Thursday, May 26, 2016 9.25AM / FBNQuest Research
We know that banks in Nigeria were once subject to sectoral lending thresholds, and that many loans to agriculture ended in tears. We also know that the DMBs are still reluctant to lend to the sector.
The CBN has stepped in with several credit facilities such as the Nigeria incentive-based risk sharing system for agricultural lending (NIRSAL).
We heard on Tuesday at a session at the annual meetings of the African Development Bank (AfDB) in Lusaka that Uganda operates a similar scheme: the Bank of Uganda provide half of the loan at zero interest rate and a commercial bank the other half at the market rate (of about 18%).
The Central Bank of Kenya has a similar scheme with Equity Bank, and its counterpart in Tanzania has gone down the same route.
The AfDB’s agenda persuaded the International Fund for Agricultural Development to announce a funding pledge of US$500m per year for the sector in Africa at the session. The risk sharing of central banks and donor support are not the solution but are designed to boost other lending.
The agenda, launched in Dakar in October 2015, involves the identification of exportable products which governments or sub-regional groups would develop and finance. Rice in Nigeria is one such product. The target is to reduce and eliminate the US$35bn annual net food import bill across the continent.
Processing is also part of the agenda. The point was made twice at the session that only 10% of global annual chocolate sales revert to the farmers. The Ivorian government has taken a lead in this area.
Another challenge is to persuade young Africans to develop a career in agriculture. The AfDB president, Akinwunmi Adesina, recalled that his own father favoured a career in medicine for him.
The rationale for the agenda speaks for itself. The AfDB estimates that 420 million Africans live below its poverty threshold of US$1.25 per day, and that the figure will grow to 550 million within ten years without a major response.
Economic and fiscal stability hinge upon a strong agricultural sector. Women’s empowerment is advanced and the drift to cities contained. Feeding Africans is one of the high 5s, a core theme of the meetings.
Adesina told the session that the challenge is doable, and cited the example of China, where new policies for farmers helped to lift 500 million people out of poverty in just ten years.