The N200 Billion Commercial Agriculture Credit Scheme

Akin Yusuf

Not too long ago the Federal Government introduced a N200 billion Commercial Agriculture Credit Scheme. This is part of government’s response to the current global economic recession, which is already having its tool on both food production and agricultural development. The scheme, which is a bond to be floated by the Debt Management Office (DMO) with technical assistance from the Central Bank of Nigeria (CBN), will be administered by the United Bank for Africa (UBA) and the First Bank of Nigeria (FBN). The aim is to enable farmers exploit the untapped potentials of the agricultural sector, lower cost of agricultural production, generate surplus for export, increase Nigeria’s foreign earnings and diversify its revenue base.

Those to benefit from the scheme include: Corporate/Large Scale Integrated Commercial Farms or Agro-Allied Enterprises, with asset of N350million (excluding land) and capacity to grow such asset to N500million in three years; and, Non-Integrated Commercial Farms/Agro Enterprises with asset of not less than N200million (excluding land). Similarly, State Governments and the Federal Capital Territory (FCT) could borrow up to 20% of the bond proceeds for onward lending to farmers through Specialized Agencies/Secretariats, even as the fund targets the following agricultural enterprises and commodities: cultivation of rice, cassava, cotton, oil palm, wheat, rubber, sugar cane, jatropha carcus, fruits and vegetables; livestock (dairy, poultry and piggery) and fisheries; processing, storage and marketing of targeted commodities; and, any other activity as may be specified from time to time. The Fund will be supervised by a Project Management Committee (PMC) made up of officers of the Central Bank of Nigeria (CBN), Executive Director of National Food Security Agency (NFSA), Federal Ministry of Finance (FMF), Debt Management Office (DMO) and Representative of Large Scale Farmers.

This is a commendable development especially coming at this period of global economic recession. I am convinced that if well implemented, the Scheme is capable of kick starting a revolution in Nigeria’s agricultural sector. For a very long time the country had dissipated energy and resources trying to develop its agriculture. The best that came out of it was to produce just enough food for the citizens and perhaps a little more for the markets. Reasonable progress was made in the late colonial period and perhaps, the first decade of independence, when Nigeria made substantial revenue from the sector although not enough to justify its potential and given that over 70% of its population is engaged in it. The challenges of Nigeria’s agriculture range from lack of finance, inadequate processing and storage facilities to poor marketing.

It is because of this that many also argue that even the recently introduced N200 billion Commercial Agriculture Credit Scheme (at least the way it is presently packaged) may not be able to sufficiently address challenges of this sector. First, this is given that previous initiatives ended up either not being implemented or were poorly implemented due to bureaucratic bottlenecks. Consider for instance that more than two years after it was introduced, no one has yet assessed the ‘N70 billion Textile Revival Fund’. What assurances do we then have that this same fate may not befall the new Commercial Agriculture Credit Scheme?

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Secondly, there is a more serious issue, which has to do with government’s decision to domicile the fund in only two banks (UBA and First Bank). What happens to farmers who are presently not doing business with either of these banks or those who are resident in areas where the two banks may not have branches? Certainly, it would have been better if the facility was spread among all the banks or at least many of them, not only to encourage access but also to tap the expertise of some of these banks, which over the years have been doing business in this sector. Restricting the Scheme to just a few commodities to the detriment of others may turn out to be a problem later on. For instance commodities like Cocoa, Groundnut and Gum Arabic should have been included. This would make the fund competitive and enable government to achieve its long term objective.

Aside from the above, the constitution of the Project Management Committee (PMC), to oversee the Fund, clearly excludes some of the critical stakeholders. I am aware that there is the All Farmers Association of Nigeria (AFAN) and the Federation of Agricultural Commodity Associations of Nigeria (FACAN). It is important to include these two bodies given that they know their members (who in deed are the real farmers as against political farmers who may eventually emerge).

Finally, I am tempted to argue that the capital requirements for the fund would make it almost impossible for Nigeria’s indigenous farmers to participate. Of course, as in the case of the Export Expansion Grant (EEG) and similar other initiatives, the foreign well capitalized companies would be at an advantage. But where does it leave us? What it means is that Nigeria’s businesses would for a long time play the underdog. At the same time, given the critical nature of the situation now, can we possibly afford to discriminate? Again, is it possible for us to find a way to accommodate our indigenous private sector that are, the real stakeholders in this economy?
I welcome the introduction of this scheme. It will succeed if well implemented. Having promoted small scale agriculture for too long, we must now leapfrog Nigeria’s economy to achieve sustainable development and realize the targets of Vision 20-2020. We can do it.