Agric lending at 5-year high fails to reflect in food prices

Even as 2020 being the pandemic year saw a general slowdown in economic activity, conversely, bank lending to the agric sector in Nigeria was N3.73 trillion, increasing by over N1 trillion from N2.72 trillion in 2019. The value of credit provided to the sector was also the highest in five years since 2016.

A 37 percent increase in lending to the agric sector in 2020 is however not reflecting in availability and affordability of food for millions of Nigerians. Food inflation rose to 22.95 percent in March, driven by wide-ranging price increases across virtually all food items – from staples such as yam, cassava, to cereals including maize and beans, then protein, especially fish, fruits and many others.

The soaring costs have been attributed to a myriad of factors, some of which are old, like the persistent conflict between farmers and herders across different areas, and other security threats that prevent farmers from accessing their farms.

Last year, however, had a new dimension as restrictions to contain the spread of the coronavirus saw farmers equally unable to access their farms; many failing to either plant when they should or even harvesting. Access to inputs to even farm with or in animal husbandry, use to raise livestock, was also a challenge.

“Last year, because of COVID-19, even if a farmer takes money to do something on the farm, he is also now threatened and mostly at home doing nothing,” said Kabir Ibrahim, national president, All Farmers Association of Nigeria (AFAN), saying, “Like many other people, he may have used it for survival.”

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Included under credit to the agric sector is also agro-allied industries, many of which would access big-ticket funds that dwarf what thousands of farmers would cumulatively get. Yet, the cost of even processed food from the agro-allied industry has not reduced, instead increasing consistently despite the sector getting more credit extended to it than previous years.

“The money would have also gone to processing equipment for large processors, and other agro-allied industries, with longer gestation period,” said Ibrahim. He, however, also stated it was not clear how much went into primary food production and what might have gone to others (including processors) listed under ‘agric sector’.

“The way the money is being disbursed is not falling into the right hands,” said Ezekiel Ibrahim, president, Poultry Association of Nigerian (PAN). He further lamented the Central Bank of Nigeria’s (CBN) suspension of the anchor borrowers’ scheme due to alleged high levels of corruption.

“This raises unanswered questions as to why there are scanty operations even though lending has increased,” he said

For Emmanuel Ijewere, vice president, Nigeria Agribusiness Group (NABG), “the lending is being given to people who really do not need it. If the whole idea of lending is to help uplift the people at the grass-root level, it was not structured for that”.

For farmers who have to go through banks to access credit, providing collateral is a herculean task. “What collateral can the average farmer provide? What Certificate of Occupancy or property in Maitama does he have?” he asked.

According to Ijewere, the quantum of lending to the agric sector did not have the desired impact in food availability and affordability, because, “it went to people who did not need it”. Foreign companies owned by Chinese, Lebanese, Indians, Pakistanis, are according to him, those mostly benefiting from credit to the sector.

As at today, he mentioned a company of Asian origin, which is active in the agric sector, from rice to poultry and export of commodities, that has credit facilities from 11 banks with a minimum of N1 billion from any of the banks.

Similar foreign companies (and even local ones) enjoy such access to funds, however, the bulk of production from many of these companies, especially foreign ones does not feed the Nigerian market. Even when available, the cost is relatively high as being currently experienced.

“I have been to many villages, and I work with farmers in Kaduna and Gombe whom I fund all the way, without them being able to access one kobo from the banks,” said Ijewere.

It remains unclear how much of bank credit actually went to primary food production, and more importantly, why food prices are at a 15-year high following a year the sector got its highest access to credit in at least 5 years.