June 14, 2020

Post-COVID-19 food crisis: CBN’s soft loans to farmers allaying Obasanjo’s fear

By Akanfe Tiri

The call by former President, Chief Olusegun Obasanjo, to African governments to embark on massive food production to avoid food crisis after COVID-19 is something that should not be taken lightly.

Obasanjo said most African governments have to find how to be self-sufficient in essential food items for the food crisis likely to be experienced after the pandemic, because he believes most African countries have not gone as far as they should go into food production this year.

This is why I believe the recent efforts of the Central Bank of Nigeria (CBN) in slashing Monetary Policy Rate (MPR) or lending rate, from 13.5 percent to 12.5 percent and reduced interest rates associated with bank facilities from nine percent to five percent in a bid to stimulate borrowing for investments in agriculture, industry and other sectors to fast-track economic recovery after the devastation of COVID-19, should be commended.

The Central Bank of Nigeria Governor, Godwin Emefiele, disclosed that the only way for the country’s economy to get out of the wood was to ensure aggressive investments in manufacturing and agribusiness sectors, post-COVID-19.

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The apex bank announced the disbursement of N93.2 billion out of the N1 trillion intervention fund targeted at manufacturing and agribusiness sectors under the real sector support fund.

This is aimed at boosting manufacturing and food production across critical sectors of the economy at a lending rate of five percent as part of efforts to turnaround the economy post- COVID-19.

While some are commending the CBN for lower interest rate, some stakeholders believe that agriculture and industrial sectors may experience a leap in productivity and stability if combined with the apex bank’s earlier initiatives like an extended moratorium, the lower interest rate on intervention funding and targeted facilities, Anchors Borrowers Programme, and Commercial Agriculture Credit Scheme among others.

In the past, the Central Bank of Nigeria’s (CBN) Commercial Agriculture Credit Scheme (CACS) made it easy for farmers to access loans from commercial banks that operate under it.

Its interest rate made loan repayment more flexible for farmers and enterprises in the agric value chain.

The scheme helped in mitigating the struggles and risks that threaten the business growths of farmers and agric entrepreneurs. The CACS loan helped farmers deal with the struggles to buy lands, buy farm products and purchase equipment.

Tola Odumosu, an agric entrepreneur and Chief Executive of Teecan Enterprises, said CACS led to a massive increase in outputs in the agric sector as farmers invest more capital in their businesses.

The increased output triggered healthy competition in the sector with farmers and traders employing innovation and creativity in the sector with aims to generate more sales, which equally resulted in an increase in employment in Nigeria.

So, smallholder farmers having access to loans at reduced rates will boost the contributions of agriculture to the country’s GDP.

Given the contribution of the agricultural sector to the gross domestic product in the first quarter of 2020 as released by National Bureau of Statistics (NBS) last week, which showed that the sector contributed 21.96 percent to the nation’s GDP, which is the monetary value of all finished goods and services made in the country.

Indeed, the contribution is higher than 21.89 percent and 21.66 percent recorded in the first quarters of 2019 and 2018, respectively.

This is why I share the sentiment of Daud Awosiyan, a cassava farmer in Oyo State, who said the timing of the reduction is right, but urged that access to the loan should be made seamless for the desired result to be achieved.

The Chairman Agriculture Group of the Lagos Chambers of Commerce and Industry (LCCI), African farmer Mogaji, added his voice by saying that the loan reduction of one percent is just the beginning, but it is not appealing enough for long term investment in agriculture.

Mogaji said: “Well, CBN has started, but they can improve on what they have started. The consideration is good and laudable but they can do better.”

Moving forward, I believe, the CBN has started the journey of boosting agricultural loans at cheaper rates, but more needs to be done in designing loans to finance the farming activities of individuals, group or corporate organisations.

Like the National President of National Cashew Association of Nigeria (NCAN), Ojo Ajanaku noted that what farmers and players in the sector need, if they must pay interest on any money given to agriculture, is something around 2.5 and 3 percent.

“That is what will help grow the agricultural sector. If we are looking at 12.5 percent, it is still on a very high side for agriculture,” he said.

But in all this, the CBN should be commended for coming up with the revised charges by banks to boost Nigeria’s economic recovery, as this development would have positive implications for financial inclusion among farmers in the country.

Tiri, agriculture journalist, wrote from Lagos.