Expediency of extending agric credit to family farmers

Over the last decade, a huge population of small family farmers in Nigeria has been shortchanged, or rather neglected, in the allocation of agricultural funds provided by the Central Bank of Nigeria. Without any iota of exaggeration, these farmers are Nigerians’ ‘main source’ of food, employment, and income. Paradoxically, most governors of the 36 states in the federation have promised to put agriculture back to the top of the development agenda, grow revenue base, increase the proportion of their budgets going to this vital sector. It is not an exaggeration to say that the promises are usually made during campaigns ahead of gubernatorial elections. But alas! After the elections, they are wont to forget promises they made regarding agricultural development during campaigns, and by that act of negligence leave family farmers groaning in the face of hardships that characterise peasant farming, particularly in the rural areas.

Without doubt, not few private companies have invested heavily in Nigeria’s agriculture value chain in recent years, paving the way for a renaissance in the country’s agro-food systems that multiplies the options for farmers in terms of the seeds they plant, the fertilisers they use, the markets they can tap into, and the information services available to help them manage their farming activities. Not only that, agricultural growth in Nigeria, particularly in the area of rice cultivation, has also expanded livelihood opportunities for millions of people now engaged in the growing off-farm stages of the agro-food system.

Offering a glimpse of future success, these advances have helped inspire a new vision for Nigeria, one in which farming realises its potential to help make the country sustainable and hunger-free.

At this juncture, it would be recalled that the CBN Governor, Godwin Emefiele, has, for the umpteenth time, assured that the apex bank remains committed to development of agriculture and other allied products in the country. His assurance cannot, in any way, be faulted, as the CBN has been at the forefront of ensuring that the agriculture sector of the economy is well funded and minded. For instance, right from April 1978 when Decree No. 20 of 1977 established the Agricultural Credit Guarantee Scheme Fund, the apex bank has not looked back. With its original share capital and paid-up capital that stood at N100m and N85.6m respectively, and with the Federal Government holding 60 per cent of the shares and the CBN 40 per cent of the shares, not few observers of the sector would erroneously opine that family farmers have no fund challenges. The erroneous thought is further reinforced, as the capital base of the scheme was increased to N3bn in March 2001. The fund guarantees credit facilities extended to farmers by banks up to 75 per cent of the amount in default net of any security realised. The fund is managed by the CBN, which handles the day-to-day operations of the scheme. The guidelines stipulate the eligible enterprises for which guarantees could be issued under the scheme. It is germane to note that since 2001 down the line to recent years that similar schemes have being inaugurated by the CBN.

Worthy of mention among the schemes are the Agricultural Credit Support Scheme, which is an initiative of the Federal Government and the CBN with the active support and participation of the Bankers’ Committee. The scheme has a prescribed fund of N50bn. ACSS was introduced to enable farmers exploit the untapped potential of Nigeria’s agriculture sector, reduce inflation, lower the cost of agricultural production (i.e. food items), generate surplus for export, and increase Nigeria’s foreign earnings, as well as diversify its revenue base. In the same vein, Commercial Agriculture Credit Scheme was also launched for the benefit of farmers across Nigeria.

Unfortunately, there have been concealed agitations by peasant farmers against how they have been from year in year out shortchanged from having access to the loan schemes. Rather, not few Nigerians, who know next to nothing about farming, were seen usually carrying portfolios and clad in suits and dark sunshades have access to the loans that are meant to support farmers.

Against the foregoing backdrop, there is need for policymakers at the CBN to take effective measures in ensuring that agriculture loans that are meant to improve the lots of farmers are extended to them as a way of motivating them, and up-and-coming young farmers across the country. Therefore, the leadership of CBN should recognise who participates in formal and informal credit, how much loans they acquire, what prevents farmers from using the credit that were extended to them primarily for the development of the agriculture sector of the economy. Again, it is incumbent on the leadership at the CBN to generate policy-relevant insights for the expansion of effective, sustainable, and inclusive financial institutions for farmers in Nigeria, as it is essential to know the factors affecting participation in credit, the amount of credit obtained, and the credit constraints.

It would be recalled that governments; both at federal and states levels were once actively involved in agricultural finance in Nigeria. However, it appears the governments of today are no more concerned; even if most political leaders leveraged on the promises of assisting farmers to drive their campaign ahead of the elections that paved the way for the present positions they occupy across the country. There is no denying the fact that they have failed to make positive impact because of many factors, including corruption and inefficiency.

It would not, in any way, be misleading for this writer to advocate that there should be return of governments and CBN to agricultural finance. It would not be a return to direct lending, but it would stimulate commercial banks to become involved in the agriculture sector. Today, there are examples in some African countries of how central banks have succeeded in involving themselves in agricultural financing. This could be replicated in Nigeria.