Nigerian banks credit to the agricultural sector has hit the highest level of N2.2trillion in 2018 since the bureau of statistics commenced the compilation of the data, a National Bureau of Statistics (NBS) bank credits report says.
The loan to the sector accounts for four percent of the total lending of commercial banks to the economy for the period.
On a year on year basis, bank loans to the sector increased by 16 percent, from N528 billion in q4 2017 to N610 billion in q4 2018.
Also, on a quarter to quarter basis, it increased by 3 percent from N592billion in q3, to N610billion in q4.
Key industry players attributed the increase in bank loans to the agricultural sector to the Central Bank of Nigeria (CBN) intervention programs targeted at supporting smallholder farmers with finance.
AfricanFarmer Mogaji, chief executive officer, X-Ray Consulting Limited said that most of the loans recorded were from the CBN but only disseminated to the farmers through the money deposit banks.
“Commercial banks are not giving loans to farmers, so if there is an increase, it definitely must be from the CBN because the apex bank has been asking them to give more lending to the sector,” Mogaji said.
In August last year, the CBN had approved the disbursement of about N75billion as loan to farmers in the 36 states and the Federal Capital Territory (FCT) under the Nigerian Incentive-Based Risk Sharing in Agricultural Lending (NIRSAL).
The loan guarantee scheme is a public-private sector initiative set up to transform the country’s agricultural sector.
It was initiated by the Central Bank of Nigeria, the Bankers’ Committee and the Federal Ministry of Agriculture and Rural Development, to guarantee 75 percent loans provided by Deposit Money Banks (DPB) to farmers as part of efforts to transform the country’s agricultural sector.
Similarly, in that same period in August, the CBN announced that the commercial banks and the apex institution would commence channeling the Cash Reserve Requirement (CRR) kept in the apex bank’s vault to agricultural and manufacturing lending at single interest rate of 9 percent.
The CRR is a certain percentage of the total bank deposits that has to be kept in the current account with the apex bank. The banks do not have access to that amount for any economic activity.
Currently, Nigeria’s CRR is maintained at 22.5 percent by the CBN.
Experts have continued to note that the biggest challenge confronting farmers is insufficient access to agro credit, which according, to them is limiting farmers’ ability to boost productivity and improve their livelihoods.
“Finance is the biggest challenge confronting farmers. It is a very serious problem that the government needs to address by providing farmers will single digit loans,” said Tola Faseru, national president, National Cashew Association of Nigeria.
“Without adequate finance, farmers cannot increase their production areas and productivity which, is critical for the attainment of Nigeria’s food security,” Faseru said.
Nigeria’s agricultural fundamentals are robust and include an estimated 84 million hectares of arable land out of which only 40 percent is cultivated and only 10 percent of the 40 percent is cultivated optimally.
Two of Africa’s largest rivers (Niger and Benue) flow through and within the borders of the country.
There is adequate annual rainfall, a large young workforce and over 190 million consumers that offer a domestic market to support increased food production and processing.
It is only the finance to unlock all this potentials that is lacking.
Experts say the glorious days of Nigeria’s agriculture could be revived when banks starts lending more to the sector.
To ensure that farmers across the country have access to adequate finance and also ensure that money deposit banks lend more to the sector, even as the country realises its agricultural potentials, experts say Nigeria must begin to hedge banks against the risks associated with funding agriculture.
That way, they say banks would lend more to the sector to drive growth and development.