Sustaining agriculture through loans and grants

JULIANA AJAYI writes about the opportunities to fund agribusiness in Nigeria 

Like every other business, the availability of human and other resources defines agricultural productivity. Agriculture in Africa is regarded as the single most important economic activity which employs about two-thirds of the working population. 

Agriculture accounts for about 14 per cent of the Gross Domestic Product in Sub-Saharan Africa. To sustain agribusiness in Africa, especially in Nigeria, loans and grants are needed. 

According to the World Bank, the development and commercialisation of agriculture require financial services that can support larger investments and agriculture-related infrastructure that require long-term funding, given that, currently, transportation and logistics costs are too high, especially for landlocked countries. 

While some loans and grants are time-bound, others are not. This means that while some doors are being shut, others make themselves available. Though some of the processes involved in obtaining loans and grants prove to be rigorous, the return at the end of the day is always worth it. For every farmer, it is the harvest that determines the success. 

Agric SME investment scheme

The Agric, Small and Medium Enterprise Scheme is an initiative of the Bankers’ Committee established to complement the Federal Government’s effort in promoting agribusinesses/SMEs as a vehicle for sustainable economic development and employment generation.

With the Central Bank of Nigeria AGSMEIS, an applicant can access up to N10m at five per cent interest per year without collateral. It comes with a seven-year tenor and 18 months moratorium. The AGMEIS loan has two phases. The first phase involves applicants, who indicated interest. This gives them the opportunity to visit NISRAL Microfinance Bank’s webpage (nmfb.com.ng). Select the Ministry of Agriculture as Entrepreneur Development Institute, also known as EDI, then visit the Ministry of Agriculture/Agribusiness department for further details or simply send email to: asobande@lagosstate.gov.ng. Then, the applicant is expected to attend a one-week compulsory training at the Lagos State Ministry of Agric EDI Centre/Oko-Oba Agege, to obtain a certificate for completion of training. 

Phase two involves those that have been successfully trained by the EDI in Lagos. If they are still interested in the loan, they will proceed to apply for a loan via the NISRAL MFB’s portal and upload the certificate of completion. After that, the application would be forwarded to the CBN for processing. 

Once the CBN processes the applications, applicants will be called for an interview regarding their business. The qualified ones will get the loan. 

Though the opportunity is open to all, some requirements must be met during the application or before the approval of the application and the final disbursement of fund to applicants. The business must be registered with the Corporate Affairs Commission, must be certified by an EDI, must possess a Biometric Verification Number,  applicant’s passport photo, a guarantor and a valid identification.

BoI agro-processing loan

This is another type of loan available to Nigerian farmers, whose business, primarily, is on agro-processing. It covers areas such as fisheries and forestry. The loan funded by the Bank of Industry and has got some requirements that must be met. 

The company must be registered; and during the application process, applicants must provide the registration number or business name for the enterprise.

BoI does not disburse loans to the borrower in cash, but to the vendors and suppliers of the equipment the loan application is meant for. BoI’s agro-processing loan starts from N5m. Should a business be considered for a loan, collateral shall be required. Some assets would be pledged to secure the loan. The bank accepts other forms of security subject to adequate coverage of the loan provided. Some of the securities acceptable to the bank include a legal mortgage on a landed property, which is duly registered with a Certificate of Occupancy, debenture on assets of the company, bank guarantee and external guarantors with a notarised statement of networth for loans below N10m. Other documents are communicated as the applicant commences the application.

BoA loan

The Bank of Agriculture is an institution created by the Federal Government of Nigeria to provide credit to the agriculture and non-agriculture sectors. It enhances capacity development through the promotion of co-operatives and agricultural and non-agricultural value chain activities.

The BoA provides up to five different agric loans, which assist farmers and agribusinesses in Nigeria to thrive. Some of the loans are:

(i) Equipment Leasing Product

This is a loan that is expected to fund products that will contribute to the success of agribusinesses and also impact economic and job growth.

The Policy and Strategy Document of the Federal Ministry of Agriculture and Rural Development tied the inability to meet domestic food requirements to a productivity challenge driven by an input system and farming model that is largely inefficient. Some of the inefficiencies are not unconnected with the crude model of farming which this product programme seeks to address by providing access to mechanised farming input to improve productivity levels.

(ii) Cooperative Feeding Family Programme

This is a loan developed to make agricultural produce readily accessible to all at competitive prices while ensuring strict adherence to international standards, certifications and regulations applicable to food processing.

This product programme is part of the plan to ensure the consumption of locally-produced foodstuff, in line with the Federal Government’s resolve to encourage the conservation of scarce foreign exchange presently deployed to the importation of food, while at the same time creating valuable jobs in the agriculture sector.

The CFFP envisages the direct supply of foodstuff to families through registered cooperatives that meet the qualifying criteria to reduce the prices, taking advantage of economies of large scale supplies. In addition, it will provide credit facilities to enable cooperative members access foodstuff for 90 days with only 40 per cent down payment and the direct sourcing of foodstuff from local primary producers and processors. This would assure quality and reduce contamination arising from poor handling. With food issues settled at home, it is expected that the productivity of beneficiaries would improve even at work, while their overall wellbeing is expected to also improve. 

(iii) Export Finance Facility 

This product is in line with the Federal Government’s initiative to hasten economic development by encouraging job creation and improving the present dismal balance of trade in Nigeria; hence, easing pressure on scarce foreign exchange.

BoA provides credit financing at pre-shipment and invoice discounting of confirmed orders at the post-shipment stage; thereby assisting Nigerian exporters in making sales that might not otherwise occur. The product provides direct credit to exporters for production or procurement at pre-shipment and avails invoice discounts at post-shipment on the basis of payments due from foreign banks under confirmed letters of credit to Nigerian exporters. 

It is the Nigerian exporter, who must request a confirmed letter of credit and bear the cost of confirmation. As such, the exporter may factor this cost into the selling price prior to the contract negotiation process. The post-shipment discount covers up to 70 per cent of the export proceeds, while pre-shipment financing is 70 per cent of verifiable export off-take contract.

(iv) Hides and Skin Revival Credit Facility

Hides and skin was one of the major sources of forex earnings in Nigeria before the discovery of oil in the late 1960s. Sequel to the discovery of oil, the industry was abandoned, resulting in reduction in forex earning and job creation.

In an attempt to reverse this, the BoA introduced a credit product named Hides and Skin Revival Credit Facility. This is to assist governments and potential private investors to access funds from the bank. 

(v) Agro-Processing Facility

Component of Agricultural Value Chain:

To ensure national food security and reduce post-harvest losses, the BoA developed a credit product known as Agro-Processing Facility.

The facility will provide funds to existing or potential private investors, who desire to establish an urban or cottage agro-processing industry.

Other available loans provided by BoA include Sugar Revival Credit Facility, Haulage Credit Facility, Merchanisation Service Provider Operators, Input Procurement Credit Facility, On-Lending Credit Product, Grow and Earn More, Youth Agricultural Revolution in Nigeria, Large Credit Product, Ranching Development Credit Facility and Direct Credit Product. 

Business expansion through loans and grants

Over the years, there have been beneficiaries of several loans and grants offered by both domestic and foreign governments. However, with less stringent rules, more farmers, especially the smaller agribusinesses, will be able to partake of it. 

A farmer based in Ikorodu, Lagos State, Akinsanya Oluwaseun, said he had applied for loans with the state government, to no avail. His hope is to get a loan, which would help him expand his business.

He said, “I have applied for an agricultural loan with the Lagos State government, but was unsuccessful. If granted, the loan will help me to feed the fishes till the appropriate size is realised, as well as stock and arrange new ponds.”

A farm owner in Ondo and Ogun states of Nigeria, under anonymity, explained that she had also tried many times to get a grant for the business, but had been unable to, due to the rigorous processes involved. 

Her words, “I have attempted to get grants a number of times. But it has been too tedious and taxing. I am interested in grants, not loans, which will help me to put some things in the farm, especially water supply and sprinklers It will also help me to stock and raise the animals.”

For Allahnana Esson, a fish farmer with Palladium Bridge Limited, “Getting a loan will help to increase capacity, and when capacity increases, customer base follows, which in turn brings more income to the business. A business becomes viable when you get access to grants, you use them as your point of increase.”

“In fish farming, we have to put into consideration water and feed. In collecting that loan, we’ll expand the business massively.

“A loan from the Federal Government will go a long way. I’m experiencing financial constraints at the moment; so a form of financial aid will enable me expand my business,” another farmer revealed.