Guest Columnist By USSIJU MEDANER
info@medaner.com, justme4justice@yahoo.com
So much has been said and written about the need to reposition the Nigerian agricultural sector. We have had and continue to have policies geared towards improving the sector, including resolving the national food insecurity sustainably and feeding Nigerians effectively and efficiently.
Doing this, we have made decisions aimed at increasing the output of food production in the country; yet, we have achieved minimal results down the decades. Across the federal, states and the local government administrations, we have been dedicating and budgeting resources annually for the sector, and yet, the citizens still groan under the burden of food scarcity and excruciating high prices.
We can build an agricultural system, where a small population of farmers effectively and efficiently cultivate our available arable lands, turning out food to feed our population, supplying inputs to agricultural cottage industries, creating the bulk of our food exports, and as well revolutionising our livestock agriculture.
This is where the question of a purposeful agricultural economy and financing comes in. A major deficiency of the agricultural sector in Nigeria is the absence of a real economy and appropriate financing to sync with. We literally lack the effective allocation, distribution and utilisation of resources in the sector as well as the proper management of the varieties of commodities produced from the sector. We have mostly left the sector to grow at a pace dictated by events, in a nation that has targets that can only be met by controlling all factors to the production of the needs of its people.
Yet, while this must be critically looked into, a primary challenge has been the need to finance the sector, like every serious business should be. We cannot continue to leave the farmers to their own wits and expect changes that would transform the country. Neither can we continue the ways we currently finance the sector that is not bringing desired results. Nigeria, as a matter of necessity, must totally overhaul its agriculture financing template to really get money to the farmers where and when they need it, at the most economically feasible cost to the farmers. To change the sector, that is what we must do.
Agricultural financing is a critical component of national agricultural development. When done well, it enables farmers to access the necessary resources to improve their productivity and competitiveness, satisfying their business acumen, and providing for the country both the staples it needs to survive and the produce it needs to grow its industry; with everyone earning money across all the value chains. Unfortunately, as at today, agricultural financing in Nigeria is confronted with numerous challenges, including limited access to credit, high interest rates, and inadequate financial infrastructure.
As important and critical effective financing is to the sector, a great number of farmers in Nigeria lack access to formal credit facilities, with stringent and unbelievable collateral requirements, high interest rates, and limited financial infrastructure forcing down the quantity and quality of engagements in the sector. To address these challenges, we must invest sincerely in the development of innovative financial products and services that cater to the needs of smallholder farmers.
Presently, the existing agriculture financing in Nigeria comes with bottlenecks and inefficiencies that defeat all purposes. The commercial banks have become alienated from financing agriculture; and literally setting conditions that are not affordable to the farming communities and farmers. Summarily, financing agriculture is no longer a priority for the commercial banks in Nigeria.
The microfinance bank option, the closest as it appears, to the grassroots, is not good for farming business financing as interest rates are often too high and even when available, is not always enough to translate to any appreciable change in outputs. Though the country has in place the Agricultural Credit Guarantee Scheme (ACGS) to provide guarantees to banks to encourage lending to agricultural businesses, the scheme’s coverage is limited and not at par with what is needed, while the guarantee process can be cumbersome.
The Central Bank of Nigeria has implemented various intervention programs, such as the Anchor Borrowers’ Programme (ABP) and the Agricultural Credit Support Scheme (ACSS) in recent times, to provide financing to agricultural businesses, but it appears eventually that systemic corruption has defeated the good objectives of the program, so much that it is not translating to the desirable increase in the quantity of agricultural products in the country. Specialised Development Finance Institutions such as the Bank of Agriculture (BOA) and the Nigerian Agricultural Insurance Corporation (NAIC) meant to provide financing and insurance services to agricultural businesses have altogether failed in meeting all set targets.
To build a working structure, we must recognise what we have that is not working. An agricultural financing system cannot by any standard impose stringent collateral requirements, high cost of repayments. These credit instruments must possess the nature of a national collaborative investment to rejig the agriculture sector. If it must work a system that removes these barriers must be engaged and set in place for the country including a seamless access, low interest rates, and sustainable advisory structure to assist the farmers on how best to utilise credits.
A strong and working agriculture financing system must be designed with commensurate agriculture insurance products; we cannot get the best from the sector as long as farmers remain vulnerable to risks such as crop failures and livestock diseases.
Financial training programs for the users of the facilities is an essential component of a functioning agricultural financing structure. A large number of these farmers are relatively without formal education, and always end up at the position where it is difficult for them to both access and manage the facilities if and when accessed.
One more things that cannot be allowed to flourish if the agricultural sector would be financed the ways it should be, is corruption. We cannot continue to allow gross misappropriation of earmarked resources and expect positive results at the same time. No.
What we need now is the establishment of a robust agriculture financing system set to provide access to finance for farmers, agribusinesses, and agricultural cooperatives to increase agricultural productivity, improve food security, and enhance economic growth. The differently organised and coordinated system should consist of a formidable, transparent and accessible agricultural finance institution, specially set up to provide loans, credit guarantees, and other financial services to the agricultural sector stakeholders. It should boast of ranges of loan products instruments tailored to different agricultural value chains, such as short-term loans for input financing for seeds and fertilizers, medium-term loans for equipment financing such as tractors and irrigation systems and long-term loans for agricultural land acquisition and development.
The agriculture financing being envisaged must design a strong credit guarantee scheme to mitigate risks for lenders and encourage them to provide loans to agricultural sector stakeholders, introduce agricultural insurance products to protect farmers against crop failures, livestock diseases, and other risks.
The innovative financing system must have to develop a digital platforms for loan applications, credit scoring, and loan disbursement to increase access, efficiency and reduce costs. It must also boast of capacity building: provide training and capacity-building programs for farmers, agribusinesses, and financial institutions to improve their financial literacy and management skills.
The imperative of funding agriculture and everything along its value chains to change the narrative of the Nigerian food production and benefits from the agricultural sector is second to none. It is a task we must grossly embark on to return the sector to what it used to be pre-crude oil era, when it stood as the main foreign exchange earner for the country and a bulk employer of labour beside guarantee of a stable food production for Nigerians.
We must organise funding sources that work together to supply all needed financial uplift to farmers and stakeholders in the agribusinesses. The country must streamline all sources to an eventually single coordinated fund, for the purpose of ensuring that the funds and other contributing aids arrive where they are actually needed and utilisations are readily available for monitoring. We cannot continue with the norm of agriculture loans and subventions ending in the hands of individuals and organisations that have nothing to do with the sector.
The agriculture financing fund should receive intake from the government allocations to agriculture loans via the Central Bank and the Bank of Agriculture, private sector funding, mobilised from a legislated contribution to national agriculture by all operating large scale businesses in the country and loan allocations to agriculture from the commercial banks. Then the singular channel will also absorb all international funding towards agriculture from international organisations, such as the World Bank, African Development Bank, and European Union. These funds would have to be coordinated for all the sources by a single system for better results and benefits to the farmers and all users of the fund and the country at large. It is only through this process that we can effectively establish a monitoring and evaluation framework to track the performance of the agriculture financing system and make adjustments as needed.
Nigerian agriculture is a sector we must revamp; and revamping it would begin with asking questions about the efficacy of its financing and then making conscious effort to resolve all recognised challenges along the financing pathway, in the interest of the country and all the stakeholders.
GOD BLESS THE FEDERAL REPUBLIC OF NIGERIA
