Govt plans cut of agric loans interest to 5%
Audu Ogbeh
NIGERIAN farmers may soon heave a sigh of relief as the Federal Government is planning to reduce interest rate on agricultural loans from 21 percent to 5 percent.
Minister of Agriculture and Rural Development Audu Ogbeh, who disclosed this yesterday in Abuja said that arrangements are ongoing to access the Nigerian Insurance Risk Lending on Agricultural loans (NIRSAL) facility of the Central Bank of Nigeria (CBN) to fashion out ways by which farmers could access loan at a 5 percent interest rate.
Speaking at a two-day national workshop on “A new Agricultural Policy for Nigeria,” the Minister expressed worry that Nigeria is the only country in the world outside Africa still witnessing agricultural lending above 5 percent interest.
Ogbe said “this morning I spoke with some officials of NIRSAL and I told them we have to bring down the interest rate on agricultural loans to 5 percent, we just have to do it and the financial institutions have to cope with that, any erring financial institution would be sanctioned severely, otherwise we will not survive.
The minister wondered, “Is there anything that other parts of world have done that Nigeria is failing to do? The fiscal and monetary policy has done terrible damage to us in the country.”
Related
Get the latest news delivered straight to your inbox every day of the week. Stay informed with the Guardian’s leading coverage of Nigerian and world news, business, technology and sports.
2 Comments
Honorable Minister, the idea of 5% interest loan to farmers is indeed a wonderful idea. You asked about what other countries do that Nigeria doesn’t do. I’m assuming you asked that question with the goal of getting an honest and constructive answer. Here’s my take: In countries that are serious about the issue, instead of the government threatening banks to lend at a particular rate, government pays banks the market rate so the banks can cover their cost of funds and also make a profit, charge the farmer 5% and govt. makes up the difference. This is a win-win-win proposition. Banks make a profit, govt. achieves its goal of encouraging agriculture, and the farmer gets cheap money to provide food for the people, and makes a profit too. Remember, banks are profit-making businesses. No responsible govt. can force them to give money away. All govt. needs to do is guarantee the bank’s return by subsidizing agric. loans, and everybody is happy. Of course the farmer’s creditworthiness has to be ascertained and there has to be monitoring to ensure the funds are genuinely used for agriculture. Banks also need to be regulated so they can give the loans to the right people in line with govt.’s agenda. These are the responsibilities of the regulators. A lot of countries do this to incentivize investors in any sector of the economy. Yes, we can too. If there’s the will to do, I guarantee you there’s a way. Just my humble view.
This is a good policy and It is the hope that it would be implemented properly. The problem is that most of this loan are tied to massive conditions that some of this farmers can’t meet. cutting the interest rate is the only things that should be done. government land should be leased to those that want to farm and all necessary input leased to them. This a means we can increase our food production, reduce import and employ our youth. There are not many younger Nigerians that have land to farm.
We will review and take appropriate action.