The government is making agriculture the mainstay of the economy, following the falling oil prices. Banks with eyes on the future are looking beyond oil sector accounts to businesses that fall within the economic diversification agenda, including agriculture and its value-chains. COLLINS NWEZE writes on steps taken by several lenders to deepen agric financing.
Years back, any credit facility granted to a farmer was considered lost from the date of approval. Ten years ago, no lender would give depositors’ funds to farmers as loans. But, things are changing. Today, the lenders scramble for agribusinesses, having seen the potential and knowing how much a well-priced loan can add to their profitability. Many lenders are buying into the agriculture financing scheme.
For instance, as part of its commitment to support agriculture businesses across the value chain and play its enabling role in the nation’s drive for economic diversification through agriculture, First Bank of Nigeria Limited held the second edition of its annual agric expo in Lagos. The expo was themed “Innovating for a Sustainable Green Economy”. As a result of the agric expo, the First Bank’s agric portfolio recorded a growth of N11.65 billion as a direct impact.
The First Bank Agric Expo, launched in 2017, was designed as a lead to national discourse on the economic benefits of sustainable agriculture value-chain as an alternative source of economic development and foreign exchange through export. The event which was over-subscribed by100 per cent had in attendance key policy influencers, agriculture service providers, primary producers, exporters and top players in the agric value chain.
The 2018 agric expo was geared to drive conversations and collaborations that promote sustainable businesses for agropreneurs whilst creating avenues for growth and increased per capita income in the larger economy.
Ogbeh described the agro-sector as a vital one with the recent National Bureau of Statistics fourth quarter, 2016 Gross Domestic Product (GDP) growth rate of about four per cent, and a 24 per cent contribution to the economy.
The minister decried the menace of the importation of foodstuffs into the country, which he identified as a major threat to achieving self-sufficiency in food production.
The Country Manager for AFEX Commodities Exchange, Ayodeji Balogun, speaking on the topic ‘Reinventing Agric for Sustainable National Development’, said achiving the goal will require capital, talent and a high drive for productivity in the sector. He also noted that there was need to rethink collaterised lending and consider structured trade finance for the agric sector.
The Managing Director/CEO, First Bank of Nigeria Limited and subsidiaries, Adesola Adeduntan stated that First Bank has over the years, committed to nation building, whilst promoting agric-business and the development of the economy in Nigeria. “This second consecutive edition of the First Bank Agric Expo is indicative of our commitment to increasingly collaborate with public and private sector partners to fully restore the prime role of the agricultural sector as the mainstay of our national economy.
Over 124 years ago, our Bank commenced operations with a major strategic focus on financing agriculture development as well as enabling farmers and agrobusinesses. I am pleased to note that agricultural financing across all value chains remains a core part of our business today.”
As a result of the Agric Expo, the First Bank’s Agric portfolio recorded a growth of N11.65 billion as a direct impact.
Other banks key into to agric financing
First City Monument Bank, Sterling Bank, Diamond Bank and United Bank for Africa have also renewed their pledge to intensify support to the agricultural sector and its value chain, including lending more to the subsector in the interest of the economy.
The lenders insisted that four basic commodities that are consumed by Nigerians – rice, wheat, fish and sugar jointly account for a significant amount of the country’s annual import bill.
They expressed their conviction that the nation has the capacity to produce these consumables in required amounts to meet our domestic consumption needs. With its attendant impact on GDP and job creation, agriculture remains a critical focus sector of the financial system.
The banks said they remained is focused on being a strategic partner to the government and other stakeholders in the agricultural sector to ensure food sufficiency, employment and revenue generation.
CBN’s moves to promote scheme
To make this happen, the Central Bank of Nigeria (CBN) has amended the Commercial Agriculture Credit Scheme (CACS). The apex bank has pegged the maximum loan intake for any project under the scheme at N2 billion. It has equally pegged the maximum interest rate to the borrower under the scheme at not more than nine per cent, inclusive of all charges.
Besides, the apex bank has approved the participation of all Deposit Money Banks (DMBs) under the scheme. The banks have a mandate to sponsor projects from any of the target areas indicated in the guidelines and bear all the credit risk of the loans they grant.
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 given to the participating bank to finance commercial enterprises agriculture.
“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”, the CBN said.
The scheme is expected to help fast-track growth in the agricultural sector of the economy by providing credit facilities to farmers at a single digit interest rate; enhance national food security by increasing food supply; and effecting lower agricultural produce and product prices, thereby promoting low food inflation.
CBN Governor Godwin Emefiele, said that agric financing is the way forward for the economy. He explained that the CBN has, as part of its developmental role and in collaboration with the Federal Government of Nigeria, represented by the Federal Ministry of Agriculture and Rural Development established the CACS for promoting local commercial agricultural enterprises, which is a sub–component of the Federal Government’ Commercial Agriculture Development Programme (CADP).
The fund, Emefiele 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 (IDS), Agricultural Credit Support Scheme (ACSS) and other similar developmental initiatives.
Bankers’ Committee steps in
The CBN and DMBs, under the aegis of the Bankers’ Committee, also restated its commitment to expanding bank lending in agro-business in order to discourage importation of goods that can be produced locally.
The bankers stated their resolve to explore large corporate bodies as anchors to lend to participants across the value chain to improve Nigeria’s agro-businesses capacity so as to create sustainable jobs and inclusive growth.
The bankers also affirmed their commitment to financial deepening of the economy, improving financial access to key sectors of the economy, innovative solutions for the critical finance of generation, provide finance for small and medium enterprises, among others.
The committee said: “We note that four basic commodities that are consumed by Nigerians – rice, wheat, fish and sugar jointly account for a significant amount of the country’s annual import bill. We are convinced that the nation has the capacity to produce these consumables in required amounts to meet our domestic consumption needs. With its attendant impact on Gross Domestic Product (GDP) and job creation, agriculture remains a critical focus sector of the financial system.” (The Nation)
