By CHINEDU IBEABUCHI
The Federal Government has lamented low funding of the agricultural sector by banks in the country.
Delivering a keynote lecture at the Chartered Institute of Bankers of Nigeria 2012 Annual Lecture, Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina said banks need to take a proactive step to cost effective initiatives.
He said banks ought to diversify their current agricultural portfolio to effectively meet the needs of the sector, adding that the current lending in agriculture is heavily skewed to agribusinesses, while smallholder farmers, commercial farmers and other small and medium size enterprises are unable to access affordable financing.
He lamented that for these small holder farmers and SMEs and indeed all other actors in the sector, the critical issue is the extremely high interest rates.
He said, “The time has come for Nigeria to consider raising long term bonds to finance the agricultural sector. The rising domestic debt is certainly of concern. However, this should not be used to argue against agriculture bonds. Many countries in the world are using the so called green bonds to power their agriculture, including China and India.
“AMCON has over 3 trillion Naira in funds. Pension funds have billions of Naira looking for sound investments. As we modernize agriculture and raise profitability in the sector through well-coordinated agricultural value chains, AMCON and Pension funds can buy agricultural bonds to further diversify their portfolios and provide access to lower interest and long term financing for the sector. Development Finance institutions can also finance long term bonds for agriculture.
“With changing weather patterns, we must now develop policies for protecting farmers from the impacts of climate change, especially droughts and floods. We must manage these risks. We need to scale up weather-index crop insurance schemes for farmers.
“Area-based flood insurance schemes must be put in place to ensure disaster payments to farmers and communities from floods and droughts that occur over vast areas and well beyond individual farmers.”
He noted that banks should do more than talking as they need to rethink their commitment to the real sector of the economy to increase collective wealth for the masses in the rural areas. This will reduce unemployment and insecurity in the economy.
“We must build financial literary. The capacity to manage credit is as important as supply of credit, so risk sharing facilities should have technical assistance components for banks and borrowers.”