Agriculture was the mainstay of Nigeria’s economy before the discovery of crude oil. From 1960 to 1969, the sector accounted for an average of 57 per cent of the Gross Domestic Product (GDP) and generated 64.5 per cent of export earnings.
From 1970 to late 2000s, the sector’s contribution to the GDP and export earnings steadily declined because Nigeria’s focus shifted to petroleum exploration. Over the past five years, the sector has contributed an average of 23.5 per cent to GDP and generated 5.1 per cent of export earnings.
The recent fall in crude oil prices has triggered conversations around the role of agriculture in economic diversification. The agricultural sector requires massive investments to increase production and to create value addition across the most-profitable segments of the value chain.
Despite the challenges faced in the sector, there has been improved lending to the agriculture. For instance, before now, no lender would give depositors’ funds to a farmer. Such loans would be considered lost from the date of approval. But today, the lenders have begun to scramble for agric businesses, having seen the potential, and knowing how much a well-priced loan can add to their profitability, many lenders are keying into the agriculture financing scheme.
To make this happen, the Central Bank of Nigeria (CBN) has amended the Commercial Agriculture Credit Scheme (CACS) following which it pegged maximum loan intake for any project under the scheme at N2 billion.
It equally pegged the maximum interest rate to the borrower under the scheme at nine per cent, inclusive of all charges.
The apex bank also approved the participation of deposit money banks in the scheme, with the participating banks required to sponsor projects from any of the target areas in the guidelines, and bear all the credit risk of the loans they will be granting.
The CACS is being financed from the proceeds of the N200 billion, three-year bond raised by the Debt Management Office (DMO). The fund will be made available to participating bank(s), to finance commercial agricultural enterprises.
“The single obligor for any project from a participating bank under the Scheme shall be N2 billion while for state governments shall be N1 billion. However, for special schemes and programmes for agricultural development, state governments may be granted concessionary approval for more than N1 billion,” said the CBN.
The scheme is also expected to help fast-track development of the agricultural sector of through the credit facilities; enhance national food security by increasing food supply and effecting lower agricultural produce and product prices, thereby promoting low food inflation.
The CBN Governor Godwin Emefiele said agric financing is the way forward for the economy. He explained that part of its developmental role, the CBN has in collaboration with the Federal Government of Nigeria, represented by the Federal Ministry of Agriculture and Rural Development (FMARD) established the Commercial Agriculture Credit Scheme for promoting commercial agricultural enterprises in Nigeria, which is a sub–component of the Federal Government of Nigeria Commercial Agriculture Development Programme (CADP).
The fund, he added, will complement other special initiatives of the CBN in providing concessionary funding for agriculture such as the Agricultural Credit Guarantee Scheme (ACGS) which is mostly for small scale farmers, Interest Draw-back scheme, Agricultural Credit Support Scheme and other similar developmental initiatives.
Emefiele said there was no need to allocate scarce forex to rice importers when vast amounts of paddy rice of comparable quality produced by poor hardworking local farmers across the rice belts of Nigeria are wasted, and farmers are falling deeper into poverty while we export their jobs and income to rice producing countries abroad? Few decades ago, Nigeria was one of the world’s largest producers of palm oil but today we import nearly 600,000 Metric Tonnes while Indonesia and Malaysia combine to export over 90 per cent of global demand. Under these circumstances, I believe it is appropriate, and in fact, expected, that the CBN contributes to protecting the jobs and incomes of local farmers, using some of the same principles Western Economies use to justify the protection of their farmers through huge subsidies.
He said that agriculture remains the largest employer of labour in Nigeria and contributes about 24.2 per cent of our GDP. In addition, a good share of the demand for forex today go directly to importing agricultural produce. So, the CBN has both a direct and indirect rationale to ensure that this sector is revived in a significant way. In this regard, we are gratified that the CBN’s Anchor Borrowers’ Programme, together with other initiatives like the Commercial Agriculture Credit Scheme and NIRSAL, are proving to be successful in several states.
He explained that in Kebbi State alone, over 78,000 smallholder farmers are now cultivating about 100,000 hectares of rice farms. It is expected that over one million metric tonnes of rice will be produced in that State alone this year.
And this is the bedrock of the recently-launched Lake rice, which is an innovative partnership between the Governments of Lagos and Kebbi States. The CBN remains committed to do more in the identified crops such as rice, maize, sorghum, tomatoes, cassava, cocoa, cotton, dairy, and groundnut.
“We also need to find ways to make land titling much easier especially for smallholder farmers. In this regard, the Nigeria Incentive-based Risk Sharing System for Agricultural lending (NIRSAL) can assist with technical knowledge and deployment of relevant GIS and Satellite imaging that will realize this within a short period of time,” he said.
Emefiele said at a workshop on innovative agricultural insurance products, in Lagos that the agricultural sector provides up to 70 per cent of employment in Nigeria and accounts for about 42 per cent of the country’s Gross Domestic Product (GDP).
Emefiele said the large import food products include wheat, rice, flour, fish, tomato paste, textile and sugar.
“We are confronted, as a nation with a wide range of development challenges especially with the dwindling global crude oil prices and the nation’s dependence on it as its major source of revenue. There is the need to diversify the mono-cultural tendencies of the economy by developing other sectors of the economy especially agriculture,” he said.
He said that Nigeria’s formal financial system is lending about four per cent of all formal credit to the agricultural sector compared to three years ago when only about one per cent of all credit went to agriculture. He insisted that lending is still low given the lingering perception by banks that agriculture is highly risky.
Emefiele said development and expansion of the agricultural insurance sub-sector will go a long way in mitigating against natural disasters and eventually encouraging banks to lend to agriculture.
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