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CBN Anchor Borrowers’ Programme: Emefiele On Driver’s Seat For Agric Value Chain

On assumption of office in June 2014, Central Bank of Nigeria (CBN) governor, Godwin Emefiele, extensively articulated his vision for the bank under his leadership. His inaugural world press briefing contained goals, objectives and action plans that constitute a blue-print towards building what he called people-focused Central Bank.

Emefiele was passionate about it. He therefore dwelt extensively on what he believed should be the role of the apex bank of Africa’s largest economy; an economy that was growing rapidly fast without a corresponding increase in job opportunities. He was also unambiguous about his 4-point agenda for driving the bank’s development finance strategy. These include:

• A New Framework for Funding SMEs

• The Agricultural sector

• The Power sector

• The Oil and Gas sector

According to him, “The core principle here is that the CBN will act as a financial catalyst by targeting predetermined sectors that can create jobs on a mass scale and significantly reduce our import bills.”

The underlying themes of all four areas were the imperative of unlocking the vast domestic financial resources for agricultural development. It also involves the creation of an efficient policy framework that would drive long-term, sustainable investment in the identified areas.

It also addresses the stimulation of effective multi-sectoral partnerships for tapping into the high potentials of economic growth that exist in virtually all the sectors.

Emefiele had said, “The CBN will revisit the goals and implementation of our intervention programmes in the Agricultural Sector, in order to ensure that high value addition is obtained from funds provided.

“Interventions in the sector will now be driven towards improving productivity in areas with high domestic demand, where opportunities exist to improve domestic supply, such as rice, fish, wheat and sugar and conservation of foreign exchange. These four commodities constitute a huge proportion of our food import bill of N1.3 trillion annually.

“The CBN would facilitate the creation of an ecosystem that will identify and link various local producers and processors with major importers of selected products.

“With the expected increase in local production, identified major importers would be encouraged to act as off-takers to local producers.”

The recent launch of the CBN-initiated ABP by President Muhammadu Buhari was borne out of the developmental agenda of the apex bank, a scheme. Buhari expressed high hopes that it would lift thousands of small farmers out of poverty and generate millions of jobs for unemployed Nigerians.

The event which took place in faraway Kebbi State, a vastly agrarian state, also served as the official flag-off of the 2015 dry season farming. Coming after the flag-off of the same scheme in February 2014 by former President Goodluck Jonathan who announced a N14 billion support for the same purpose, Emefiele demonstrated commitment to his 4-point development agenda in achieving the diversification drive of the economy and the unlocking of the vast opportunities in Agriculture and Agro-allied sector.

It could be recalled that Jonathan administration also released N9 billion in 2013 for the dry season farming scheme. The ABP is an initiative of the CBN aimed at creating an Ecosystem to link out-growers (Small Holder Farmers) to local processors. Under the scheme, the CBN set aside the sum of N20 billion from the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) for farmers at a single-digit interest rate of 9.0 per cent to address the challenges of poor funding.

The scheme was therefore designed as a one-stop solution for the challenge in developing the agriculture value chain by creating economic linkages between farmers and processors to not only ensure increased agricultural output but also reduce dependence on imported foods

The CBN further explained that the ABP involves a finance model whereby companies involved in the production and processing of key agricultural commodities, referred to as anchor firms, CBN, Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and State Governments organize the out-growers or farmers and ensure that they comply with contractual terms thereby reducing the incidence of side-selling. Being target-oriented, the scheme aims at creating economic linkages between over 600,000 small-holder farmers and reputable large-scale processors with a the overall aim of increasing agricultural output and significantly improving capacity utilization of integrated mills. Emefiele said that the developmental initiatives programme had been designed to create economic linkages between farmers and processors. “It will ensure increased agricultural output of rice paddy, and also importantly close the gap between production and consumption by ramping up utilisation capacity of Nigeria’s integrated rice mills,” he explained.

The CBN governor emphasised on the cushion effects of the scheme on the Naira and the nation’s foreign reserves.

As the one sitting on the hot sit, he is concerned about the huge foreign exchange flight involved in massive food importation annually, whereas the country has the capacity for local production of such items.

According to him, the allocation of foreign exchange to the importation of items such as rice, wheat, milk and fish, among others, had contributed greatly to the depletion of the nation’s foreign reserves, especially in the face of low oil revenue resulting from falling oil prices.

The CBN governor was therefore emphatic about unemployment and escalating food imports prompted the Bank, under his leadership, to shift from concentrating only on price, monetary, and financial system stability to act as a financial catalyst in specific sectors of the economy particularly agriculture, in an effort to create jobs on a mass scale, improve local food production, and conserve scarce foreign reserves The role of ABP in creating economic linkages between over 600,000 smallholder farmers and reputable large-scale processors will result to increasing agricultural output and significantly improving capacity utilization of integrated mills. As Emefiele pointed out, this would close the gap between the levels of local rice production and domestic consumption.

Another important aspect is that it will complement the Growth Enhancement Support (GES) Scheme of the Federal Ministry of Agriculture by graduating GES farmers from subsistence farming to commercial production. The CBN had set aside N40 billion from the N 220 billion Micro, Small and Medium Enterprises Development Fund for farmers at a single-digit interest rate of 9 per cent. Taken all together, there is empirical evidence of the ABP scheme achieving its objective through deliverables in expected, measurable outcomes within five years.

The expected outcomes are:

• An increase in the ratio of agricultural lending from 3.72 percent of total bank lending in 2014 to 7.0 percent;

• An increase in capacity utilization of rice mills from the current level of less than 50 percent to not less than 80 percent;

• Empower at least 1 million farmers in each of the selected produce under the programme;

• Create at least 2,000,000 direct and indirect jobs in the processing segment of the above value chains;

• Reduce Nigeria’s import bill on the identified commodities by at least 30 percent annually over the specified period.

With Nigeria’s agricultural commodities and food import bill averaging over N1 trillion in the past two years, Emefiele identified the need to expedite actions towards achieving the scheme’s objective, especially given the economic realities evident in the significant spillovers that have occurred in the economy from the sharp drop in crude oil prices.

Food products like wheat, sugar, milk, rice and fish now account for N901 billion or 93.5 per cent and N788 billion or 88.71 per cent of this total in 2013 and 2014, respectively. The Import bill of rice and wheat was estimated at N428 billion and N307 billion in 2013 and 2014, respectively.

The National Bureau of Statistics (NBS) in its Q3 2015 Job Creation Report disclosed: “Over 70 percent of the informal sector jobs created in Q3 2015 were related to rural agriculture due to the beginning of the farming season where rural and subsistence farmers become fully engaged on their farms. The third quarter of the year coincides with the planting season in Nigeria and has historically recorded higher job numbers when compared to other quarters, as farmers employ more hands to assist on the farms.”

Similarly, in its 2015 Q3 GDP Repor, the NBS noted under Agriculture: “In the Third Quarter of 2015, the sector grew by 9.33%, marginally higher from growth rates recorded in the corresponding quarter of 2014 and the Second Quarter of 2015 when growth was recorded at 9.19% and 9.17% respectively.

“Growth in the sector was driven by output in Crop Production accounting for 83.83% of overall growth of the sector as a result of the harvest season. Agriculture contributed 24.51% to nominal GDP during the quarter under review, higher than the corresponding quarter in 2014 and the Second Quarter of 2015 by 0.74% points and 6.62% points respectively.”

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