CBN strategies to revamp agriculture, other non-oil sector

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By Olabode Jegede

With decline inflow of foreign exchange into the country, the federal government under the leadership of President Muhammadu Buhari diversification into other sector has been on aggressive motives.

With over 60 per cent drop in global oil prices between 2014 and 2016, the country’s economy witnessed negative consequences that made the government to adjust budget spending and increased borrowing.

Given Nigeria’s dependence on crude oil revenues for close to 86 per cent of foreign exchange earnings and over 60 per cent of government expenditure, the drop-in prices led to heightened inflationary pressures, depreciation of our exchange rate.

The effect of the above led the nation’s economy into recession during the second quarter of 2016.

On the need to revamp the nation’s economy and create jobs, the federal government has embarked on different initiatives which include diversification  into non-oil sector, most especially Agriculture.

Signaling the effect of dwindling global oil price on foreign reserves and depreciation of Naira, the Central Bank of Nigeria (CBN) has taken upon itself to support the government moves to awaken the agriculture sector

The apex consistently emphasized the need to support greater growth of the nation’s economy and in reducing unemployment, through targeted interventions in the agricultural and manufacturing sectors.

Commercial banks were not exempted as they were meant to contribute five per cent of their profit to agriculture sector and Small & Medium Enterprises (SMEs), which is expected to boost capital inflow and job creation.

The CBN continued to builde on the success of Anchor Borrowers Program,  Agricultural Credit Guarantee Scheme Fund (ACGSF), Commercial Agriculture Credit Scheme (CACS) and other intervention programs geared towards supporting the growth of  agriculture and manufacturing sectors.

The Governor, CBN, Mr. Godwin Emefiele early in the year said the apex bank in working with the directive of the federal government in the next five years is set to boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely: Rice, Maize, Cassava, Cocoa, Tomato, Cotton, Oil-palm, Poultry, Fish, and Livestock/Dairy.

According to him, “Our choice of these 10 crops is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next five years if efforts are made to expand cultivation and processing of these items in Nigeria.

“So far, we have held series of engagements with importers and producers of these products. Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2billion in 2018 to $12billion by 2023.”

He noted that the apex bank intervention programs would strengthen the linkage between farmers and agro-processors/manufacturers by ensuring that the output of farmers is purchased by agro-processors/manufacturers.

According to him, “This linkage with agro processors is necessary in order to prove that farmers are creditworthy individuals with bankable contracts. It will also help to unlock private capital flows from financial institutions to farmers, in order to enable farmers meet orders from agro processors.

“To complement the progress made so far as well as the lesson learnt from the conduct of previous programs, we intend to strengthen the capacity building arm of the Anchor Borrowers Program, which will help support better farming practices and higher outputs for farmers.

“Through the credit bureaus, we will also leverage technological tools such as analytics in identifying and supporting farmers that have exhibited good credit behavior, in repayment of their loan obligations. This measure will improve their ability to source for financing from commercial banks.

“We will introduce a non-oil export aspect to the anchor borrowers’ program, which will be focused on linking smallholder farmers to international buyers.

“To discourage the activities of smugglers, who bring in restricted goods into the country, perpetrators and their affiliated companies will be blacklisted and denied access to banking services in the entire country.

“This renewed focus of our intervention program, coupled with increased support for research and development on improved seedlings and enhanced farming practices, will help drive exponential growth of our agricultural and manufacturing sectors.”

Another interesting move by CBN was planned move to ban milk dealer access to foreign exchange at the last Monetary Policy Committee (MPC) meeting.

He had expressed that the amount spent on the importation of milk is too high, stating the need to reduce it.

“We are determined to make milk production in Nigeria a viable economic proposition. If you need a loan to acquire land, do artificial insemination, grow grass or even provide water, we will give you. We are getting to the end of the road of milk importation in Nigeria,” Emefiele explained.

The move by CBN was to encourage backward integration to conserve foreign exchange and create jobs for Nigerians. This is coming on the backdrop of highly successful policy which restricted sale of forex from the Nigerian foreign exchange market for the importation of some 43 items goods that could be produced in Nigeria.

“Arising from the success of the restriction policy, we approached some milk importers, like we did for rice, tomato and starch and asked them to take advantage of CBN’s low-interest loans to begin local milk production instead of relying endlessly on milk imports,” the Director, Corporate Communications, CBN,  Mr. Isaac Okorafor had explained in a statement.

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