Nigeria: As CBN Supports Economic Diversification Through Agric Interventions

27 September 2019

Donatus Nwamezirihe writes on the Central Bank of Nigeria's development finance initiative to support the country's drive to raise productivity in the agriculture sector

In order to develop other sources of revenue as well as to protect the economy from perennial shocks occasioned by the drop in crude oil prices, the Central Bank of Nigeria (CBN), through its Anchor Borrowers' Programme (ABP) has continued to support operators in the agricultural sector.

The programme, a development finance initiative, is aimed at supporting economic diversification in the country as well as to enhance job creation and help preserve forex.

Globally, agriculture has been recognised as a key catalyst for creating jobs, reducing unemployment and driving growth in Nigeria.

With the country blessed with favourable climatic conditions, vast arable land and fertile soils, the significant role agriculture should play in the nation's quest to achieve sustainable development has never been doubt.

This potential was one of the reasons why President Muhammadu Buhari recently disclosed plan by the country to stop providing foreign exchange for importation of food into the country.

A statement by a presidential spokesman, Mallam Garba Shehu, had quoted Buhari as saying the foreign reserves would be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food.

"Don't give a cent to anybody to import food into the country," he said.

According to the president, some states like Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano, have taken advantage of the federal government's policy on agriculture with huge returns in rice farming.

He, therefore, urged more states to embrace the ongoing revolution in agriculture to feed the nation.

"We have achieved food security, and for physical security we are not doing badly," he said.

Indeed, the CBN through its Commercial Agriculture Credit Scheme (CACS) as well as the ABP has continued to support genuine local rice manufacturers, in line with its development finance function.

The ABP programme was designed to assist small scale farmers to increase the production and supply of feedstock to agro-processors.

The programme is an initiative of the central bank aimed at creating an ecosystem to link out-growers (small holder farmers) to local processors, increase banks' financing to the agricultural sector enhance capacity utilisation of agricultural firms involved in the production of identified commodities and as well as the productivity and incomes of farmers.

There are reports that it has reduced the level of poverty among small holder farmers and improved jobs creation, while assisting rural small-holder farmers to grow from subsistence to commercial production levels.

The programme was hinged on three pronged approach namely the out-grower support programme; training of farmers, extension workers and banks; and risk mitigation.

The ABP was also one of the reasons why the non-oil sector's contribution to the country's Gross Domestic Product figures released recently improved. The ABP is currently operational in about 26 states.

Earlier this year, while appraising the economic diversification actions of the CBN, the Governor, Mr. Godwin Emefiele, said the programme has enabled agro-processors and manufacturers to source their inputs from local sources, rather than relying on the importation of these items in the face of pressures on the nation's foreign exchange resources. Consequently, the apex bank has rolled out a new policy to end reliance of the nation's dairy industry on foreign inputs, just as it assured that the apex bank was ready to provide loans for those who want to go into cattle business.

He had warned that Nigeria could no longer continue to spend between $1.2-$1.5 billion on milk importation, annually.

"That is a very high import product into the country, given that it's a product that we are convinced can be produced in the country. Cows produce little milk due to roaming.

"Let's ask ourselves the question: What really does it take to produce milk? Get the cow and give the cow plenty of water to drink and let the cow eat a lot of grass and the cow positioned in a place without roaming about, that cow gets fat and you can take milk out of it.

"We called in the management of the oldest milk company in Nigeria to Central Bank office in Lagos. We held at least three meetings with them. We told them that we were trying to use the opportunity to appeal to them to do backward integration. Integrate backward and begin the process of development and production of milk in Nigeria.

"Unfortunately, after three years, nothing has happened. Three weeks ago, we had another meeting, where we said we need to take stock of what you guys are doing because we can no longer continue to spend close to $1.2 to $1.5 billion importing milk to the country, a product we can produce.

"To some extent, they should help us also to reduce the rate of herder/ farmer conflict. Perhaps, if they had started this journey three years ago with us, the herders/ farmers conflict that we see today would not have been as intense as it is this time. Our policies must be respected."

This shows that contrary to the allegation that it was backing the proposed RUGA project, the apex bank had started the push for domestication of the nation's dairy industry with the support to pastoralists over three years before the RUGA controversy.

It is believed that the policy, if well implemented, would support the domestication of the dairy industry, especially as regards ranching of pastoralists for effective milk production, while saving farmlands and agriculture sector perennial attacks.

Similarly, the central bank is now directing attention to growing protein content in the agriculture sector by directing attention to cattle ranching and poultry farming.

The CBN's commitment to supporting cattle and poultry farmers is being done with the aim of improving protein availability in the nation's food chain.

The CBN chief, while announcing a new policy to end milk imports into the country, assured that the bank was ready to provide loans for those who want to go into the cattle business.

He insisted that Nigeria has what it takes to produce milk, assuring that the CBN was ready to give loans to those interested in ranching and other businesses in the livestock value chain.

Indeed, one of the central goals of every developing country is to reach high-income status and agriculture plays a critical role in transforming economies to reach such goal, along with achieving other essential development goals like ensuring food security and improving nutrition.

According to the Dean of the Institute of New Structural Economics and Professor at Peking University, Justin Yifu Lin, in order for any nation to end hunger and undernutrition while accelerating economic growth, agricultural transformation must become a reality.

"Nearly all countries started off poor, and only a handful have achieved high-income status. However, the ones that achieved it started with agriculture and went through an economic transformation that accelerated growth and reduced hunger and undernutrition.

The President, Federation of Agricultural Commodities Association of Nigeria (FACAN), Dr. Victor Iyama, said farming and ranching should be promoted as staples of the nation's economy, saying government should support excellence in food safety and sustainability and lay the foundation for the nation to an emerging centre for all aspects of agribusiness.

He said the government must support innovations around crop sciences and livestock to create business opportunities, adding that agribusiness is a key sector that supports growth and diversification.

Iyama commended Emefiele for his support through the ABP to make the nation's agriculture and food system a key driver of the country's economic growth, saying the gesture will help the sector grow trade, advance innovation, while maintaining and strengthening public confidence in the food system, and increase its diversity.

He commended the CBN's policy of providing loans for those who want to go into the cattle business, underscoring the readiness of FACAN to work with the CBN to develop a partnership that will benefit a wide range of stakeholders, including producers, processors, indigenous communities, women, youth, and small and emerging sectors to focus on the issues that matter most to them.

He said farmers are interested in partnership that deliver programmess that help them grow their businesses through research, marketing and operational support, and protect their livelihoods through risk management programmes.

The CBN boss has assured that the bank was ready to provide loans for those who want to go into the cattle business. He told milk importers that the bank was ready to advence credit to them whenever they were ready for backward integration.

He said: "By the time we restrict you, if you need a loan to acquire land we'll give you. If you need a loan to grow your grass, we will give you. To produce water, we will give you a loan. But that you will continue to import milk into the country, I think we are getting to the end of the road. I will repeat, we are really getting to the end of the road,"stressing that the nation could no longer continue to spend between $1.2-$1.5 on milk importation, annually. He said that the nation has the capacity to produce its milk requirements and that the CBN was ready to give loans to those interested in ranching and other businesses in the livestock value chain farm produce in the country.

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