Agriculture is the most important sector of the African economy and will drive its rise to economic power. In deed agriculture has been predicted as one of the major driving forces of Africa’s economic resurgence, complimented by a growing interest in the continent’s natural resources. For Nigeria, agriculture contributes about 22 percent of its GDP and over 50 percent of informal employment. However, about 90 percent of the agricultural output is accounted for by small scale farmers with less than two hectares under cropping. This situation presents huge gaps that can be exploited for good and also help in putting to an end the era of treating agriculture as a developmental programme, rather than a business venture.
With the economic recession the country is currently grappling with, there is consensus across board that there is no better time to leverage the potential of the agriculture sector, not just to pull out of recession, but also to diversify the economy and place it on the path of sustainable growth and development.The ban on importation of goods which can be produced locally is one step the current government has taken in demonstration of the renewed focus on agricultural development to ensure diversification of the country’s revenue source away from oil. Minister of Agriculture and Rural Development, Chief Audu Ogbeh, while speaking at the inauguration of the Technical Working Group of Agricultural Roadmap, last year emphasized that the decline in global oil prices had made it imperative for the country to diversify the economy, with agriculture as a major anchor. “We have to diversify and that diversification holds a lot of promise through agriculture,” Chief Ogbeh stated.
One of the factors bedevilling the industry is the lack of access to finance, a major impediment that prevents farmers from investing in basic inputs, such as good seeds, fertilizers and small-scale irrigation needed to raise productivity and generate sustainable income. As a result, yields have not increased significantly, leading to pervasive hunger and poverty. Similarly, with little or no commercial financing and other incentives available to entrepreneurs seeking to build businesses that could boost food production, agricultural production remains at a subsistence level.
“Regarding agriculture, the opportunity is immense,” said Dr Demola Sogunle, Chief Executive, Stanbic IBTC Bank PLC. “Though much is required, and a collective inertia still remains, there are increasing signs of how agricultural transformation can change the country’s fortunes. The current economic situation, especially with strong government backing, makes agriculture an attractive prospect for the country,” he added.
Hitherto, various governments and the Central Bank of Nigeria have introduced financing initiatives to encourage local banks to finance agriculture and also help to reduce the cost of finance for investors/ entrepreneurs in the sector. Some of these initiatives include the Nigeria Incentive-Based Risk Sharing Model for Agricultural Financing, an initiative that provides guarantee on exposure to the financing institution while also providing interest rate rebate for the borrower. Another one is the Commercial Agriculture Credit Scheme (CACS), a CBN initiative that provides single digit financing through commercial banks at nine percent annually for commercial farmers. The Real Sector Support Fund (RSSF), also a CBN initiative which provides single digit financing to the real sector, including the agric sector, for periods of up to 15 years at an interest rate of nine percent per annum. The Anchor Borrowers Programme, another CBN initiative, also provides financing at an interest rate of nine percent per annum. The scheme was recently established to specifically cater to smallholder farmers via an ‘anchor’ platform, by creating markets/offtake for the smallholder farmers.
The above are also supported by efforts from international multilateral agencies like the International Institute of Tropical Agriculture (IITA), and German Technical Cooperation (GIZ), among others that have developed various initiatives towards providing technical support for primary production and other critical aspects of the agri-business value chain. International funding agencies like the African Development Bank are also not to be left out via provision of on-lending facilities to support agri-business development.
It was largely in search of ideas and strategies to unlock the sector and stimulate growth of local production that lots of forums focused on agriculture have become commonplace. The ultimate goal is to unlock the country’s economic potential. Most of these forums usually reach the consensus that the requirements of Nigeria’s economic renaissance include the adoption of innovative strategies, appropriate policy directions and meticulous implementation.
“The quest to unlock Nigeria’s agricultural sector, given its massive transformative potential, continues to gain interest and momentum from within Nigeria and abroad,” said Sogunle. He noted that developments in the agricultural sector can increase the volume and value of exports from Nigeria to other parts of the world especially if we focus on value-added and semi-processed product instead of raw produce.
To move forward, experts say Nigeria must look inward for local financing solutions. Several local banks are gradually becoming quite active in the agric space, providing both financing and other support to the industry. For instance, a few years ago, Stanbic IBTC Bank PLC collaborated with Tata Africa Services and John Deere Financial, a division of United States-based John Deere, through which the bank is providing a range of financial services to customers of John Deere. The bank also recently commenced some collaborative efforts with NIRSAL by providing finance towards supporting critical areas of the agri-business value chain.
With better governance and stable policies in place, Nigeria will reap the economic benefits of having a greater proportion of the population in the economically active sector. The large share of agriculture in Nigeria’s GDP, according to experts, suggests that a strong growth in agriculture is necessary to trigger overall economic revival and growth.