High lending rates harmful to agricultural development -CBN

The Central Bank of Nigeria (CBN), on Monday maintained that the agricultural sector would not survive on high commercial interest rates from banks and called for recommendations on how to better harness its enormous opportunities to diversify the Nigerian economy for sustainable growth.

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele said the sector required single-digit lending rates and long-term loans to be properly repositioned to stimulate the economy amid the present fiscal crisis caused by the faking price oil.

Speaking in Abuja at the opening of the Nigerian Agri-Finance Conference, themed: “Catalysing the Diversification of the Nigeria Economy through Effective Agricultural Finance”, he said despite the Maputo declaration of 2003, which requested that African Governments should commit at least 10 per cent of their annual budget to the agricultural sector, the country had not met even half of the allocation to the sector.

The central bank governor said the sector was larger than manufacturing and oil sectors combined, creating over 70 per cent of informal sector jobs in rural agriculture.

He said to complement efforts by the fiscal authorities to curb food importation, the CBN followed up with a policy directive in June 2015, by excluding 41 items, including some agriculture-based commodities, as “Not Valid for Forex” to help conserve foreign reserves.

He said the theme of this year’s conference supported the current national priority of attaining self-sufficiency in food production, stimulating non-oil exports and diversifying the economic base of the country.

Emefiele said: “With an annual food imports bill of over N630 billion (decreased from N1.3trillion), unemployment rate of 9.9 per cent, and poverty, economic diversification is no longer optional but a necessity to reposition our economy to attain inclusive growth and global competitiveness.”

According to him, the exclusion “Effectively barred importers of these items from accessing the official foreign exchange window. This is expected to discourage importation and stimulate domestic production through increased investment. Towards this end Government set self-sufficiency targets for some of these commodities. It is 2016, 2018 and 2019 for tomato paste, rice, and wheat, respectively.”

He added: “These attempts at stimulating local production of agricultural commodities were to complement existing credit delivery initiatives to boost productivity through value chain approach.

“In this respect, you will agree that agriculture and agro-based industries remains most fundamental to these diversification efforts as a major

contributor to the gross domestic product (GDP) in the country. Governments in other climes have also recognised the importance of the sector by providing incentives for its growth.”

He said having spearheaded several initiatives including the Nigeria Incentive based Risk Sharing System for Agricultural Lending (NIRSAL), and Anchor Borrowers’ Programme (ABP) among others, the apex bank will “continue to institute pro-agricultural sector policies to totally reduce our food import bills, create jobs and diversify the economy. I wish you all fruitful deliberations.”

Also speaking at the occasion, the Chief Executive, Union Bank of Nigeria Plc, Mr. Emeka Emuwa said berated the sector contribution to export earning which is valued at less than 10 per cent.

According to him, “In Nigeria, the sector employs over 50per cent of the country’s labour force but contributes less than 10per cent to export earnings. Today, Nigeria finds herself with a 43per cent decrease in oil revenue from N486.4 billion in January 2015 to N370.4 billion in January 2016.

“This has resulted in a shortage in foreign currency, reflected in declining reserves from $32.4 billion in January 2015 to $27.8 billion as at March 2016. Disparities between the official exchange rate (N197/$) and the parallel market rate (N320/$), reduced availability of forex to support manufacturing and increasing food prices, reflected in rising inflation from 8.2 per cent in January 2015 to 11.4 per cent as at February 2016.

Furthermore, he said: “One of the key challenges facing the Agricultural sector today is the lack of effective agricultural finance. The Central Bank of Nigeria and the Nigerian banking industry have made significant progress in addressing this recording 36% growth in loans to the agriculture sector to about N48.4 billion.”

He said: “To ease the difficulties of farming in Nigeria, Union Bank will continue to provide credit to the agriculture sector and we encourage other banks to do the same. We remain committed to driving investment in the agricultural sector and as an active member of AFRACA, we urge all participants to align with AFRACA’s vision of “a rural Africa where people have access to sustainable financial services for economic development.”