Business

Evaluating CBN’s intervention in cash crop production

Recently, the Central Bank of Nigeria (CBN) disbursed N34.34 billion to major oil palm companies to plant new 100,000 hectares of palm trees by 2025. Also, the apex bank released over N700 million to 1,221 cocoa farmers in 10 states. These developments are aimed at bringing back the pre-oil boom era and a boost to economic diversification agenda. TAIWO HASSAN reports

Indeed, oil palm and cocoa beans were the mainstays of Nigeria’s economy before oil boom based on their immense contributions to the country’s gross domestic product (GDP) at that time. No doubt, Nigeria was the attraction for many African countries in the shipment of these two commodities with farmers being at the elite status. Till date, the revenue generated by Nigerian government pre-oil boom era can be seen in structures such as the Cocoa House, Ibadan, National Stadium, Nigerian Television Station (NTA), Ibadan, Oyo state and many other infrastructure projects in the country. Unfortunately, the discovery of oil coupled with the oil boom changed the country’s agriculture landscape with the consequence hitting Nigerian agric sector massively with local farmers facing hardship, bankruptcy in the process.

Restoration

Apparently, for many decades, the country’s agriculture was in shambles following the neglect in favor of crude oil. However, the inception of Federal Government’s Anchor Borrowers’ Programme spearheaded by the CBN in 2015, became the tonic the rejigged and restructured the country’s agriculture with renewed hope beckoning stakeholders in the sector, including local farmers, to start finding their feet again. The new wave was also felt positively in the palm oil and cocoa segments of Nigerian agriculture with the apex bank intervening from the N220 billion SMEs fund, which also covered agriculture.

Complaints

Indeed, complaints from palm oil producers had greeted the country with calls on the Federal Government to intervene in the sector by salvaging it from its bleak situation. Particularly, the stakeholders believed that there were conspiracies from government’s angle to deliberately thwart the sector’s growth with continued import waivers usually granted some importers under the ECOWAS Trade Liberalisation Scheme (ETLS). Ironically, in the past, government had consistently issued waivers under the ECOWAS Trade Liberalisation Scheme (ETLS) to importer of refined palm oil from China and other Asian countries because of the duties and tariffs being paid into its coffers.

CBN as game changer

In a bid to revive the country’s palm oil sector to stimulate growth and development, the apex bank has been at the forefront to ensure that Nigeria’s lost glory in palm oil returns to the front burner. At a meeting with some state governors in Abuja around midyear, the CBN Governor, Godwin Emefiele, disclosed that it had committed about N30 billion to enhance oil palm production in the country. Emefiele explained that the fund was disbursed through deposit money banks to six oil palm companies to support their expansion programmes. The bank disclosed that the disbursed N30 billion to major oil palm companies was targeted to plant new 100,000 hectares of palm trees by 2025, starting with 20,000 hectares in 2020. He listed the companies as PZ Wimar, Biase Oil Company Limited, Eyop, Okomu Oil Company, Presco Oil Company and SIAT Limited, adding that application for Ada Palm Imo State was being expected. Also, the apex bank governor disclosed that about 40 applications from investors across the country for the cultivation of 126,694 hectares were being considered. For a layman, the importance of funding in any project goes a long way in bringing positivity and this is exactly what the CBN has just done to a once supposed a time industry begging for government’s support for survival. In fact, the intervention fund coming from the apex bank to the sector is expected to catapult real investment in the sector, which will bridge the deficit of 1.25 million metric tonnes per annum currently in the sector.

Okomu oil’s transformation

However, the CBN’s move has had a positive impact on one of Nigeria’s largest agro-processing companies, Okomu Oil. The company is in the business of developing oil palm plantation, palm oil milling, palm kernel processing, and the development of rubber plantation. To generate revenue, it sells processed fresh fruit bunches into crude palm oil for resale locally and via exports. Most of its customers are manufacturers of consumer goods such as soaps and cosmetics. It also generates revenue by processing rubber lumps into rubber cake for exports. In 2019, Okomu Oil reported that revenues were down seven per cent year on year, while profits also fell 40 per cent to N5 billion, its worst year since 2016, the year Nigeria fell into its last recession. In the same year, N15.8 billion of its revenue was from local sales while the balance N2.9 billion (mostly Rubber) was from exports. Most of its local sales revenues came from Crude Oil Palm. Despite its dominance in this sector, it faced an existential threat which if not contained could further erode progress made over the years. The company blamed smuggling or illegal imports as the major reason for the revenue drop experienced in 2019. But things could have gotten worse were it not for what the company described as the “timeous” intervention of the government in closing all land borders. Since then, the company has seen its profits nearly doubled to N4 billion, 20 per cent shy of profits for the whole of 2019. Revenues are also up by 5.8 per cent to N13.5 billion in the first half of 2020 compared to the same period in 2019.

Stakeholders’ comments

While reacting to CBN’s inter-ventions the National President, National Palm Produce Association of Nigeria (NPPAN), Henry Olatujoye, commended the apex bank for coming to the oil palm farmers’ aid, saying palm oil is a money spinner in the country if well managed. Olatujoye explained that the intervention funds given to the oil palm sector by the CBN would go a long way to reposition the sector. While thanking CBN for its support to the sector, he frowned at the activities of economic saboteurs operating at borders, saying they deprived the country of huge foreign exchange from palm oil export in the past. He said that the country would benefit a lot from CPO as a leading foreign exchange earner with its price now $500 per tonne as against $426 of crude oil. Similarly, the Managing Director of Okomu Oil Palm Company, Dr. Graham Hefer, in an interview in Lagos, explained that the intervention fund from the CBN to the approved oil palm firms was a windfall that will assist them to get out of the doldrums they have been facing in the industry. Hefer thanked the management of the apex bank for supporting them with credit at a single digit. In his own submission, Chairman, LCCI Agricultural and Allied Group, Mr Africanfarmer Mogaji, said that the intervention fund had been impactful under the leadership of Emefiele. Mogaji said that Nigerian farmers needed financing to be able to produce abundantly at all times. The Governor of Edo State, Godwin Obaseki, said that there were a lot of factors making the country uncompetitive in oil palm production. He said for the intervention of the CBN to achieve the needed results, there was a need to have a very clear plan that will provide the right infrastructure for the land to be given out by governors. He also said there was a need to determine where to get the planting materials that will serve as input for oil palm farmers. Obaseki, however, applauded the CBN for coming to the rescue of the oil palm famers and the sector in general.

Cocoa

President of Cocoa Farmers Association of Nigeria, Adeola Adegoke, disclosed that CBN’s release of over N700 million to 1,221 cocoa farmers in 10 producing states would enable each farmer take about N592,332 to increase their production to about 300kg of cocoa beans per hectare. He explained that in the first quarter of this year, international trade data showed that agric and raw material sectors were the only items that increased, while other sectors decreased, with cocoa leading the exports.

Last line

Stakeholders have disclosed that the CBN’s interventions in the country’s cash crop sector will complement the country’s food sufficiency programme, thereby, averting food crisis post-COVID-19.

 

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