Against the backdrop of dwindling oil revenues and rising huge food import bills, the Federal Government took the bold initiative to up the tempo of the ongoing economic diversification effort in order to hedge the country’s economy from the vagaries of the international oil market and reduce the foreign exchange expended on food imports.
For some years, now, Nigeria has not been earning from oil exports as a result of persistent fluctuation in the oil price and the activities of militants, which constrain oil production and exploration in the Niger Delta. But while efforts are being made to address this challenge which partly explains the country’s rising budget deficit the Federal Government felt uncomfortable with the huge amount of foreign exchange the country spends on the importation of food items every year.
A recent report by National Bureau of Statistics (NBS) said that the amount of money the country has been spending on importing food and drink increased from 2015 to 2017 and dipped in 2018 and if the trend from the first quarter of year had continued the bill would go up again. According to the NBS, in 2015, Nigeria spent nearly $2.9 billion on importation of food and drink and by 2017; it had risen to $4.1billion.
Since 2016, the country’s finances have been under severe pressure with the crude oil, the main source of government revenue and foreign exchange reserves, selling for as low as $12 or $13 a barrel (with production costs of around $22 per barrel), and a debt servicing to revenue ratio of more than 50 per cent even before the oil price crash.
Facing its second recession in four years, with about 3.4 per cent gross domestic products (GDP) growth forecast by the International Monetary Fund (IMF), the country has little economic resilience. According to analysts, what this translates to is that Nigeria will not be able to sustain restrictions on its 81.15 million-strong workforce, 83.2 per cent of which operate in the informal sector. The economy has yet to return to the path of sustainable growth since it exited recession in 2017.Oil accounts for about 15 per cent of Nigeria’s GDP but it makes up about 80 per cent of government revenue.
On account of this President Buhari insisted that the country must word towards self-sufficiency in food production and no more food imports. “I am restating it that nobody importing food or fertilizer should be given foreign exchange from the Central Bank. We will not pay a kobo of our foreign reserves to import food or fertilizer. We will instead empower local farmers and producers,” he declared.
It for these reasons that the intervention programmes of the Central Bank of Nigeria (CBN) can be appreciated. Among the many initiatives of the apex bank is the Anchor Borrowers’ Programme (ABP) it established in 2015. The ABP which was launched by President Muhammadu Buhari on November 17, 2015 is, specifically, designed to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities.
Essentially, the policy plank is to provide farm inputs in kind and cash to SHFs to boost production of designated agricultural commodities, stabilize inputs supply to agro-processors and address the country’s negative balance of payments on food. At harvest, the SHFs, individually, supply produce to the agro-processor (Anchor) who pays the cash equivalent to the farmer’s account.
The loan is targeted at smallholder farmers engaged in the production of identified commodities across the country. “The farmers should be in groups/cooperative(s) of between five and 20 for ease of administration, while the targeted commodities of comparative advantage to the state include but not limited to:
- Cereals (Rice, Maize, wheat etc.)B. Cotton C. Roots and Tubers (Cassava, Potatoes, Yam, Ginger etc.)D. Sugarcane E. Tree crops (Oil palm, Cocoa, Rubber etc.)F. Legumes (Soybean, Sesame seed, Cowpea etc.)G. TomatoH. Livestock (Fish, Poultry, Ruminants etc.) and any other commodity that will be introduced by the CBN from time to time.”
In 2017, CBN expanded the programme to include Agricultural Commodity Associations (ACAs) of the targeted produce in an effort to expand the implementation of the ABP. This decision was taken to further ramp-up domestic production of identified commodities by leveraging the existing organized structures of the agricultural associations nationwide, thereby providing huge economics of scale in the implementation of APB.
In simple terms, Farmers’ Group & Cooperative Society (NFG-CS) will be leveraging her size and existing structures to help enroll registered members for the ABP.
The CBN, through FCMB will provide financial support to registered members of the cooperative who maintain accounts with the bank. This support will cover the costs of farming between one (1) to five (5) hectares under the supervision of the cooperative. This means that the ABP granted to cooperative members is to empower them invest in the ongoing farming season of the NFG-CS. Qualified members will have hectare(s) of land farmed in their name under the management of the NFG-CS, which is undertaking to provide security for members who qualify for the programme.
The CBN provides this support to qualified members directly to their FCMB operational accounts. However, qualified beneficiaries will not be able to access this fund for anything less than what it was intended for, that is, subscribing with the cooperative for specific crop and Hectare(s) which the funds provides for.
On the conditionality for qualification for the programme, intending beneficiary must be a fully registered member of the cooperative, maintain an FCMB account with at least a balance of N2, 000 and must sign an undertaking to have a lien placed on their account if they qualify for the programme. The lien will limit them from withdrawing from the account until the provided funds is used for the purpose it was provided.
By November this year, it will be five years since the programme was launched. Many Nigerians want to know how much of its objectives have been achieved.
Governor of the CBN, Godwin Emefiele, has shed light on this when he said, early in the year, that Nigeria’s monthly food import bill fell from $665.4 million in January 2015 to $160.4 million as of October 2018. According to Emefiele, the reductions in food import recorded on rice, fish, milk, sugar and wheat, within the 34 months, helped Nigeria saved $21 billion. Nigeria’s food imports bill dropped by 75.9 per cent in 34 months.
“Noticeable declines were steadily recorded in our monthly food import bill from $665.4 million in January 2015 to $160.4 million as at October 2018; a cumulative falls of 75.9 per cent and an implied savings of over $21billion on food imports alone over that period. Most evident were the 97.3 per cent cumulative reduction in monthly rice import bills, 99.6 per cent in fish, 81.3 per cent in milk, 63.7 per cent in sugar, and 60.5 per cent in wheat.
“We are glad with the accomplishments recorded so far. Accordingly, this policy is expected to continue with vigour until the underlying imbalances within the Nigerian economy have been fully resolved,” Emefiele was quoted to have said at a dinner held by the apex bank, adding that in continued recognition of its role as an agent of development and aimed at ensuring self-sufficiency to reduce Nigeria’s excessive dependence on imports, the CBN invigorated its development finance activities
He said the apex bank has since been maintaining a particular focus on supporting farmers, entrepreneurs as well as small and medium scale businesses, through its various intervention programmes such as the Anchor Borrowers Programme, Nigeria Incentive-Based Risk Sharing System for Agricultural Lending and the National Collateral Register.
With the efforts by CBN to farmers, stakeholders acknowledged the apex bank was determined to support more farm activities with competitive and comparative local advantages and protect them by restricting food importation.
The Maize Association of Nigeria (MAAN), which shared CBN’s sentiments, said in July that the apex bank acted in the best interest of the economy, urging farmers to explore the opportunities presented by the restrictions to increase production capacity.
MAAN President, Abubakar Bello, who spoke at a news conference in Abuja, recently, listed the achievement of the last planting season, adding that though the association was targeting about 25 million metric tonnes of maize production in this year’s planting season, it might suffer about 25 per cent reduction due to COVID-19 pandemic.
According to him, maize farmers have cultivated about 250,000 hectares of maize in this year’s wet season farming. He said in the 2020 planting season, the CBN had supported the value-chain of maize production, providing the needed input from land preparations to harvesting, aggregation and storage.
Bello said in this wet season programme, 250,000 hectares of land have been cultivated for maize by MAAN members, adding that the group would work with its partners to double maize production.
He said the apex bank has supported by providing high yielding maize seeds to all our members, adding that with all these great steps being taken by government, the country can be self-sufficient in maize production in the next few months if we all believe in the capacity of our farmers and put our hands on the plough.
The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), has clarified that all successful applications under its ABP for 2019 farming season have been honoured and that only farmers with incomplete loan documentation were prevented from accessing the funds until they meet the stipulated guidelines.
The clarification was in reaction to a protest staged outside NIRSAL’s Head office in Abuja where protesters who carried placards with different inscriptions accused the agency and the CBN’s ABN of “diverting farmers’ money” and “killing farmers”.
NIRSAL Head of Corporate Communications, Anne Ihugba said that over N100 billion facilitated from the financial sector into the agricultural sector is improving the lives of farmers across the country. Apart from growing its balance sheet to N100billion, NIRSAL has facilitated over N102billion loans from commercial lenders across the various Agricultural Value Chains in Nigeria, creating over 40,000 jobs.
“Though NIRSAL found the inauspicious visit as an opportunity to engage and enlighten more young people on its agribusiness initiatives and the promise they hold, the protest smacked of witch-hunting and a well-crafted agenda to smear the organization”, she said.
The Central Bank of Nigeria said earlier in the year that it would fund 1.6 million farmers across the country in the 2020 wet season through its Anchor Borrowers Programme.
The Vice President, Nigeria Agribusiness Group, Dr. Emmanuel Ijewere, stressed the importance of diversifying the economy.He said the process has already started with the farmers at the fore front, adding that if agriculture was taken seriously it is the biggest provided of job, opportunities for people to remain in the villages and develop the villages than everybody coming to the cities.
The Chairman Agricultural Trade Group of Nigerian Associations of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ade Adefeko, said, the ABP has been largely successful though there a few defaults which was to be expected but largely positive.
“What people are doing now is to change their palettes and eat local and backward integration efforts are being intensified by local companies but the impact will be felt only much later,” he maintained.”
Ijewere stated that diversifying the economy was. He said agriculture should be taken seriously as it is the biggest provider of jobs and opportunities for people.
“We have improved the value chain from farming to table and so that is the situation that is beginning to happen now,” he said.
Adefeko however appreciated the CBN’s effort in the agro-value chain, adding that, “banks are doing their bit but can do more. They are being encouraged to lend to the informal sector.”
The CBN on their own have come with numerous intervention funds for Rice, Maize, Tomato, Oil Palm and now Dairy,” Adefeko added.