Nigeria Needs to Boost Food Reserves, Says Emefiele

3 March 2021

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday warned against Nigeria repeating the mistakes of the past by neglecting agriculture.

He said the country should immediately start to build its own food reserves, as the experience from the COVID-19 pandemic and the associated lockdowns globally had demonstrated that countries only export out of their reserves.

The CBN governor spoke in Zauro, Kebbi State, during the launch of the 2020 wet season harvest aggregation and 2021 dry season input distribution under the CBN-Rice Farmers' Association of Nigeria (RIFAN) Anchor Borrowers' Programme (ABP) as part of the fifth anniversary of the programme.

He said: "The rhetoric around neglect of previous years will remain part of our history and the best time to correct those mistakes is now and every stakeholder must contribute their quota to guarantee the realisation of these national targets."

Emefiele, however, called for support to sustain the current efforts of the apex bank to galvanise agricultural production towards meeting the requirements of the country's growing population.

He said the ABP, which is an essential part of President Muhammadu Buhari's drive for economic diversification, had improved the fortunes of rural farmers as well as transformed agriculture into the potential for economic growth.

He said in the past five years, the scheme had recorded huge successes, learning points and challenges.

He, however, expressed optimism over the country's capacity to achieve food self-sufficiency.

According to him, the CBN and RIFAN have targeted to cultivate one million hectares of rice farms, which represented over 350 per cent increase from the 221,450 cultivated in 2020.

In addition, a total of 2,923,937 farmers cultivating 3,647,643 hectares across 21 commodities through 23 participating financial institutions have been financed in the 36 States of the federation, including the Federal Capital Territory (FCT), from inception till date.

The CBN has also financed 221,450 farmers for the cultivation of 221,450 hectares in 32 states under 2020 wet season partnership with RIFAN.

Emefiele, however, stated that the partnership between the CBN and the Kebbi State government as well as RIFAN, was aimed at complementing the Economic Sustainability Plan of the current administration

He said following Buhari's recent approval of the resuscitation of the Nigeria Commodity Exchange (NCX) and the commitment of N50 billion by the CBN and other stakeholders, the emergence of a vibrant commodity exchange would enhance post-harvest handling, guarantee effective pricing for farmers, minimise the adverse effect of middlemen and transfer the gains from primary production to other nodes of the value chain.

While also acknowledging the importance of loan repayment to the sustainability of the programme, the Emefiele said it was constantly engaging the farmers to enhance their trust in the system as well as provide a competitive price arrangement and facilitate effective market linkages for their outputs.

He explained that farmers will repay their loans in paddy for ease of repayment.

He added that to create value and transfer these gains along the value chain, the CBN has designated millers to off-take the paddies and track the release of outputs to the market as the bank strives to manage inflation and grow the rice value chain.

Also at the event, the Kebbi State Governor, Senator Abubakar Bagudu, and his Ekiti State counterpart, Dr. Kayode Fayemi, who doubles as chairman, Nigerian Governors' Forum (NGF), commended Emefiele for the novel initiatives in reviving agriculture.

Bagudu said the policy had not only brought succour to the country in terms of food security and diversification but also helped the country to exit recession in two quick successions.

Fayemi also described the interventions as thinking outside the orthodox paradigm of growing the GDP.

President, Rice Farmers Association of Nigeria (RIFAN), Alhaji Aminu Goronyo, expressed gratitude to Buhari for his vision that Nigeria must feed herself by producing what she eats and eat what she produces.

He added that the CBN governor had proven to the world that the agricultural revolution was doable

CBN Considers Ending OMO Sale to Foreign Investors

Meanwhile, the CBN is preparing to end an era of debt sales that handed foreign investors one of the best returns in Africa.

Offerings to non-residents of Open Market Operations (OMO) bills are to be phased out once current obligations have been redeemed, Bloomberg quoted CBN's Director of Monetary Policy, Mr. Hassan Mahmud, to have said in Abuja, in an interview aired during an online conference yesterday.

However, he didn't give a time frame.

Though the sales helped to shore up the currency, the debt has become too burdensome to sustain as foreigners snapped up securities that offered to carry traders -- who borrow in low interest-rate markets to invest elsewhere -- returns of as much as 30 per cent in dollar terms in recent years.

The market for OMOs had grown to about $40 billion by the end of last year, according to Cairo-based investment bank EFG Hermes, with foreigners holding about a third.

The cost of liquidity management is getting too high and issuance of OMO bills should be a transaction between the central bank and commercial lenders, Mahmud said.

"It's not supposed to be for the public, but along the line, the transition broke and investors who were non domestic were investing in OMO," he said.

The central bank has reduced OMO issuance by 61 per cent in the first two months of 2021 compared with the same period last year, according to data compiled by Bloomberg.

OMOs, which have maturities of less than a year, were created to mop up excess liquidity in the banking system, but had been opened to foreign investors to attract dollars since 2015 oil-market crash.

In October 2019, the central bank restricted OMO sales to banks and offshore investors, barring the participation of domestic institutional investors and non-banking firms.

That distorted the market for Nigeria's short-term debt, with yields on treasury bills collapsing.

OMOs maturing in February 2022 yielded around 8.5 per cent yesterday, compared with three per cent for one-year treasury bills in the secondary market.

Repatriation of returns by offshore OMO holders have been putting pressure on the foreign exchange market, Mahmud said.

The central bank has settled more than $2 billion of OMOs to foreign investors, "but the pile-up is still more than that," he said.

"The goal is to get that off, and if inflows are going to come, they should come in through the normal channels of the capital market," Mahmud stated.

Moody's Investors Service had warned as far back as 2019 that the cost of keeping the naira stable using OMOs would be prohibitive and leave the country vulnerable to outflows.

Non-residents held $13.2 billion of the securities as of September, according to a fixed-income analyst at Chapel Hill Denham in Lagos, Omotola Abimbola.

It is unlikely that the central bank will increase lenders' loan-to-deposit ratio, which is at 65 per cent until there is stability and signs of consolidation and economic growth, Mahmud said.

The CBN is also maintaining the forbearance given to lenders to restructure loans in the sectors affected by the pandemic.

Mahmud said: "We want this recovery to consolidate before we start reversing those things.

"Assessment is going on and the bank-examination report will determine whether some of those will be rolled over or not."

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