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With funding shortfall hampering implementation of Nigeria’s budgets in recent years, the Central Bank of Nigeria (CBN) is revving up its intervention schemes despite concerns about such projects in some quarters. TONY CHUKWUNYEM writes

 

Three significant events took place last week which clearly show that despite calls in some quarters for it to scale back its developmental functions and focus on its ‘core’ mandates, the CBN looks set to step up its intervention programmes. First, was the announcement by the apex bank that it had revised guidelines for the N200 billion Commercial Agricultural Credit Scheme (CACS) to include Non-Interest Financial Institution (NIFIs).

 

 

In a circular posted on its website entitled: “Amendment to the Commercial Agriculture Credit Scheme (CACS) Guidelines,” the banking watchdog stated that the extension of the scheme to NIFIs was part of its efforts to deepen access to finance and reduce exclusion rate. It also stated that with the release of the revised guidelines for CACS: “It is expected that the review of the guidelines for other invention funds would follow in due course.”

 

The CBN in collaboration with the Federal Ministry of Agriculture and Water Resources established the CACS in 2009 to provide finance for the country’s agricultural value chain. Loans under the scheme, which is financed through N200billion Bond raised by the Debt Management Office (DMO), are disbursed at a maximum interest rate of 9.0 per cent.

 

In its Economic report for the 4th quarter of 2017 released a fortnight ago, the CBN had stated : “At end-December 2017, total amount released by the apex bank under the Commercial Agriculture Credit Scheme (CACS) from inception to the participating banks for disbursement stood at N551.18 billion for 547 projects. The projects included 65 state government projects under CACS and 8 Paddy Aggregate Scheme (PAS)”

 

However, barely 48 hours after the CBN released the revised guidelines for the CACS, the National Council of State (NCS) at the end of its meeting in Abuja, announced that it had recommended that the Federal Government should increase the Fund it set aside for development of the agricultural sector from $200million to $1 billion as part of efforts to diversify the country’s economy through improved agric funding.

 

The NCS is a body made up of former Nigeria leaders, Governors of the 36 states of the Federation, Ministers and other top government officials.

 

Shedding more light on the NCS recommendation, Ogun state Governor, Ibikunle Amosun, who was among officials that briefed journalists at the end of the meeting, disclosed that the Fund will be disbursed through already existing CBN programmes such as the CACS and the Anchor Borrowers’ Programme (ABP).

 

N55bn disbursed under ABP

 

One of the CBN’s key intervention programmes, the ABP was launched by President Muhammadu Buhari, on November 17, 2015 at Birnin Kebbi, Kebbi State. It is noteworthy that in his October 1st address to the nation, the President said the programme: “has been an outstanding success.”

 

Significantly, in a speech during the ground-breaking ceremony of a major Integrated Poultry and Powderised Egg Facility at Emure-ile, Ondo State last Friday, CBN Governor, Mr. Godwin Emefiele, put the total amount of money disbursed under the ABP in partnership with state governments and private sector groups since the commencement of the programme, at N55.526 billion to over 250,000 farmers.

 

According to the CBN Governor, these set of farmers, have cultivated almost 300,000 hectares of farmland for rice, wheat, maize, cotton, soybeans, cassava, etc.

 

He said: “As you may all know, the ABP is designed to support small holder farmers by providing them with the requisite training, tools and funds at single digit interest rates, which will enable improved cultivation of key agricultural items such as maize, soybeans, rice, cotton and wheat. The programme also provides a ready market for farmers by linking them with credible off-takers and processors of their produce.

 

“Two years into the implementation, the programme has contributed to the creation of an estimated 890,000 direct and 2.6 million indirect jobs,” he added.

 

Over 7m jobs created

 

Indeed, in a statement issued last November, the CBN through its acting Director, Corporate Communications, Mr. Isaac Okorafor, had put the total amount of jobs created through its development finance interventions in critical sectors of the economy as at August 2017, at seven million. Specifically, the apex bank revealed that through its Agriculture Guarantee Credit Scheme, it had created over five million jobs; while the CACS had created over one million jobs.

 

In addition, it listed the ABP, its Micro Small and Medium scale Enterprises Development Fund (MSMEDF), its credit refinancing scheme, among others as initiatives that had led to job creation.

 

Okorafor noted that the CBN’s interventions in the agricultural sector have made the country almost self-sufficient in rice production. He said that the Bank was working with the Federal Ministry of Agriculture and Rural Development to establish the Accelerated Agricultural Development, which aims at the pilot stage to create at least 10,000 jobs in each state of the Federation.”

 

 

The CBN spokesman also argued that no Nigerian airline would have remained in business by now if not for the regulator’s N300 billion Power and Airline Intervention Fund (PAIF), which according to him, had created 7,899 direct jobs and 14,304 indirect jobs.

 

Challenges

 

However, New Telegraph had reported two weeks ago that the intervention schemes, especially the MSMEDF and Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS), could have recorded even more success but for the low uptake of their funds by small business owners.

 

Commenting on the issue at the Bankers’ Committee retreat in Lagos last December, the CBN boss, had expressed concern that since the AGSMEIS took off early in 2017, “not a penny” had been disbursed. He revealed that it was in order to address this that the CBN decided to review the framework for accessing the scheme as well as the N220billion MSMEDF to allow easy access by small businesses at an even cheaper rate.

 

 

According to the CBN Governor, the structure of the AGSMEIS, which was designed to be an equity fund, will change effective this year to ensure that at least N13 billion of the fund was disbursed this month and another N25 billion by April. Although it was initially established for agricultural related businesses, Emefiele said the Bankers’ Committee had agreed  to extend the AGSMEIS to small businesses and artisans as part of measures to create employment and stimulate the Nigerian economy.

 

Similarly, while urging the media to help advertise the scheme so that more customers can come forward to access it, the Director, Banking Supervision, CBN, Ahmad Abdullahi, pledged that, from this month, banks will intensify efforts to ensure that disbursement of the AGSMEIS, which was estimated to have hit N60 billion by the end of last year, fully commences.

 

 

Interventions, key to economic resilience

 

According to analysts, despite challenges hindering effective implementation of some of the intervention schemes, the CBN’s developmental finance initiatives have been key to the economy’s resilience.

 

For instance, in a chat with this newspaper, a financial analyst, Mr. Mathew Osayende, argued that with commercial banks lending at above 25 per cent and the Federal Government facing great difficulties in sourcing money to fund its budgets, the economy would not have rebounded so quickly from recession without the CBN’s intervention schemes.

 

He said: “It is true that the CBN appears to be expanding its intervention schemes, but you can imagine what would have happened to the economy if it was not carrying out this role.

 

 

The Federal Government, which is the fiscal authority, was not able to effectively implement the 2016 and 2017 budgets primarily due to revenue shortfall.

 

Also, the commercial banks are unable to lend at single digit interest rate as a result of the high cost of funds. “What the CBN has done, however, is to target key sectors of the economy and design intervention schemes, which allow operators in these sectors to access loans at 9 per cent.”

 

Conclusion

 

According to industry watchers, while monetary and fiscal policies must work in harmony to speed up economic growth, the absence of the latter in these parts has been largely responsible for the CBN’s burgeoning intervention schemes.

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