrestles with cost inflation, Dangote Group has signed a $400 million equipment procurement agreement with China's XCMG Construction Machinery Co., Ltd., according to Business Day reports. The deal targets advanced construction equipment acquisition to accelerate refinery expansion and enhance petrochemical production capacity at the Dangote Refinery complex in Lekki, Lagos State. The 650,000 barrels-per-day facility, which commenced operations in 2023, represents Africa's largest single-train petroleum refinery and a centerpiece of Nigeria's industrial diversification strategy.
The equipment deal encompasses excavators, bulldozers, cranes, and specialized machinery designed to support both refinery expansion phases and ancillary petrochemical projects. XCMG, ranked among China's top construction equipment manufacturers with annual revenues exceeding $10 billion, will supply technology intended to reduce project timelines and improve operational efficiency across Dangote's industrial footprint.
The investment disparity between capital-intensive industrial projects and agriculture reveals fundamental allocation patterns within Nigeria's economy. While the Dangote equipment deal represents a single transaction equivalent to approximately 0.08% of Nigeria's $500 billion GDP, the agricultural sector—despite its employment dominance—struggles to attract comparable capital deployment for mechanization and input subsidies that could address the cost crisis.
Nigeria's inflation dynamics compound these sectoral imbalances. The National Bureau of Statistics reported headline inflation at 34.80% year-on-year in December 2025, with food inflation registering 39.84% over the same period. These figures reflect persistent naira depreciation, fuel subsidy removal impacts, and supply chain disruptions from insecurity across major farming regions including Benue, Plateau, and Kaduna states.
The Central Bank of Nigeria maintained its monetary policy rate at 27.50% through its January 2026 meeting, prioritizing inflation containment over growth stimulation. However, as Business Day analysis argues, this approach may prove insufficient when inflation stems primarily from real constraints—inadequate transportation infrastructure, energy deficits, and security challenges—rather than excess monetary aggregates.
For agricultural producers, elevated input costs intersect with limited access to credit at viable rates. Commercial lending rates averaging 30-35% effectively exclude smallholder farmers from formal financing channels, forcing reliance on informal lenders charging significantly higher rates or foregoing productivity-enhancing inputs entirely. The Agricultural Credit Guarantee Scheme Fund, designed to de-risk agricultural lending, guaranteed just ₦118.6 billion ($76 million at current exchange rates) in 2024—a fraction of sectoral financing requirements estimated at over $10 billion annually.
The Dangote investment, while significant for industrial capacity, also highlights infrastructure development patterns that favor large-scale, capital-intensive projects over distributed investments in agricultural value chains. The refinery complex benefits from dedicated port facilities, independent power generation, and direct access to international supply chains—advantages unavailable to the dispersed network of smallholder farmers producing Nigeria's food supply.
Looking forward, Nigeria's ability to address agricultural input cost inflation will likely determine food security outcomes for its 220 million population more directly than industrial mega-projects, despite the latter's visibility and foreign exchange generation potential. Without targeted interventions—including input subsidies, mechanization financing, and supply chain infrastructure—the gap between agricultural struggles and industrial expansion threatens to widen, with implications for both social stability and economic development balance.
The federal government faces pressure to move beyond acknowledging the input cost crisis toward implementing fiscal measures that directly reduce farmer costs, even as monetary policy remains constrained by inflation-targeting mandates that may not address the agricultural sector's specific challenges.