Business

CBN: Boosting cash crop to drive economic growth

As part of efforts to help end the country’s overdependence on crude oil, the Central Bank of Nigeria (CBN) has, in recent years, increased support for the production of cash crops, such as cocoa and palm oil, writes TONY CHUKWUNYEM

During a visit to the then Minister of Agriculture and Rural Development, Chief Audu Ogbeh, in January 2018, Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, disclosed that the apex bank would aggressively support farmers to boost the production of crops like tomatoe, cocoa and palm oil across the country. Emefiele said the drive was to support government’s effort towards ensuring that the country feeds itself and reduce food importation. He said: “We have supported cassava production in some southern states and we are going to aggressively push tomatoes this year.

We are working with the South western states and the ministry toward pushing cocoa this year. The Development Finance Department of CBN has concluded its framework for palm oil in the southeastern and mid-western parts of the country.”

Significantly, before Emefiele made his remarks, Ogbeh had attributed some of the successes recorded in the ministry, including the $35 million that exporters in the country earned from the sale of hibiscus leaves, known as `zobo’ to Mexico in 2017, to CBN’s support for farmers across the country.

“The backing of the CBN is so crucial because we have to move forward. Our country has to survive. Once we end rice and eventually wheat importation, we will begin to drive other crops,” Ogbeh said. Emefiele has, in fact, never hidden his desire to ensure that the country regains its lost agriculture glory, when Nigeria used to be a leading exporter of cocoa, palm oil and groundnut, among other commodities.

N200bn export initiative

For instance, under Emefiele’s leadership, the Bankers’ Committee, at its meeting in April last year, announced a N200 billion credit facility to boost production and export of five cash crops, including cocoa, oil palm, shea butter, sesame seed and cashew. The committee said the decision to set up the N200 billion fund to boost production and export of cash crops was in order to consolidate the pro-growth stance of CBN. According to the Chief Executive Officer, United Bank for Africa (UBA), Mr. Kennedy Uzoka, who addressed journalists on the subject, the N200 billion will be extended as loans to companies producing any of the five cash crops, at single digit interest rate for up to 10 years tenor. He said: “As you know, we have always talked about Nigeria been a mono economy, oil only and many seminars have happened with so many resolutions. But the committee believes we have not made much progress in this direction. “In terms of the policies that drive exports, we believe that a lot of them have to be changed. And we know about the congestion at the port. So we looked at all these things and we broke them into immediate, medium and long term because some we cannot address within a short period. Fortunately CBN has different kind of funds. We looked at the existing funding structure so that we don’t reinvent the wheel, and see which of these funds can address the current challenges. And we did find a lot.” Subsequently, CBN, a few weeks later, unveiled guidelines for the N200 billion Export Facilitation Initiative (EFI). The guidelines showed that under the initiative, farmers, as well as value chain industries that are into cocoa, cashew, palm oil, shea butter and sesame seed, would be able to get funding with a single interest rate of nine per cent, spanning between one year and 10 years tenor. It stated that commodities were to be funded under the approved guidelines of Agricultural/Small and Medium Enterprises Investment Scheme (AGSMEIS), Non-Oil Export Stimulation Facility (NESF) and Real Sector Support Facility-Differentiated Cash Reserves Requirement (RSSF-DCRR) in line with the approved limits in the Export Facilitation Initiative Funding Framework (EFIFF). In addition, the EFIFF stipulated that small holder farmers operating in clusters along with medium and large sized companies were eligible to apply. It also stated that for the large and mid-sized players, funding would be made available for land acquisition and cultivation (facility A), adding that funding would be made available for milling and refining capacity (facility B). Specifically, the guidelines stated among others, that for cocoa and oil palm producers, facility A and B would last for seven to 10 years and five to seven years respectively; tenor for small holder farmers’ funding would last for five to seven years, while for cashew producers, the tenor for all facilities was one year with a 120-day clean up cycle, where the beneficiary completely pays out the loan within the pre-defined period. Similarly, following his reappointment for a second term in office in June last year, Emefiele, while unveiling his agenda on June 24 last year, disclosed that one of the key areas that the apex bank would pay particular attention to, would be on building on the success of its intervention programmes in the agricultural sectors.

10 key commodities

As the CBN governor put it: “Building on the success of our Anchor Borrowers Programme (ABP) and other intervention programmes geared towards supporting the growth of our agriculture and manufacturing sectors, we intend to boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely rice, maize, cassava, cocoa, tomato, cotton, oil-palm, poultry, fish and livestock/dairy.” He further said: “Our choice of these 10 crops is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next five years if efforts are made to expand cultivation and processing of these items in Nigeria. So far, we have held series of engagements with importers and producers of these products. Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2billion in 2018 to $12billion by 2023. “To complement the progress made so far as well as the lesson learnt from the conduct of previous programmes, we intend to strengthen the capacity building arm of the Anchor Borrowers Programme, which will help support better farming practices and higher outputs for farmers.”

Anchor Borrowers’ Programme

Indeed, although CBN, during Emefiele’s first term in office (2014- 2019), established some new intervention schemes and vigorously implemented already existing ones, it seems to have made the most impact on the economy with the Anchor Borrowers’ Programme (ABP). Launched by President Muhammadu Buhari on November 17, 2015, the ABP is aimed at creating a linkage between anchor companies involved in the processing and smallholder farmers of the required key agricultural commodities, including, cereals (rice, maize, wheat etc.); tree crops (oil palm, cocoa, rubber etc.); legumes (soybean, sesame seed, cowpea etc.); roots and tubers (cassava, potatoes, yam, ginger etc.); cotton, sugarcane, tomato, and livestock (fish, poultry, ruminants), among others. According to CBN, “the programme thrust of the ABP is provision of farm inputs in kind and cash (for farm labour) to small holder farmers to boost production of these commodities, stabilize inputs supply to agro processors and address the country’s negative balance of payments on food. At harvest, the SHF supplies his/her produce to the Agro-processor (Anchor) who pays the cash equivalent to the farmer’s account.” The regulator also initially pegged the interest rate for ABP loans at nine per cent at the inception of the scheme, but reduced it to five per cent as part of measures to alleviate the effects of the COVID-19. Furthermore, the CBN has recently included non-interest financial institutions, among organisations deposit money banks (DMBs), Development Finance Institutions (DFIs) and Microfinance Banks (MFBs) that are eligible to disburse the loans.

Support for cocoa farmers

Additionally, under the ABP, the CBN, last week, in Akure, the Ondo State capital, commenced the distribution of inputs and cash worth N770 million to 221 cocoa farmersmembers of the Cocoa Farmers Association of Nigerians (CFAN) – in 10 cocoa producing states in the country. Speaking at the ceremony, the National President of CFAN, Mr. Adeola Adegoke, said the CBN’s assistance would lead to increase in the yield of farmers per hectre. Adegoke said the sum of N197,444 was given out as loan per hectare and three hectares are calculated for each farmer, through the anchor borrowers’ scheme. He added that the loan attracts a nine-per cent interest rate payable within 18 months and that it was expected that the loan, tagged: “Good Agricultural Practices,” would increase beneficiaries’ productivity from about 350kg of cocoa beans per hectare to about 600kg. He commended President Muhammadu Buhari for supporting the Anchor Borrowers’ Programme for different farm crops. Interestingly, the consensus among industry watchers is that it was the positive impact of CBN’s agricultural intervention programmes on the economy, under Mr. Emefiele’s leadership, that made President Buhari to reappoint him for a second and final five term in May 2019. He thus became the first CBN governor to serve for a second term since Nigeria’s return to democracy in 1999.

Conclusion

However, analysts point out that while funding certainly plays an important role in boosting cash crop production, the fiscal authorities would have to tackle infrastructure and other challenges, to ensure that the apex bank’s commodity development initiatives help to curb the country’s dependence on oil.

 

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