Business

CBN: Boosting productivity in agric sector

If the Gross Domestic Product (GDP) report for Q2’20 released by the National Bureau of Statistics (NBS) last week is anything to go by, the Central Bank of Nigeria (CBN)’s measures to improve productivity in the country’s agricultural sector are clearly yielding positive results, writes TONY CHUKWUNYEM

In its Gross Domestic Product (GDP) report for Q2’20 released last Monday, the National Bureau of Statistics (NBS) attributed the contraction in Nigeria’s oil and non-oil sectors to “significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19.” Still, the bureau stated in the report that agricultural activities played a key role in driving non-oil sector’s output during the period. Q2’ GDP report Specifically, NBS stated: “The nonoil sector declined by –6.05 per cent in real terms during the reference quarter (Q2’20).

It was the first decline in real non-oil GDP growth rate since Q3’17. The recorded growth rate was –7.70 per cent points lower compared to the rate recorded during the same quarter of 2019, and –7.60 per cent points compared to the first quarter of 2020. Nevertheless, non-oil sector output was driven by financial and insurance (financial institutions), information and communication (telecommunications), agriculture (crop production), and public administration, moderating the economy-wide decline.” Continuing, the bureau said: “Four sub-activities make up the agricultural sector: crop production, livestock, forestry and fishing.

The sector grew by 19.90 per cent year-on-year in nominal terms in Q2’20, showing an increase of 2.14 per cent points from the same quarter of 2019. Looking at the preceding quarter’s growth rate of 22.47 per cent, this quarter’s growth rate represented a decline of –2.57 per cent points.

“Crop production remained the major growth driver of the sector, as it accounted for 87.34 per cent of nominal GDP in the sector in Q2’20. Quarter on quarter, growth stood at 9.36 per cent in the second quarter of 2020. Agriculture contributed 23.92 per cent to nominal GDP, higher than the rates recorded for the second quarter of 2019 and the first quarter of 2020 which recorded 19.39 per cent and 20.88 per cent respectively. “In real terms, the agricultural sector grew by 1.58 per cent (year-on-year) in the second quarter of 2020, a decrease of –0.21 per cent points from the corresponding period of 2019, and –0.62 per cent points from the preceding quarter. On a quarter on quarter basis, the sector grew at 6.57 per cent.

Further, the sector contributed 24.65 per centto aggregate real GDP in Q2 2020, higher than the contributions in the second quarter of 2019 and the first quarter of 2020 which stood at 22.78 per cent and 21.96 per cent respectively.” Clearly, very few analysts would doubt that the relative positive performance of the agricultural sector in the second quarter of this year, despite the COVID-19 crisis, is primarily the result of intervention programmes established by the Central Bank of Nigeria (CBN) in the last few years, especially since the current Governor of the apex bank, Mr. Godwin Emefiele, assumed office, to boost activities in the sector.

Anchor Borrowers’ Programme and others

Beginning from when he was appointed for his first term as CBN governor in June 2014, Emefiele unveiled a 10-point agenda, in which he declared that the apex bank, under his watch, would introduce a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health and oil and gas.

True to his pledge, CBN, between late 2014 and 2019, vigorously pursued intervention schemes such as the Anchor Borrowers’ Programme (ABP), Agricultural Credit Guarantee Scheme (ACGS), Commercial Agriculture Credit Scheme (CACS), the N220billion Micro, Small and Medium Enterprise Development Fund (MSMEDF) and the Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), among others. Furthermore, in line with his vision, CBN, on June 24, 2015, excluded importers of 41 goods (later increased to 44), including several key agricultural commodities and services from accessing foreign exchange at the official foreign exchange markets in order to encourage local production of those items. CBN hinged its reason for the move on the need to, among other things, conserve foreign exchange; sustain foreign exchange market stability; ensure the efficient utilization of foreign exchange; ensure that optimum benefit is derived from goods and services imported into the country; and encourage local production of items on the “Not valid for Forex” list.

For instance, ABP, which was launched by President Muhammadu Buhari on November 17, 2015, was intended to create a linkage between anchor companies involved in the processing and Small Holder Farmers (SHFs) 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.” Also, interest rate for ABP loans was as low as nine per cent at the inception of the scheme, which, however, with the advent of the Covid-19, was been adjusted to as low as five per cent.

Significantly, the loans are disbursed through deposit money vanks (DMBs), development finance institutions (DFIs) and microfinance banks (MFBs). Recently, CBN also included non-interest financial institutions, among organisations that are eligible to disburse the loans. Being one of the most successful intervention programmes set up by the regulator, ABP had empowered over 1.1 million farmers between 2015 and June 2019, according to figures obtained from CBN.

Africa’s biggest rice producer In addition, while prior to Emefiele’s assumption of office, Nigeria used to be the biggest importer of rice from countries such as Thailand and India, it now, owing to the success of ABP, leads the continent in the production of the commodity. This was confirmed by the Chief Executive Officer of the Nigeria Export Promotion Council (NEPC), Mr Segun Awolowo, at an event in Jos, last year, when he revealed that Nigeria’s import of foreign rice has declined by 3.7 million metric tonnes. He stated that with Nigeria’s rice production put at 4.9MMT, dependence of the country on foreign rice had declined from 4.5MMT to 800,000MMT, adding that the country was among the top 16 rice producers in the world with production valued at N684 billion.

He said with the country’s latest production record, which surpassed other African countries, Nigeria’s annual rice import would have reduced from 4.5MMT to 800,000MMT. Awolowo said: “We gathered that Nigeria attained about 4.9MMT in rice production in 2019, which makes it the largest producer in Africa, surpassing Egypt, which produced 4.3 million metric tonnes annually. With Nigeria’s latest production record, annual import would have drastically reduced from 4.5MMT to 800,000MMT.”

Similarly, the Maize Farmers Association of Nigeria has said that production of the commodity increased from eight million tonnes to 22 million tonnes in Nigeria between 2015 and 2019. Notably, industry watchers believthat it was the positive impact of CBN’s agricultural intervention programmes on the economy, under Emefiele’s leadership, that made President Buhari to reappoint him for a second and final five-year term in May 2019. He thus became the first CBN governor to serve for second term since Nigeria’s return to democracy in 1999 Indeed, when Emefiele was reappointed, the All Farmers Association of Nigeria (AFAN), the umbrella body of farmers in the country, was one of the first associations to congratulate him. While commending the president for the re-appointment, National Vice President of the association, Chief Daniel Okafor, appealed to Emefiele to continue with ABP and ensure that all agriculture commodities associations benefitted from the scheme in his second tenure.

Furthermore, stakeholders have pointed out that it was due to the success of ABP and other such programmes that Nigerians had enough locally produced food items to fall back on during the COVID19 lockdown when disruption to global supply chains hindered importation.

As President of the Rice Millers and Importers of Nigeria (RiMIDAN), Dr. Tunji Owoeye was quoted in an interview with a national daily in June as saying: “The lockdown didn’t meet players in the agricultural sector unprepared because in the last few years, CBN, under Godwin Emefiele, has strengthened government intervention in the sector and this has increased output even before pandemic. If the intervention is sustained, I can assure Nigerians that our farmers would not only feed the nation, but will feed the entire West Africa.”

Sustainability

Owoeye may not have any difficulty fulfilling his promise, as CBN seems set to sustain its interventions. For instance, speaking during the flag-off of Farm Inputs Distribution for cotton farmers for the 2020 planting season in Kwali, Abuja, CBN’s Director, Development Finance Department, Yila Yusuf, said the apex bank would fund 1.6 million farmers across the country in the 2020 wet season through ABP. He said CBN would finance the farmers under its 10 focal commodities, which would cut across the value chains, adding that this would help to create an impact that would guarantee food security in the country. He disclosed that through the ABP, CBN had already engaged 256,000 farmers in cotton production for the 2020 planting season, besides other farmers.

“CBN is trying to bring back the glory of textiles of those days where the industry used to employ 10 million people across the country. In the 80s, we lost that glory because of smuggling where our country was turned to a dumping ground of textiles materials. It is an unfortunate situation, about five billion dollars was spent annually on the importation of textiles,” he said. Prior to Yusuf’s remarks, Emefiele had announced that loans of up to N7 billion were disbursed to cotton farmers in June this year, adding that the bank also planned to improve local cotton production in the country from about 80,000 tonnes in 2018 to over 300,000 tonnes by 2020.

Conclusion

As analysts noted at the weekend, the CBN’s measures to boost the agricultural sector would be critical in ensuring that the economy makes a quick recovery from the impact of the coronavirus crisis.

 

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