Banks credit to agriculture rose to N20bn.
The Federal Government said on Thursday that it saved about N776 billion in the last year through the abolition of the fraud in the fertiliser subsidy scheme it undertook with the 36 state governments aimed at boosting productivity in the agricultural sector.
The Minister of Agriculture and Rural Development, Akinwunmi Adesina, who stated this in Abuja, said since the introduction of the Growth Enhancement Scheme, GES, last year, over 40 years of corruption in fertiliser and seeds allocation has ended.
”Under the scheme, we can see that fertilisers get to our farmers,” the minister said. “The problem was that between 1980 and 2010, the total amount the Federal and State Governments spent on fertiliser subsidy was roughly N873 billion. But, about N776 billion of that literally just developed legs and walked away without any trace.”
Noting the huge savings to the government through the scheme, Mr. Adesina said bank credit to the agricultural sector has also more than doubled in the last two years, peaking at about N20 billion this year, or about four per cent of banks’ credit portfolio during the financial year.
Speaking at a Breakfast Meeting with the Central Bank of Nigeria, CBN, and chieftains of the banking industry in Abuja, the minister noted the improved disposition of the financial institutions to lend more to farmers, agro-processors, agro-input dealers and other operators in the value chain, saying this was proof that the Agricultural Transformation Agenda of the present administration was achieving the desired objectives.
Specifically, the Minister commended the Central Bank for collaborating with his ministry to create the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending, NIRSAL, as part of the solution to the lingering problem of high cost of bank credit to the agricultural sector.
He said that the collaboration helped immeasurably to remove most of the major risks that, prior to its introduction, discouraged banks from providing credits to the sector, despite its strategic importance.
“I want to say that the partnership between the CBN and the Federal Ministry of Agriculture is moving agriculture forward in this country.
“We started two years ago and I think it is something that is having significant impact in this country. The amount of lending going to the agricultural sector is increasing significantly,” he said.
The Minister said the abuses that characterised the inputs distribution era made the Federal Government to decide to clean that up and that the mandate by the President was achieved as the rot that had lingered for almost 40 years was cleaned up in 90 days as fertilisers and seeds were sold by companies directly to farmers by the electronic wallet.
He explained that the private sector-operated, GES, which today allows the seed companies and the fertiliser companies to sell directly to farmers, and by so doing, build their value chains, with the farmers promptly accessing their inputs, would not have been possible if there was no money in the system.
Mr. Adesina said this informed the collaboration between the ministry and the CBN to develop the “NIRSAL” programme, which was designed to reduce the risk of lending by banks to the sector.
The Central Bank’s Deputy Governor, Financial System Stability, FSS, Kingsley Moghalu, said the bank’s commitment to improved lending to the real sector was informed by the fact that the institution was a development-oriented regulatory institution.
Mr. Moghalu, who represented the Central Bank Governor, Lamido Sanusi, said the board and management of the regulatory bank believed that in playing its financial re-engineering roles in the nation’s financial services industry, it was not enough that monetary policies and supervision of the banks alone were pursued.
Such initiatives, he said, must be pursued in a way that would impact positively on the real sector, to help create jobs in the economy, adding that despite this, the bank still believed that as the central bank of a developing country, it was not enough just to work on monetary policy.
”t is not enough just to work on banking supervision. We have to make sure that as the guardian of the financial system that the institutions that we supervise make their contribution to the economy of Nigeria; becoming a sovereign sound economy that is not based on rent seeking, but on production of food, industrial manufacturing, agro-processing and so on,” he said.
Pointing out that this was the direction the CBN was going, Mr. Moghalu said that in the last one year or two, lending to agriculture has doubled, with the Central Bank giving in addition to de-risk lending for agriculture, which kept banks from lending to agriculture for a long time.
”We felt that if we could help to de risk the whole process, that this whole question of lending to agriculture can proceed on a commercial basis,” Mr. Moghalu stated.