With the recent focus of the Federal government of Nigeria on diversification of the economy, Agriculture is being promoted in many quarters as the next frontier in driving the economy of the nation. The reason is not farfetched as agriculture was the major export industry before the discovery of crude oil in the late 1950s with cocoa, groundnut, palm oil being major export products among others.
Before independence in 1960, the economy was characterised by the dominance of exports and commercial activities. There was no viable industrial sector. After independence, agriculture continued as the mainstay of the economy. In spite of fluctuations in world prices, agriculture contributed about 65 per cent to GDP and represented almost 70 per cent of total exports. Agriculture provided the foreign exchange that was utilised in importing raw materials and capital goods. The peasant farmers produced enough to feed the entire population.
But Nigeria’s status as an agricultural powerhouse has declined drastically over the years. While Nigeria once provided 18% of the global production of cocoa, second in the world in the 1960s, that figure is now down to 8%. And while the country produces 65% of tomatoes in West Africa, it is now the largest importer of tomato paste.
The Anchor Borrowers’ Programme which was initiated by the CBN as a sub-shoot of the Micro, Small and Medium Enterprises Development Fund (MSMEDF) was created to support farmers and increase their production capacity. About N19billion was disbursed in the last farming season with reported 90% success rate. The programme was initially designed for Rice Farmers only but the scope has since been expanded to other farming sectors.
One financial institution that has been involved in the Anchor Borrowers Programme is Keystone Bank.
The Managing Director of Keystone Bank, Mr. Philip Ikeazor has underscored the importance of financial institutions in driving the agricultural sector. “Financial institutions have a crucial role to play in providing support to players along the agriculture value chain and the CBN’s initiative of the Anchor borrowers programme is a step in the right direction. Financing in agriculture is one factor of production which facilitates the acquisition, procurement and management of the other factors of production like, land, expertise and management”.
Mr. Ikeazor however noted that there are challenges to financing of the agricultural sector. He highlighted that in spite of the good efforts of the federal government there have been challenges experienced in reaching the targets of effective financing. He stated,“We however have to take into consideration the issue of uneven distribution of credit which is present at sub-sectorial levels of allocation” He stated that if some of these challenges are to be overcome, programmes of both the private and public credit institutions need to shift focus to the rural areas.
According to experts in the agricultural sector, the low volume of business in the rural areas where poverty is most prevalent cannot guarantee sustainable business activities to encourage the establishment of commercial banks to provide the needed finance for agricultural production.
Moreover, the cost implication of processing agricultural loans in the rural economy makes it unattractive for conventional banks to channel their resources to farming. Although, the commercial banks finance agricultural activities but their credits are urban based and so small that their impact cannot be felt in the rural areas where farming actually takes place.
Lack of priority attention to rural population in credit delivery by commercial and other banks in the economy contributed to the depressed economic conditions in the rural economy, and this situation also affects the overall economic growth and development of the nation.