The agriculture sector accounts for c.20% of Nigeria’s total GDP and, according to industry sources, at least 60% of the country’s working population are smallholder farmers. Agriculture could become the backbone of Nigeria’s economy, similar to the oil sector. However, constraints such as an outdated land tenure system restricting access to land, the limited adoption of research and technology, the high cost of farm inputs, little or no access to credit and inadequate storage facilities among others have contributed to relatively low agricultural output. Over the past eight quarters, the sector has grown by an average of 2.8% y/y. In Q1 2019, it expanded by 3.2% y/y.
The sector is one of the few that has benefitted from policy continuity and has recorded visible success. However, the impact on the broader economy has been modest. For instance, the laudable strides made via the CBN’s Anchor Borrowers’ Programme (ABP) have supported about 200,000 smallholder farmers but there seems to be a glitch when it comes to the distribution of post-harvest output.
At a briefing geared towards policy formulation and implementation we attended earlier this month, we learnt that the federal ministry of transportation has commissioned railway projects to assist with transporting agricultural output from the northern region to markets in the south.
As for access to credit, the latest report in the Selected Banking Sector Data series released by the National Bureau of Statistics shows that loans extended by deposit money banks to the agriculture sector accounted for just 4% of the total credit allocated to the private sector in Q1.
Typically banks adopt a risk-averse approach when extending credit, particularly in order to curtail asset quality deterioration. Over the past few weeks, the CBN has released circulars directing banks to lend more to the real economy by boosting their loan-to-deposit ratio to 60%. We suspect that if this is feasible, there is a higher chance that banks may lend more to the real sector (agriculture inclusive). However, we also note that the CBN may need to apply moral suasion as banks may be unwilling to lend aggressively to specific sectors.
Other financial interventions such as the Farmer Moni loan scheme, which falls under the FGN’s enterprise and empowerment programme and is executed through the Bank of Industry, have made a visible impact in the agriculture sector. The loans start from N250, 000 and are tailored to suit the peculiarities of different planting seasons and farming requirements.
We note that about 5,000 farmers have benefitted from the scheme. The program also includes a guaranteed off-taker, which it sources.
The screening of President Buhari’s ministerial nominees by the upper chamber of the National Assembly has kicked off. Although Audu Ogbeh will not be returning as the minister of agriculture and rural development, we doubt that there will be any severe disruptions to existing policies geared towards the agriculture sector.