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‘Lower interest, N50b credit can boost agric, diversify economy’

By Femi Ibirogba
07 May 2020   |   4:06 am
Millions of Nigerians are faced with challenges of food, income and sustainable means of livelihood as COVID-19 ravages the world economies, but professionals have said the intervention dynamics of the Central Bank of Nigeria....

There should be zero % on agric loans, says FUNAAB don

Millions of Nigerians are faced with challenges of food, income and sustainable means of livelihood as COVID-19 ravages the world economies, but professionals have said the intervention dynamics of the Central Bank of Nigeria (CBN) are capable of bridging the gap if handled diligently and transparently.

On March 16, in a circular to the money deposit bank and the public, the apex bank announced that “All CBN intervention facilities are hereby granted a further moratorium of one year on all principal repayments, effective March 1, 2020. This means that any intervention loan currently under moratorium are granted additional period of one year.”

The bank also reduced the interest rate, indicating that “Interest rates on all CBN intervention facilities are hereby reduced from 9 to 5 per cent per annum for one year, effective March 1, 2020.”

The third intervention is the creation of a N50 billion targeted credit facility for households and small and medium-sized enterprises, including the agro-allied industries.

Probing the extent to which the CBN’s COVID-19 interventions could go in helping the recovery of the economy through the agro-allied micro, small and medium-sized industries, The Guardian gathered from professionals that these industries and households, mostly in the informal sector, could fast-track sustainable jobs, entrepreneurship and poverty eradication cumulatively.

In the face of dwindling oil revenues and the global economic meltdown occasioned by the Covid-19 pandemic, the government’s sermon on diversification of the national economy has become even more pertinent. In the circumstance, the point on revival of agriculture cannot be overemphasised. In fact, it appears the only way to go even as the apex bank applies the needed mechanics to hold together the monetary end of the economy in the face of the uncoordinated agricultural policies.

Sharing his expertise, Prof. Sanni Lateef, who is a former deputy vice chancellor at the Federal University of Agriculture, Abeokuta (FUNAAB), said extension of moratorium and reduction of interest rate are welcome incentives.

However, he added, the CBN should give zero interest rate for agricultural credits in the next five years because cost of quality seeds and agricultural inputs have risen and have implications on returns on investments.

“If CBN can give zero interest, farmers will increase their hectares from one to at least five and this will give enough higher yields and more income from sales of the agricultural produce. There is the need to entice our youths into agriculture to mechanise and use modern processing equipment. If done, there will be more youth farmers, employment and income generation for enhanced livelihood of Nigerians,” Prof. Sanni said.

Similarly, the Regional Coordinator, Africa Rice Centre, IITA, Ibadan, Dr Francis Nwilene, argued that “What the government needs now is emergency initiatives to boost food production. These initiatives should be divided into three stages of short-term, medium-term and long-term.”

For the short-term measures, he said while supporting the foregoing, the government should to provide farmers with free production inputs such as improved quality seeds and fertiliser as the entire production chains are disrupted and the rainy season begins.

Dr Nwilene added that the CBN should facilitate access to markets for the farmers to sell their products, saying, “The CBN interventions (one to three) above can follow in the medium to long-term strategies.”

Again, the chairman of Answer Industries Ltd, a processor of egg powder in Ijebu-Ode, Ogun State, Mr Segun Sewoniku, is of the view that “the CBN’s attempt is laudable, but far from being adequate when one considers the real value of the naira to the dollar.”

He argued that inputs that go into the production of finished goods in Nigeria are sourced directly or indirectly from outside the country. Therefore, interest rate reduction and extension of moratorium would not in reality help to diversify the economy.

“It may only give breathing space to those that have access to the loan or act as buffer money to either increase capacity or maintain continuity,” he added.

To help diversification, he suggested, the government should deliberately identify specific indigenous agro-allied companies in most local government areas for needs assessment and capital injection on Build, Operate and Transfer public-private partnership agreements. This, to him, would jump-start the process of diversifying the economy.

Also, the President of the Poultry Association of Nigeria, Mr Ezekiel Ibrahim Mam, said the reduction of the interest rates from nine per cent to five is of great significance to the production sector.

He said: “The government should encourage agricultural production. Any time the economy is down, the first approach is to secure the human resources and food is at the centre of securing the human resources.”

In the same vein, Funso Sonaiya, a professor and former Dean of Agriculture at Obafemi Awolowo University, Ile-Ife, also viewed the CBN’s extension of moratorium and lower interest rate as palliatives, saying, “In themselves, they are not enough to achieve diversification into agriculture. The number three (N50 billion funds) can do it if properly targeted.”

Tyson Foods has shown that meat cutting plants are a strategic resource in the fight against COVID 19 in the US, he said, and a very strategic area of agriculture is processing – primary and secondary.

“I give two simple examples – yam flour and ‘ewedu’. The first is available in most stores in Southwest Nigeria. The second has to be bought in whole-plant bunch that contains small, big, short, tall plants; some with smooth-edge leaves, others with variegated leaf varieties. Ewedu seeds are sold. That means simple selection for plant size, leaf shape and size, etc., can easily be rewarded through the seed market.

“A lot of our foods have annual market value that runs into trillions of naira! More than 50 to 60 per cent of the total value is added during processing. The CBN should target these low hanging fruits in crop and animal food processing. It is a goldmine for the national treasury,” Prof. Sonaiya explained.

The Vice Chancellor of Al-Qalam University, Katsina, Prof. Shehu Garki Ado, also expressed the view that the above steps could boost agriculture, which, in turn, could imply diversification of the economy.

“Extension of moratorium can enable producers to sell their produce at a time the price is favorable rather than at farm gate when the price is usually low. As the price gets competitive, the profit margin increases. So, the increased moratorium period will enable farmers to repay the loans taken and leave them with significant profits,” he said.

Reduction of interest rates, he added, could also increase investor’s profitability and capital base.

“With increased investment, more farm products are made available at lower production cost. This will invariably increase the quantity, leading to lower consumer price, and more materials for value addition, thereby increasing job opportunities to citizens as well as improving food security.

“Therefore, the targeted credit facilities, if properly channelled to agriculture, will certainly improve production, reduce unemployment, increase availability of raw materials as well as improve food security at the family level,” Prof. Ado said. He also lamented that genuine farmers might not benefit from the intervention as a result of corruption and poor implementation, saying, “but if the disbursement is made timely and genuine farmers benefit from the loans along with genuine inputs, the increase in productivity will be dramatic.”

He also advised that “Political problems should not be allowed to affect the disbursement to genuine beneficiaries. And if this is fully utilised judiciously, the economy can be on course to diversification, value addition and recovery in the post-COVID-19 lockdown and meltdown.”

Meanwhile, no fewer than 3,256 individuals and small businesses have benefited from the N50 billion Targeted Credit Facility (TCF), the Managing Director of Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), Mr Abubakar Kure, has disclosed.

Kure said that the first batch of beneficiaries had received the facility, adding that subsequent disbursements would be done weekly, and that the idea was to provide liquidity in order to mitigate effects of COVID-19 pandemic and help the economy to normalise.

Kareem Sanni, a cocoa production stakeholder, said he strongly believed these three aforementioned interventions would help to boost the recovery process post-COVID-19.

“For agriculture and agribusiness, extension of moratorium and reduction of interest rate will benefit small and medium scale agribusiness as well as agro-allied industries. However, the government can do better by honestly earmarking a large percentage of N50 billion strictly for agribusiness, making it accessible and as well making the potential beneficiaries aware of the availability of this facility by way of advertisement.”

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