The Managing Director of Nigerian Agricultural Cooperative and Rural Development Bank (NACRD), Alhaji Mohammed Santuraki, was a guest of the Editorial Board of LEADERSHIP. During the interaction, he fielded questions on the activities of his bank especially in the efforts to revive agriculture. The bank chief expressed regrets that less than 11 percent of subsidy on agriculture gets to the real farmers. Christian Ochiama was there.
What is the mandate of your institution?
The bank is basically created to support two major sectors of the economy - agriculture and rural enterprises. In a developing economy like ours, rural economy is predominantly agricultural. So, that is our mandate. This mandate arose especially in the last 12 years when the Nigerian Agricultural and Cooperative Bank (NACB) merged with Peoples Bank of Nigeria and some part of the Family Economic Advancement Programme (FEAP) to create the Nigerian Agricultural, Cooperative and Rural Development Bank (NACRD) in year 2000. Before then, NACB was just concerned with just financing agriculture. When they acquired the mandate of Peoples Bank, the mandate expanded to also include micro economic and non agricultural. So, specifically our mandate is to support agriculture. In those days when banking was not as pervasive as it is now, we also had the mandate of inculcating banking habits in the rural populace. Our mandate also includes the promotion of the formation of cooperatives as well as development of cooperative associations. We also have the mandate of providing technical support to farmers especially the small holder farmers. So, basically, everything we do boils down to those areas - providing credit, services to the agricultural rural sector, rural savings mobilisation, providing extension services, capacity building as far as agro-allied businesses are concerned
70 percent of Nigeria's population is into agriculture; to what extent have your operations impacted on this segment of the populace?
Agriculture is a very large sector and one institution cannot claim to have the capacity to do all that is needed in the industry. But from our own side, since the institution was created, we have disbursed about N45 billion in loans to about 500,000 enterprises and have supported the creation of six million jobs. Over this period also we have promoted the formation of 10,000 cooperative societies and engaged in about 50 different capacity building exercises. We have also collaborated with other stakeholders; that is what we do sometimes to extend the level of resources we have. So, we've done collaborative ventures with about 25 different entities some of them are still ongoing. So, as far as supporting agriculture is concerned, it could have been better, no doubt about it. But of course, we've had a lot of limitations in terms of funding. Funding is a key issue which I am happy that the government is trying to address. Funding agriculture has been a very big issue on all spheres. If you realise, just before independence and slightly post independence, we were predominantly an agricultural economy. We had very decent shares in the export market- cocoa, groundnut, cotton, palm oil. In fact, in some of them, we were the leading exporters. But today, we are down to zero while the Asian countries have taken over. Reportedly, some of them came here to take seedlings. That story is well worn out. But the fact is that they did what we didn't do because consistently, these people have invested in the last 20 to 30 years more than 16 percent of their budget.
Is government your only source of funding?
Absolutely; because we are a development bank. What I didn't mention is that we are owned 60 percent by government through the Ministry of Finance and then 40 percent by the Central Bank of Nigeria (CBN). So, our model in the past was that we were dependent on recapitalisation; when we were formed, we were supposed to be capitalised to the tune of N50 billion. That was about 13 years ago. At that time, bank capitalisation was in the region of N2-N3 billion. So, the government had the intention of creating a mega bank. But up to this moment (13 years after), we are now at about N30 billion and this was paid over a very long period of time in pieces. Like I said, the government is trying to do something about that. Recently, the president announced that Bank of Agriculture (BoA) will be capitalised. There is a committee in place. We are working under the leadership of the coordinating minister for the economy.
Has there been any injection of fund by the CBN?
What CBN has done mainly is to set up intervention funds. And for agriculture, most of the intervention funds that have been set up have gone through the commercial banks, not bank of agriculture.
In your opinion, do your operations conform to global best practices?
You know, there is not a single model for doing this. When the development finance institutions, especially agricultural development finance institutions, were created in the emerging economies in South America, Africa and some parts of Asia in the 70's, they were totally government-owned. They were supposed to be capitalised by government, and then government was passing some of its foreign loans for agriculture, interventions from International Development Finance Institutions (IDFI) through those institutions. To that extent, yes. But what some of the other governments, especially in the Middle East, did was to use budget mechanism to support agricultural development finances. In some countries, the dedicate part of the budget to support these institutions. In some countries they don't. In other countries what has happened is that some of these banks have become commercialised, diversified banks. So there is not a singular model of doing this. For us, what is important is to create a sustainable institution, and the best way to do that, in our view, is to formally mandate the bank to get a formal banking licence, and be able to raise deposits. In our case, that hasn't happened because that was not our original model.
What percentage of interest do you charge on loans?
It depends: for the small holder loans, it is between 10-12 percent.
What is the range of small holder loans?
Micro loans are everything up to N250, 000. Small holder loans are from N250, 000 to N5million. From N5miilion to N30million will be medium; above N30million will be large scale.
Are they collaterised?
It depends. The micro loans are usually not collaterised. These loans are usually given to groups/ cooperative societies. So, we rely on peer pressure for repayment. That is not collaterised. But anything above that requires collateral, yes.
What's your take on subsidy for agriculture?
The problem with developing economies is that we take everything passed on to us by the West which certainly is a challenge. Today, we are even shy of saying subsidy. But the unfortunate thing is that even in the developed economies, including the United States, they somehow subsidise their farmers. But we are trying to get around because they say we shouldn't subsidise. My view is that subsidy is good especially if it is targeted. The challenge we have is being able to target subsidy so that it gets to the beneficiaries. Our agricultural policy has been very fertiliser-centric over the last few years. Fertiliser is important but it is not the most important in the agricultural production mix. There are other things that are important but because fertiliser is a political weapon, it is used for political patronage and government was subsidising fertiliser heavily. It was found that less than 11 percent of the subsidy gets to the farmers; the people who benefit the most are usually the middlemen. We think that it is a decision in the right direction that the new leadership in the Ministry of Agriculture decided to remove subsidy and look at the other issues in the agricultural matrix: infrastructure, inputs, finance, technology and so on. So, I have a very positive attitude towards subsidy - that it should be directed and be delivered at the right point.
Apart from the federal government, what are the alternative sources of funds?
The other source of funding is intervention funding - if the government has a specific programme they want to target. Usually it would be channelled through the relevant industry development bank. Third, is foreign intervention, that is, International Development Finance Institutions (IDFIs). We also believe that internally generating funds can also be a source of funding because it has been shown that the propensity to save in the rural areas is much more than the demand for loans. If we are to get a kind of formal banking licence, this is one area that we will certainly drive.
The N200 billion by the CBN was not routed through your bank but through the commercial banks; what made the CBN take that decision?
Well, you have to ask them that question, but I can try. What people don't understand is that that money was actually borrowed by Debt Management Office (DMO) as a loan. When it was raised as a loan, the CBN now made the proceeds available to the commercial banks. The commercial banks are lending money based on their own balance sheet; it is not as if they are just passing the CBN money to their customers. They are lending money based on their own balance sheet. So, if there is a default, the CBN will debit the account of the deposit money banks. And that is why they are also very careful in disbursing the loan. They have to be satisfied that the credit risk is good before they disburse. Now, since we are not regulated to the same extent by the CBN as the deposit money banks are, the CBN in its wisdom said that passing this money through the deposit money banks, they will have more control over it. The banks lend based on their balance sheet.
This explains the difficulty in accessing the money?
Yes, because people will just say CBN gave banks money. It is not that simple. The only key advantage is that CBN is providing liquidity to the banks at a reasonably good price. There is some element of subsidy really because the funding cost is low. The intention is to support the banks by providing them liquidity but the credit risks remain with the commercial banks.
To what extent are you supervised by the government?
Earlier, I told you about the ownership structure, but we are supervised by the Federal Ministry of Agriculture. We do have a lot of interactions with the minister based on the programmes they are carrying out. As a result of those exchanges, we are able to influence policy as far as financing agriculture is concerned. Also as a federal government owned institution, we also interact with the legislative arms of government. As I came here, I received a letter of invitation from the National Assembly. We also have a body of CEOs of development finance institutions where all of us meet with the minister of finance - the CEOs of NEXIM, Federal Mortgage Bank, etc. To that extent, we do have avenues to do that. Outside that, we do have an Association of Nigerian Development Finance Institutions (ANDFI) which, incidentally, I chair.
How can an illiterate farmer access loan from your bank?
That, actually, is our bread and butter business. We have 201 outlets across the country. In addition to that, we have six zonal offices. So, in all, the number of outlets and contact points are about 207. We have a branch in every senatorial district in this country. So, we've been in business in nearly 30 years. This is something we have been doing. Our micro loans especially are popular with the farmers. We've been working with them for a long time mainly through their cooperative associations. The issue of identification is not a problem. We also have Community Relations Committee. We actually inspect the farms before we give out the loans. For the new farmers, we give the loans in stages, not at a go. We pay them pre- approval visits and based on that, the loan is analysed to satisfy ourselves that we are dealing with the real farmers. However, the issue of diversion, you can't control that. As an institution, we try as much as possible to supervise delivery. We give you the money as the needs arise.
Do you have any programme to connect with the youths to attract them to agriculture?
We already received the board approval to create what we call Youth in Agricultural Revolution in Nigeria (YARN). We deliberately chose those words so that we can connect with them. And our budget for this is about N30 billion. We have something similar for the women which we call Grow and Earn More (GEM).We are not the decision makers but we can make policy inputs and try to convince the people who make decisions.
Any plans to revive farm settlements to attract more youthful farmers having regard to our ageing farmers?
We are working with some state governments to try and bring back the farm settlements of the olden days. The state governments are also putting resources on the table. The state governments are the owners of the land. They are very vital as far as agricultural revolution in this country is concerned. So, we are collaborating with some of them. The issue of ageing farmers is very important and that is why we need to modernise our agriculture. The youths will not practice agriculture the way our parents did it. UNIDO organised a forum of Songhai Centre in Port Novo. Some youths attended. The truth is that connecting with the youth is not happening with the momentum we expect it to happen.