Despite the various intervention funds rolled out by the federal government and the Central Bank of Nigeria (CBN), private firms emerged top financiers of Nigeria’s agricultural space as credit was largely unavailable to sector players in 2020.
This was revealed by the AFEX Commodities Exchange Limited in its Annual Commodities Review where it stated that private firms emerged top credit providers with lesser input of government funds, adding that Lack of access to loans and fertilizers remained largely the biggest challenge to most farmers in 2020
“62 percent of farmers were able to access input finance from private companies in 2020, making private companies the top providers of finance to farmers among other sources like Government, Corporative etc.”
The report also noted that credit inaccessibility constrained farmer’s productivity during the wet season
“Although we expected more output across crops in the 2019/20 wet season, our crop production survey revealed access to finance as a key factor affecting productivity for farmers despite increase in private organizations and other financial institutions’ providing access to finance for farmers.”
The report also showed that credit to the sector grew marginally by 10 percent to N903.7 billion in Q2 20202 from N673.1 billion in Q3 2019 despite the CBN’s move to boost credit to the real sector through the increase of bank’s loan to deposit ratio to 65 percent in Q3 2019.
As a recommendation, the commodities exchange advised that loan conditions to the sector should be revised stating that the double digit monetary policy rate adopted by the country as well as the high risk involved in agro financing makes It challenging for farmers to pay back loans.
“Boosting access to loans at lower cost to smallholder farmers is key to boosting production, although policies geared towards achieving this are in place, however proper policy design monitoring mechanism and adequate regulatory framework that supervises the implementation and operation of the program are also important,” it stated.
The report also revealed that scarcity of fertilizer, a core agricultural input, also hampered productivity as 43 percent of farmers were forced to use lesser amounts of fertilizer. According to the report Nigerian uses about 20kg of fertilizer per one hectare on the average which is poor when compared with the 100kg countries like South Africa and Egypt use on the same land mass.
As a recommendation, AFEX advised that “Beyond current fertilizer subsidies, we suggest more interventions and reforms aimed at eliminating bottlenecks in the fertilizer supply chain which has impaired the confidence of private investors over the years.”
