Agric financing: Pathway to sustainable economic growth

The drastic fall in Nigeria’s crude oil earnings is no longer news. However, the consequential decline in revenue accruing to states from the federation account has brought about the need to explore other options to generate revenue for states and local governments.

There seems to be a jolt and sudden realisation that there is the urgent need to unlock and exploit other opportunities to sustain economic development.

“With an annual food imports bill of over N630 billion (decreased from N1.3 trillion), unemployment rate of 9.9 percent and poverty, economic diversification is no longer optional but a necessity to re-position our economy to attain inclusive growth and global competitiveness,’’ said Godwin Emefiele, governor of the central bank.

With the economy in a restoration phase, diversification has suddenly become a mantra of sorts; reverberating at all economy-related discussions and fora in the country in recent times.

There is no doubt that Nigeria’s oil and gas sector generously upheld the economy over the past three decades, but with the recent plummet in crude oil prices and its resultant effect on the economy, it is safe to say that the time has come for Nigeria to diversify.
In pursuing this goal, agriculture has been identified as pivotal in revamping the economy. Before the discovery of oil, agriculture was the mainstay of Nigeria’s economy, employing over 90 percent of the population and providing a measure of food security.

Although, the importance and potential of agriculture was ignored and relegated to the background following the oil boom of the 1970s during which “petro-dollars” flowed freely, it has always been a major contributor to the economy.

The sector has been instrumental in employment creation, food production and foreign exchange earnings. The sector has consistently contributed to Nigeria’s GDP, recording 23 percent in 2015.

If playing at the background, albeit mildly, the sector has undoubtedly been the mainstay of the economy, its potential and status as paramount driver of the economy. This has probably been recognized by both private and public sector bodies, a reason a raft of policies and programmes are being developed to restore the sector to its glory days.

Some of the reforms by the Federal Government to boost the sector include a commercial bill financing scheme to assist farmers, the Bank of Agriculture (BoA), community banks, establishment of the Agricultural Credit Guarantee Scheme Fund (ACGSF), Nigeria Incentive-Based Risk Management System for Agricultural Lending and SMEs Equity Investment Scheme, among others.
Most of these efforts, however, would probably bring meaningful impact on agricultural production in the long term. Worthy of note is the fact that financing remains a huge challenge to the sustenance of most of these initiatives.

This situation has heightened the agitation for private sector financing of some of the key agricultural initiatives. The importance of finance as a lever to help boost and revamp agricultural development is indispensable. Perhaps, this is why the Federal Government seeks out more growth strategies and implementation options, to encourage players from the private space to participate.

For instance, Stanbic IBTC Bank is collaborating with a number of government agencies and multilateral organisations to spearhead a true agricultural revolution in Nigeria, leveraging the Standard Bank Group’s experience and expertise in agribusiness and agricultural financing.

One local financing initiative that was a turning-point for the continent was the partnership between Standard Bank Group and the Alliance for a Green Revolution in Africa (AGRA), a dynamic partnership working across the African continent to help millions of small-scale farmers and their families lift themselves out of poverty and hunger through better farming practices.

Standard Bank teamed up with AGRA to create an innovative fund for Africa’s smallholder farmers.

The fund operates in Ghana, Mozambique, Tanzania and Uganda, opening loan opportunities to smallholder farmers and small- and medium-sized agricultural businesses previously considered too risky for lending. AGRA and other partners are providing a guarantee fund, and in turn, Standard Bank made $100 million available for lending over three years.

Stanbic IBTC, in acknowledging the nation’s huge agricultural resource base and the great potential it offers for growth of the economy, is increasingly priming itself to empower the Nigerian farmer.

The goal of empowering farmers would be achieved through bespoke schemes and initiatives such as its Smallholder Farmer Finance Scheme, which aims to address the gap in agribusiness financing and lack of market access to ultimately increase smallholder livelihoods.

A notable initiative was the agreement of a pre-season price contract between Stanbic IBTC and Grand Cereals Limited (GCL), which guaranteed farmers a minimum price for their produce at the end of the season. If at the time of harvesting, market prices are higher than the agreed minimum price, GCL will pay the market price.

Another notable initiative is the recently inaugurated multibillion N8, 000 hectares of Rice Out-growers Scheme in Hadejia, Jigawa State, launched by Aliko Dangote, chairman, Dangote Group, as part of his partnership with governments at all levels to reduce food imports.

The launch of the scheme, marked with the distribution of rice seedlings to the benefitting farmers, has the potential to provide direct jobs for 5,000 farmers and another 5,000 indirect jobs.
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Nigeria has enormous arable land that will ensure that agric growth will yield vast benefits to the economy, and with strategic financing from Stanbic IBTC Bank and the likes, it is hoped that a large number of unemployed youths and undergraduates will embrace agriculture as an attractive option, instead of roaming the streets of the urban centres for non-existent white collar jobs.

Consequently, with more hands gainfully engaged, food security is assured, crime rate will decline and more people are empowered.

Agricultural finance is indispensable when it comes to the growth of the sector and the many benefits that will accrue to Nigeria.
More importance should now be placed on agricultural finance as efforts to grow the sector without financing options will be futile.

As the federal and state governments continue to develop and implement policies and programmes to aid farmers, more private sector players like Stanbic IBTC Bank, Dangote, Olam, among other agribusiness firms, would need to develop initiatives, strategies and schemes to help boost the financing of agriculture and in turn sustain economic development.

Josephine Okojie