Despite experiencing occasional hiccups, Nigeria still remains Africa’s largest economy going by major international rating agencies’ ratings.
As at February 2020, Standard & Poor’s credit rating for Nigeria stood at B with negative outlook. Between November and December 2019, Moody’s credit rating for Nigeria was B2 with negative outlook, while Fitch’s credit rating for Nigeria was last reported at B+ with negative outlook.
Nigeria is touted to have the highest average GDP growth in the world between 2010 and 2015, according to a Citigroup report published in February 2011. And in the bid to achieve this feat, the Central Bank of Nigeria (CBN), has been in the forefront of putting fiscal initiatives in place to support the sector seen to be critical to the realisation of this goal.
Agriculture, which was the country’s key economic driver and mainstay some decades back but became moribund owing to neglect following the discovery of crude oil, has now been recognised as a major component of Nigeria’s economic recovery and growth plan. Though the sector had suffered low productivity over the years due to neglect and heavy reliance on antiquated methods is currently receiving attention from the CBN as well as the private sector in an effort to reposition and empower it to make the country food-sufficient again.
According to the CBN Governor, Godwin Emefiele, “the vulnerability of the Nigerian economy to global shocks simply reflected the fact that we were unable to sufficiently produce what we consume. Hence, the unwarranted dependence on foreign goods. But why are we unable to sufficiently produce what we consume? Perhaps the most important of these factors is the inadequate finance to strategic high impact and high employment multiplier sectors… including agriculture, MSMEs, manufacturing, power, etc.”
Emefiele, therefore, said the bank, in recognition of the need to resolve the challenge of insufficient flow of credit to the agriculture sector, has adopted the approach of direct intervention initiatives.
The bank embarked on measures that would resuscitate the sector and improve its productivity including the establishment of the Anchor Borrower’s Programme (ABP), Agricultural Credit Guarantee Scheme Funds (ACGSF), Commercial Agriculture Credit Scheme (CACS), and Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL).
Other measures were the restriction of forex for imports of certain food items, outright ban on importation of goods that can be produced locally, removal of subsidy for the importation of 41 non-essential commodities and border closure.
Speaking on the success rate of these initiatives at The Guardian Newspaper’s presentation of a special report on “Financing the Economy” recently, Emefiele said under the ACGSF programme designed to “stimulate lending by banks to the agricultural sector by providing guarantee cover for their exposures to agricultural activities, N101.6 billion has been guaranteed in favour of 1.04 million farmers.”
Under the CACS scheme which “objective is to fast-track the development of the agricultural sector by providing credit facilities to large-holding and commercial agricultural enterprises at a concessionary interest rate with a view to enhancing national food security, increasing output, generating employment and diversifying the revenue base,” over N393.5 billion had been released to about 478 large scale agricultural projects since inception in 2010.
Through NIRSAL, which was established “to de-risk lending to agro-allied businesses through ownership and sharing of risk by all parties in the lending agreement,” over 224 projects valued at more than N33 billion were guaranteed for the Ministry of Agriculture’s Growth Enhancement Scheme.
Also, under the ABP, aimed at creating a link between smallholder farmers and local processors; improving productivity of commodities and building capacity of smallholder farmers, the apex bank has disbursed over N44 billion to beneficiaries in addition to providing a guaranteed market through anchors/aggregators that serve as off-takers to the farmers.
According to Emefiele, owing to the ABP scheme, rice production has increased tremendously resulting in creation of jobs and the crash of its importation. Impact of the border closure on the agriculture sector of the country and by extension, the economy, has been in leaps and bounds, especially in the rice value chain, as Nigeria boasts of over 40 rice mills with production volume running into hundreds of millions of tonnes annually.
The CBN governor stated: “We have seen a boost in local production. Due to our strategic development finance initiatives supported by the dogged implementation of our FX restriction on certain items, we have recorded spectacular improvements in domestic production of most of these items. As a result, many local manufacturers are reporting major boosts to their revenue and profit.”
Assessing the impact of these initiatives on the agriculture sector and the economy in general, however, stakeholders have lauded CBN for its efforts at repositioning the sector to restore and grow the economy but pick holes in their implementation.
The National President of All Farmers Association of Nigeria (AFAN), Ibrahim Kabiru, said, “CBN has done a very good work with ABP except that it should make it possible for more farmers to be involved in it by targeting the farmers directly through their umbrella organisations because what we have seen is that sometimes they give these funds to briefcase farmers – who are not real farmers. Any time they want real farmers, they can reach them through AFAN.We have the mechanism to find out what farmers do because we know the preponderance of crops in each region. And then to be a member, you have to show us your acreage and the crop you cultivate.”
On the border closure, Kabiru explained that, “at the initial stage, we were very expectant that the border closure was, in a way, going to protect what we produce in Nigeria because we have had problems of price turbulences because if you cultivate your rice in Nigeria and you look at the input and the labour and all those things you collect money to do, by the time you pay your interest, your production cost will be high, and if you have to break even, you have to sell your product at a higher price than people are buying the imported rice.”
Concerning NIRSAL, the AFAN boss also said, “it is the de-risking agency designed to de-risk farmers’ loans because most banks are afraid to invest in agriculture. But recently, microfinance banks are being recapitalised to be able to take care of farmers’ needs. If that happens and they do it judiciously, transparently, and honestly, and they target real farmers, it will impact on the farmers. But NIRSAL had come with a very bad story pretending that it can give loans but it is not designed to give loans but to de-risk loans.”
He harped on the need to be clear on the modus operandi of microfinance banks in the agriculture space, saying “we want to know how they want to reach out to farmers and give them loans; what is the tenor, what is the quantum? Are they coming through the farmers’ association or are they doing it with the people they know?”
Speaking on CBN’s ban of forex for importation of items that can be produced locally, Kabiru said, “it was very good for development because why should you give money for things you have here? Why should you encourage that? For instance, if somebody tells you he wants to import maize that can be produced here, why should you subsidise that? If they have to import maize, let them source their forex anywhere from the open market. That is what happens in other parts of the world. So once these initiatives are done transparently and honestly, they are good for Nigeria but what we are encountering is that these are not properly implemented.”
For his part, the Vice President of Nigeria Agribusiness Group (NABG), Mr. Emmanuel Ijewere, said, “all the cries over the years that relying on oil is unsustainable is now coming to roost at a difficult time. CBN did very well with its economic recovery initiatives. CBN stepped into it (fiscal initiatives for agriculture) because they believed that the future of Nigeria was agriculture but the government itself, over the years, has never put in place plans to effect that thinking that agriculture is the future.”
According to Ijewere, “the present CBN governor has served two ministers of agriculture because he has done what many CBN governors never did and it was bold for CBN to do what it did but it still needs to go back to the drawing board now. The paradigm has shifted. The infrastructure for agriculture does not exist but we must continue to find ways to feed our people.”
He further stated: “We neglected agriculture. We made so much noise about it but did nothing serious about it. Even the banking industry was only paying lip service to it. What CBN has done has been very good but unfortunately for them, they removed the carpet from under their feet. They must now go back and start rethinking given the new situation now. I believe CBN did well and with the same zeal they will do even better when they rejig the situation about agriculture going forward.”
