• Friday, May 24, 2024
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BusinessDay

How ABP, FX restriction support Nigeria’s economic growth

Farmers

Since the fall in global crude oil price of 2016, Nigeria has attempted to diversify its economy away from oil.

Agriculture became an option for diversification owing to its vast potentials to drive more sustainable economic growth in Africa’s most populous nation in terms of job creation and revenue diversification.

To accelerate this growth, the government devoted lots of energy to deepening agriculture through the enactment of various policies.

One of such policies is the Anchor Borrowers Programme (ABP) and the restriction of foreign exchange to some importers of agricultural products that can be grown locally in the country.

The ABP initiative which started since 2016 to provide single-digit credits to farmers has impacted the country’s agricultural sector tremendously.

The government has since been lauded for the initiative as it has increased food production and impacted farmers’ livelihood positively.

About 902, 518 farmers have benefitted from the scheme as it has created over two million direct jobs and eight million indirect jobs, data from the Central Bank of Nigeria (CBN) economic report shows.

A total of N174.5 billion has been spent to finance farmers since the inception of the scheme.

Nigeria’s rice production has seen increased since the ABP initiative.

“The Anchor Borrowers Programme has really impacted the agric sector positive and rice production in the country,” said AfricanFarmer Mogaji, head-agribusiness, Lagos Chamber of Commerce and Industry (LCCI).

“Finance and access to the market which has been some of the major challenge limiting productivity, are issues the ABP initiative addresses,” Mogaji said.

The ABP initiative has led to an increase in the country’s paddy production from about four million to seven million metric tons annually, according to data obtained from the National Bureau of Statistics (NBS).

Numbers of rice mills both integrated and cottage mills have also increased by more than 50 percent as the government and private sector continues to make more investments in processing.

The average crop yield per hectare of the crop has risen from 2.5 metric tonnes per hectare to an average of 4 and 5 metric tonnes of the same acreage, owing to renewed government commitment.

Currently, the United States Department of Agriculture (USDA) puts Nigeria’s milled rice 2018/2019 production at 4.78 MMT, up over 2.5 percent from 2017/18 figure of 4.66 MMT.

Rice import has reduced by 99 percent from about 1.2 million MT to about 784MT.

This significant reduction in rice imports has saved the country $600million, thereby reducing pressure on the country’s foreign exchange reserves.

Similarly, the restriction of FX to some importers of food items has helped in boosting local production of some agro commodities.

The policy has led to an increase in the production of some crops in which the country has a comparative advantage in its production.

Data from NBS shows that investment into the sector has been growing at an annual average of 82 percent since the government renewed support to agriculture.

As a result of increase in food production, request for FX for food production has also reduced and this has contributed to the growth of the economy.

Agriculture was one of the major sectors that contributed to bringing the country out of recession in the second quarter of 2017.

The Nigerian agricultural sector grew by 2.36 percent in 2019 and contributed 23pecent to Nigeria’s Gross Domestic Product for the period.

The country just regained its position as the largest economy in Africa $425billion after losing the position in 2016.

 

Josephine Okojie