Gross underfunding of the Nigeria’s agricultural sector is raising concerns by different experts on whether the government is able ramp up the huge potential in the sector to drive growth and create jobs particularly at this time of economic recession.
Available statistics indicate that both recurrent and capital expenditure by the Federal Government for the agricultural sector has been less than 3 per cent of total budget on average over the years as against the 25 per cent and 10 per cent prescribed by the Food and Agricultural Organization of the United Nations (FAO) and the African Union (AU) respectively.
“Our agricultural sector is underfunded and because of that, we cannot be sustainable,” said Grace Evbuomawan, Senior Lecturer, Banking and Finance Department of the Covenant University Ota, Ogun State.
She spoke on Wednesday at the 22nd Seminar for Finance Correspondents Association and Business Editors in Abakiliki, Ebonyi state.
The funding gap is even inspite of interventions of the Central Bank of Nigeria to make the agriculture sector viable enough to aid growth and provide jobs.
Since inception in 1978 to end December 2015, the CBN’s Agricultural Credit Guarantee Scheme Fund (ACGSF), cumulatively serviced a total of 998,908 beneficiaries with about N95. 834 billion.
Available data also indicate that from inception in 2009 to September, 2015, about N310.845 billion was released to the economy under the the CBN’s Commercial Agriculture Credit Scheme (CAGS) in respect of 396 projects.
As at end September 2015, the cumulative number/value of credit risk guarantees (CRGs) issued under the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) stood at two hundred and forty seven (247) projects valued at N21.673 billion.
Presenting a paper titled, “Financing Agriculture for Sustainable Economic Development, Evbuomawan said there was need to rally funding support the agriculture sector.
She argued for instance that on the average between 1981 and 2014, the agricultural sector attracted 8.9 per cent of total loans and advances by the commercial bank to the Nigerian economy, which is rather small considering the fact that the agricultural sector contributes about a quarter of Nigeria’s gross domestic product (GDP), and provides livelihood for over 70 per cent of the population who produce over 90 per cent of the food consumed in the country.
She explained in addition, that analysis of weighted average deposit and lending rates of commercial banks in Nigeria between 1981 and 2014 showed that savings rate averaged 7.76 per cent while prime and maximum lending rates averaged 17.64 per cent and 21.04 per cent respectively, which “obviously does not favour the agricultural sector.”
Meanwhile, sectoral distribution of loans and advances by Microfinance banks in Nigeria between 2009 and 2014 also indicate that agriculture was disenfranchised as it garnered an average of N5.465 billion which constituted only 6.9 per cent of total loans while commerce got the lion’s share of N39. 814 billion or 52.47 per cent.
“Available information reveal that the level of funding that the agricultural sector had received over the years have not been adequate. Both the government and the financial institutions in the country have not given the agricultural sector adequate attention, despite the importance of this sector,” she noted.
“Consequently, the Nigerian agricultural sector have not been able perform its assigned roles in economic development sustainably. In the light of the above the following recommendations are put forward to enable the agricultural sector contribute to sustainable economic development in Nigeria.”
According to her, the poor funding is also explained by the various food security indicators which point to the fact that Nigeria is still far from being completely food secured.
She said average value of food production and average supply of protein from animal origin are still very low in Nigeria compared to World figures.
Average value of food production per capita in Nigeria declined by 8.18 percent between 2005-07 and 2010-12 compared with increases of 6.69 and 9.50 per cent during the same period in the World and in Developing countries respectively.
Similarly, it is reported that average supply of dietary protein from animal origin is abysmally low in Nigeria, with records of just 10 grams per capita per day in 2009-11, just about one-third of the World’s figure, one-sixth of that of Developed countries and a quarter of that of Developing countries.
According to Evbuomawan, most of the country’s dietary energy is still obtained from cereals, roots and tubers and this has adverse nutritional implications on the populace.
“Most disturbing is the fact that prevalence of food inadequacy which declined marginally from 10 percent to 9.8 percent between 2007-09 and 2008-10, rose to 11.2 percent in 2012-14, consequently, number of people undernourished has been on the increase, from 8.7 per cent of total population in 2007-09 to 11.2 percent in 2012-2014,” she noted, quoting FAO figures.
She said In order to improve farmer’s access to credit, modern approaches to agribusiness finance need to be embraced hence the need to develop more agricultural value chains to cover the array of crops, livestock, fishery and forestry possibilities in Nigeria.
She also pointed to an urgent need to expand substantially the domestic supply of modern farm inputs such as fertilizers, improved seeds, agro-chemicals, irrigation pumps, improved livestock and fishery inputs, etc. through public/private sector partnership so as to achieve the desirable growth in consumption and yields.
According to her, adequate infrastructure to drive agricultural growth cannot be over emphasised.
“Adequate rural road network for quick evacuation of inputs and output, power for processing and storage including cold chain to increase value addition and improve shelf life and irrigation facilities to assure year round production and income are prerequisites,” she added.
