CBN in recent years has played an active role in stimulating growth in the agricultural sector.
The Central Bank of Nigeria (CBN) announced plans to fund farmers under its 2020 wet planting season scheme. The scheme is covered under the apex bank’s Anchor Borrowers Program (ABP). The scheme will be the largest ever in the history of the ABP with loans worth N432bn expected to be disbursed to 1.1m farmers across the country. To give perspective, the CBN has only disbursed about N190bn in loans under the ABP program since its inception in 2015. The farmers who will be considered are those who produce; rice, cotton, oil palm, tomato, cassava, poultry, fish, maize, cocoa, and livestock/dairy. According to the bank, the planned loans will aid the cultivation of one million hectares of land and produce 8.3m tonnes of the target commodities.
The CBN in recent years has played an active role in stimulating growth in the agricultural sector. The ABP has been a major platform designed to achieve this objective with c.N190bn loans disbursed to over 1.1m farmers under the program.
Furthermore, the CBN in a bid to strengthen local production of major agricultural products banned access to FX for importers of several agricultural products including rice, palm oil and recently dairy products. While we laud the initiatives of the CBN in supporting the agricultural sector, it appears the sector is yet to show any remarkable improvement in terms of real output. Since the inception of the ABP in 2015, the agriculture sector has grown by an average of 3.2% between 2015 and 2019 which pales in comparison to the prior 5 years (2010 -2014) and 10 years (2005 – 2014), when the sector grew by an average of 4.5% and 5.7% respectively.
This implies there may be many other factors asides funding burdening the sector. There are also indications that the ABP is wrongly perceived by beneficiaries. There were reports earlier this year on how the CBN is struggling to recoup some of the loans it had previously disbursed to several farmers due to many of them having a mentality that it was their “share of the national cake”. Thus, we believe the process for disbursing, supervising and recouping the loans under the program needs to be revamped (See CSL Nigeria Daily, February 4, 2020 – Suing ABP beneficiaries; A wild goose chase?).
While we consider funding a major challenge for farmers, we believe inadequate agriculture infrastructure remains a huge constraint on productivity. We recall the last published Agriculture Promotion Document by former Minister of Agriculture, Audu Ogbeh puts harvest loss rates of perishable crops at 60%. Lack of storage & agro-processing facilities and poor road infrastructure which hampers route-to-market have been highlighted as the major cause for these losses. In 2016, an independent research on the tomato farming sector in Nigeria revealed actual production capacity for Nigeria stood at 1.5m tonnes but only 800,000 tonnes of those make it to the market due to post-harvest bottlenecks.