Again, complaints over non-approval of single digit interest rate on agric lending came to the front burner among the private sector and local farmers recently as they unanimously agreed that it is the only way out of the country’s agriculture doldrums. Taiwo Hassan reports
In many fora on agriculture, stakeholders have always been clamouring for the ratification of single digit interest rate for agriculture in the country.
They believe that accessing fund from commercial banks at single digit interest rate will go a long way in driving agricultural growth in Nigeria and also guaranteeing food safety and security for the populace.
Ideally, the Central Bank of Nigeria (CBN) in its capacity has demonstrated that achieving single digit interest rate is fundamental as it will revolutionise the country’s agric sector optimally in its bid to contribute immensely to the national gross domestic product (GDP).
In addition, the CBN has also been at the vanguard of promoting sustainability, food production and security in the country’s agric sector with its various intervention funds to ensure that the sector becomes the engine room of Nigeria’s economic revival, in line with the diversification agenda of President Muhammadu Buhari’s administration.
For CBN, the agric sector remains one of the critical sectors in the country’s economy that can act as a game changer for the country if well funded.
To ease the challenges faced in accessing funds, the apex bank rolled out N750 billion special intervention funds for the sector at a single digit interest rate.
Following the apex bank’s special intervention fund, reports of heavy complaints greeted the loans as commercial banks frustrate genuine farmers from accessing it with ease.
These allegations were further confirmed by the CBN Governor, Godwin Emefiele.
Improved access to credit
Speaking on access to credit, the Lagos Chamber of Commerce and Industry (LCCI) explained that information at its disposal indicated that agro-allied operators and Micro, Small and Medium scale Enterprises (MSMEs) were still being deprived easy access to credit by commercial banks, which is not in tandem with the CBN plan on credit availability.
LCCI President, Babatunde Ruwase, explained that there was need for the apex bank to de-risk the sector to make it comfortable for commercial banks to grant loans to farmers at single digit interest rate for the benefit of the economy.
“While the CBN had previously put in place credit schemes to help improve credit access, we note that many MSMEs are still not able to access credit. Our observation reveals that many commercial banks are still reluctant in granting credit to this important sector of the economy.
“Not many MSMEs have benefitted from the N220 billion MSMEs fund set aside by the CBN. We advise the CBN to put in place measures at de-risking the sector so that banks would be more comfortable at making funds available to MSMEs.
“We support the CBN’s move towards developing a Trade Receivables Portal to enable MSMEs trade their invoices with financial institutions to improve their cash flow. We are however skeptical about the workability of this laudable idea judging by the current disposition of commercial banks to lending to MSMEs and farmers, except this trend is reversed.
“We commend the desire of the CBN to boost consumer spending through a lending framework that will involve large departmental stores, equipment leasing companies, automobile companies in partnership with financial institutions and credit bureaus.
“We however advise that necessary measures be put in place before commencement to ensure that the intended goal is achieved as consumer spending is critical towards ensuring economic growth.”
Inflation rate
On the country’s inflation rate, Ruwase explained that the CBN seeks to support improved GDP growth and greater private sector investment by creating a low inflation environment and maintaining exchange rate stability.
The LCCI boss applauded the apex bank for the role it is playing towards achieving single digit interest rate in the country’s agriculture sphere.
He stressed that the CBN still needed to work with other stakeholders not only in approving single digit interest rate, but also bringing down the cost of food, which impacts considerably on the consumer price index.
“We commend this focus and strongly agree with the CBN that single digit inflation is needed for growth of the Nigerian economy. We also want to commend the desire of CBN to work with other stakeholders to bring down the cost of food which impacts considerably on the consumer price index.
“However, we are of the opinion that monetary policy alone cannot accomplish all of these. There is need for a framework for sustained collaboration with stakeholders, particularly in the agricultural sector. Bringing down food prices would also require active and decisive actions from the government to put measures in place to reduce seasonal production of food crops, improve post-harvest operations, improve transportation, improved security and ensure genuine access to credit by farmers. This would help reduce the volatility experienced in food prices currently,” the LCCI president explained.
Poultry farmers’ demands
In an effort to ensure improved productivity and affordability in the poultry sector, the Poultry Association of Nigeria (PAN) urged the Federal Government to consider a single digit interest rate on agricultural loans for its members.
Frowning at the low consumption rate of eggs and poultry meat in the country, the association’s President, Ezekiel Ibrahim, made the passionate appeal in Abuja recently.
He further lamented that the products were only consumed by majority of the populace during festivities and parties.
In his words: “For poultry meat and egg to be part of our daily menu and affordable by majority of the populace, we need to improve our technology for crop production and ensure reduction in the cost of capital in agriculture, which is currently double digits.
“We are talking of single-digit interest rate while in most European countries, the maximum interest rate is two per cent; some are charging point five per cent and 1 per cent; even in some African countries, the interest rate is very low. So, we are urging the government, as a source of intervention, to set the interest rate at five per cent to agriculture.
“At the moment, the average production of crops per hectare is about 2.5 to three tonnes per hectare. In Brazil, we are talking about five tonnes per hectare of maize. Invariably it means the cost of production in Brazil will be very low. It means their poultry meat will be competitive hence almost an average person in Brazil has poultry product on his daily menu.”
He postulated that there were two-way approaches to it, stressing that as government reduces the interest rate, farmers should improve crop production. Through such measure, a large number of people will go into poultry production.
Such an approach, according to him, will in a short time make eggs and poultry meat invariably cheaper and affordable for majority of the populace.
Ogbeh’s stance on agric lending
A former Minister of Agriculture and Rural Development, Chief Audu Ogbeh, had recounted that the high interest rate being charged by commercial banks was alarming and detrimental to the growth and development of agriculture.
According to him, the current administration is working assiduously to address the numerous challenges facing agriculture development in the country, especially the high interest rate.
He revealed that getting five per cent single digit interest lending rate for farmers in the country is the priority of the present administration.
“We are now working towards reducing the interest rate on agriculture to five per cent, especially for the small borrowers.
“For us, the major achievement if we succeed in bringing interest rate to five per cent is, we believe in the next two to three years, this country will become a major force in agriculture worldwide,” Ogbeh said.
Last line
Feelers in the industry is that achieving single digit interest rate in agric lending at this period of high inflation rate in the economy is not achievable because the banks are not ready to change their position for now.
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