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By Amechi Ogbonna
Last January when farmers and beneficiaries of the Central Bank of Nigeria’s agricultural intervention funds displayed one million bags of rice at an exhibition showpiece in Abuja, it was indeed a clear testament that the federal government’s drive towards food self-sufficiency was right on track.
In a matter of speaking, that showcase came as a pleasant surprise to millions of doubting Thomases and other Nigerians who thought that the agricultural revolution programme of the Muhammadu Buhari administration was a fluke.
This is because prior to the implementation of the Central Bank of Nigeria Anchor Borrower Programme (ABP), for instance, Nigeria had depended heavily on rice importation from Thailand, India, Brazil and the United States of America, to meet its nearly 7 million tonnes per annum national demand.
Both the Nigerian government and the Organised Private Sector were convinced that that was a habit that even the uninformed knew was a foreign exchange guzzler draining the nation’s reserves particularly at times its main foreign currency earner crude oil was trading below budget threshold.
Rice is one of the most consumed staples in Nigeria, with a consumption per capita of 32kg. In the past decade, consumption has increased 4.7percent and almost four times the global consumption growth.
As at 2017, Nigeria’s consumption had reached 6.4 million tonnes – and approximately 20 percent of Africa’s consumption according to a research work by PwC, a renowned international accounting firm.
But over the last few years, through the CBN intervention support, rice production in Nigeria had reached a peak of 3.7 million tonnes in 2017.
For instance, between the periods of 2010-2019, Nigeria’s rice importation stood at 2.6Mt with import bill on rice alone at N467. 96 billion at international price of $435.3 per ton. The rice importation bill is projected to increase by 93percent or N433. 97 billion by 2029.
Report from the Organisation for Economic Co-operation and Development (OECD) and Food and Agriculture Organisation (FAO) of the United Nation Agricultural Outlook reveal that Nigeria’s spending on rice importation is projected to reach N901.93 billion by 2029 from N467.96 billion in 2019-2020 despite the projected increase in production for the same period
Consequently, in an effort to step up local rice production and reduce importation the Central Bank of Nigeria in 2015 launched the anchor borrower scheme (ABP) an agricultural loan scheme launched by the federal government. The scheme was inherently designed to boost agricultural yields, halt large volumes of food importation and address negative trade balance.
Speaking at the unveiling of rice paddy in Abuja in January, President Muhammadu Buhari, said “The Anchor Borrowers Programme has so far supported over 4.8 million smallholder farmers across Nigeria for the production of 23 agricultural commodities, including maize, rice, oil palm, cocoa, cotton, cassava, tomato, and livestock. Today, rice production in Nigeria has increased to over 7.5 million metric tonnes annually,”
Buhari was pleased that the Central Bank of Nigeria (CBN), had in line with its developmental functions as enshrined in Section 31 of the CBN Act 2007, established the Anchor Borrowers’ Programme (ABP) to create economic linkages between smallholder farmers (SHFs) and reputable companies (anchors) involved in the production and processing of key agricultural commodities hence the harvest of huge paddy that was stacked in Abuja.
The core of the programme is to provide loans (in kind and cash) to smallholder farmers to boost agricultural production, create jobs, reduce food import bill towards conservation of foreign reserve.
It explained that the ABP was the outcome of consultations with stakeholders comprising Federal Ministry of Agriculture & Rural Development, state governments, agro-processors, commodity associations, financial institutions and smallholder farmers to ramp up agricultural production, boost non-oil exports and diversify the revenue base of Nigeria.
Clearly the overriding objectives were to increase banks’ financing to improve agricultural productivity by creating an ecosystem that drives value chain financing; reduce the nation’s food import bill through import substitution and enhanced domestic value addition. It also seeks to create new generation of farmers through innovative financing to support smart agriculture; and deepen financial inclusion and grow smallholder farmers from subsistence to commercial farming.
Agricultural commodities covered under the Programme shall include:Cereals (Rice, Maize, wheat, Cotton, Roots and Tubers (Cassava, Potatoes, Yam, Ginger, Sugarcane, Tree crops (Oil palm, Cocoa, Rubber, Legumes (Soybean, Sesame seed, Cowpea etc., Tomato, Livestock (Fish, Poultry and Ruminants among others.
So far the apex bank in February 2022 said it has disbursed a total of N948billion to 4478, 381 farmers under the Anchor Borrowers Programme, who cultivated 5.2 million hectares of farmland across the country. , This according to Governor Godwin Emefiele has led to the creation of an estimated 12.5 million direct and indirect jobs, across the country.
The CBN however assigned the duty of providing covers and assessing risk of farmers covered under the APB to Insurance underwriters
According to the guidelines released by the Development Finance Department of the CBN the underwriters should provide insurance cover for the projects; ensure timely processing and settlement of claims; provide technical assistance to farmers on insurance policies; and monitor projects for early warning signals or red flags.
Aside the ABP, a cursory look at the CBN, interventions in the economy over the years will clearly show that the agricultural sector has been a major plank of these interventions since the 1970s and are motivated by the recognition of the critical roles agriculture plays in economic growth and development.
The interventions of the CBN in the agricultural sector started in 1977 with the introduction of the Agricultural Credit Guarantee Scheme Fund (ACGSF).
The Fund guarantees credit facilities extended to farmers by banks up to 75 percent of the amount in default net of any security realised.
Between 1978 and 1989 when the government stipulated lending quotas for banks under the Scheme, there was consistent increase in the lending portfolios of banks to agriculture,
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According to data from the CBN, the ACGSF since inception till March 2021, has facilitated 1.180 million loans valued N122.632 billion to farmers across the country.
Another agricultural intervention scheme of the CBN in the agric sector is the Agricultural Credit Support Scheme (ACSS) which was introduced to enable farmers exploit the untapped potential of Nigeria’s agricultural sector, reduce inflation, lower the cost of agricultural production (i. e. food items), generate surplus for export, increase Nigeria’s foreign earnings as well as diversify its revenue base.
ACSS funds are disbursed to farmers and agro-allied entrepreneurs at a single-digit interest rate of 8.0 percent. At the commencement of the project support, banks will grant loans to qualified applicants at 14.0 per cent interest rate. Applicants who pay back their facilities on schedule are to enjoy a rebate of 6.0 per cent, thus reducing the effective rate of interest to be paid by farmers to 8.0 per cent.
Commercial Agriculture Credit Scheme (CACS)
In a bid to encourage commercial farming on a large scale, the CBN in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) in 2009 established the Commercial Agriculture Credit Scheme (CACS) to provide finance for the country’s agricultural value chain namely production, processing, storage and marketing.
The CBN explained that increased production arising from the intervention would moderate inflationary pressures and assist it to achieve its goal of price stability in the country.
Under the CACS, loans are provided to commercial farmers at a maximum interest of 9 percent.
The scheme also allows for moratorium in the loan repayment schedule taking into consideration, the gestation period of the enterprise.
Data for the CBN shows as at January 2021, banks under the CACS have disbursed N672.9 billion loans to fund 636 commercial farming projects while total loan repayment stood at N443.9 billion.
In terms of employment, the CBN disclosed that the firms that benefited from the CACS recorded net job increases of 24,457 between 2009 and 2018, which explains why most economic experts including the nation’s organised private sector have advocated its continued implementation.
Policy outcomes
There is no gain saying it that the various intervention efforts of the CBN have helped to increase the contribution of the agric sector to the nation’s Gross Domestic Product (GDP). According to data from the Nigeria Bureau of Statistics, NBS, agric sector contribution to GDP rose to 22.35 per cent in Q1’21, from 19.79 per cent in 20215.
Most notable is the 2.2 per cent real growth recorded by the agric sector in 2020, when the economy as a whole contracted by 1.92 per cent.
Significantly in this regard is the 3.4 per cent real growth recorded by the sector in Q4’2020, the highest growth since 2017.
According to analysts, the robust growth recorded by the agric sector in Q4’2020, helped the economy to record its first growth in three quarters, and also out of recession, following the contractions recorded in Q2’2020 and Q3’2020, which sent Nigeria into its second recession in five years.
Meanwhile, experts have continued to assess the impact of CBN’s intervention in recent growth rate recorded in the in agriculture in Q4’2020, with analysts at Vetiva Capital Management Limited insisting that : “The agricultural sector maintained a clean sheet in 2020, supported by intervention efforts of the Federal Government and the development finance activities of the Central Bank. This was despite the interruptions to farming activities and food transportation, caused by floods and lockdown measures respectively experienced during the year due to the Coronavirus pandemic.
For analysts at FBNQuest, The expectation was a slowdown in contraction to -1.95percent and was undone by robust growth of 3.42percent for agriculture, the sector’s best showing since Q4 ’17.
Several times we have made the point that Nigeria’s performance would be more muted than that of most emerging markets due to the protection its large informal economy enjoys from global headwinds (such as COVID-19). The argument still holds but it could now be that the credit interventions of the CBN, state development banks and others are starting to have an impact.”
In its response to recent recovery in the economy, the Lagos Chamber of Commerce and Industry (LCCI), attributed the manufacturing sector (+3.4%) positive growth trajectory after three consecutive quarterly contraction amid numerous headwinds to the developmental finance interventions of the Central Bank of Nigeria.
It pointed out that the apex bank introduced several measures including establishment of N1.1 trillion credit facility in a bid to minimise the impact of covid-19 disruptions on manufacturing activities in the country leading to the positive growth trajectory.
Consequently, it’s President Mr Michael Olawale Cole has called on the Central Bank of Nigeria (CBN) to sustain its development finance initiatives in 2022 since it is helping to reactivate the economy.
To consolidate on the interventions earlier initiated, the CBN needs to roll out more friendly supply-side policies to boost liquidity in the market. This would help bolster investor confidence and attract foreign investment inflows into the economy.
“We expect the CBN to sustain its development finance efforts this year while also maintaining its stance on minimum Loan to Deposit Ratio (LDR) requirement. It is expected that credit flows will yield limited outcomes if the structural challenges stifling domestic productivity are unresolved. The CBN should sustain its policy of keeping interest rates low to enable investors to raise capital at cheaper rates,” he said.
