The Minister of Agriculture and Rural Development yesterday advised commercial banks to create credit instruments and services that are tailored to the risks and cash flow patterns in the agricultural sector.
Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina, gave this advice in a lecture delivered at the Chartered Institute of Bankers of Nigeria (CIBN) 2012 annual lecture held in Lagos.
The minister's speech was titled: "The New Agricultural Transformation in Nigeria: Opportunities for Banks and Other Stakeholders in Economic Diversification."
According to him, there are tremendous opportunities for commercial banks and other stakeholders in the finance industry to initiate much needed overhaul of the agricultural financial lending system.
He explained: "In recent years, the topic of unlocking agricultural finance has gathered increasing popularity and has been widely discussed in arenas such as this. While progress has been made in agricultural lending, it is still far from being enough to meet the needs of this very important sector.
"It is my hope that CIBN's decision to hold this lecture is a sign that the commercial banks in Nigeria have finally recognised the importance and value of increasing their agricultural loan portfolios and are committed to developing innovative financial instruments to effectively deploy much needed capital to this potentially lucrative sector."
He declared that there was need to take a multi-faceted approach to solving the problem in the sector.
"First, the government must create an enabling environment by working with the private sector to develop programs and services that reduce the perceived and real risks associated with agricultural lending in order to encourage banks to lend. However, the onus does not fall on the government alone.
"Second, commercial banks should to be more innovative and proactive. Banks and other private lending institutions have a responsibility to develop credit instruments and services that are tailored to the risks and cash flow patterns in the agricultural sector.
"Lastly, we must draw lessons from our experiences to date, and progress in Nigeria's agricultural Transformation, to drive greater performance of commercial banks in lending to the agricultural sector," he added.
According to him out of the country's population of 165 million, the agricultural sector contributes over 40 per cent of its Gross Domestic Product.
Continuing, the minister said: "This large market represents a high and fast growing demand for agricultural goods and services. Although not fully harnessed, Nigeria also has the capacity to meet, and potentially exceed, this domestic demand. Our nation is abundant with the labour and natural resources necessary to improve productivity.
"Arable land, perhaps the most critical natural resource, is abundant in Nigeria; we have a total of 84million hectares of arable land of which only 40 per cent is under cultivation."