Agric. Sector to Disappoint despite Private Sector-led Scheme, Firm Says
Despite the Central Bank of Nigeria (CBN) private sector-led accelerated agriculture scheme, a Lagos based financial service firm, Greenwich Limited expects the initiative to underperform due to some bottlenecks that need to be addressed.
Greenwich noted this in reaction to the CBN’s private sector-led agricultural scheme recently initiated to support drive for food sufficiency and employment among Nigerians.
In a bid to boost economic growth and tackle the high level of food insecurity, Agricultural sector has remained a prime focus of the current administration.
However, output has remained low in the year due to flood in the Northern part of the country and poor seedling due to subsistence nature of beneficiary of the CBN’s financing.
Prices of food items has remained high, triggering concern among Nigeria of possibility of food crisis.
Meanwhile, land border closure has limit choice available as the nation records 14 consecutive rise in consumers price index, majorly driven by food inflation.
CBN’s private sector-led scheme comes in addition to major interventions, such as the Anchors’ Borrower Programme (ABP), the Agriculture Promotion Policy (APP), and the Commercial Agriculture Credit Scheme (CACS) that aimed at beefing up local capacity.
Greenwich Trust stated in the note that the perennial issues in the industry remain the lack of infrastructure, heightened level of insecurity, the low level of mechanization, amongst others.
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The firm stated that these have dampened participation and growth potential in the sector.
Recalled that the apex bank introduce Private Sector-Led Accelerated Agriculture Development Scheme, which aims to engage 370,000 youths in agricultural production, in partnership with the State government.
The scheme is expected to complement the existing Accelerated Agricultural Development Scheme (AADS) by pursuing private-sector collaborations to facilitate production of key agricultural commodities.
The guidelines were based on strategic objectives of promoting food security, engendering job creation, and supporting the stakeholders interested in unlocking land for appropriate financing.
On the financial front, the scheme is expected to be funded from the Anchors Borrowers Programme, with a maximum loan of NGN2bn per obligor and an annual interest rate of 5%, of which the Central Bank of Nigeria (CBN) is expected to take up 50% of credit risk.
The loan tenor is also tailored to the varied form of crops, with a six-year term for the annual crops, while the perennial crops have a maximum tenor of ten (10) years.
“Notwithstanding this laudable initiative, our review indicates a pressing need to deepen the CBN’s impact analysis as well as evaluate the effectiveness of the interventions released thus far”, Greenwich explained.
Apart from this, Greenwich said funding should also be targeted towards sourcing quality seedlings that would prop-up yield/per hectare.
This remains at considerably low levels, particularly for staples like Maize (2.5 tonnes/hectare), and Rice (1.2tonnes/hectare), compared to Thailand’s (Maize-4.7 tonnes/hectare, Rice-2.0 tonnes/hectare), according to the OECD’s records (2019).
Beyond shoving out these loans, Greenwich said there remains a growing need to carry out detailed studies to boost output quality.
“We also maintain the view that without appropriate risk management frameworks in place, the initiative could lead to a gradual build-up of non-performing loans”, the firm added.
Nevertheless, analysts stated that the key value drivers of the sector; population growth, key investments, and retail expansion continue to steer a positive outlook for the sector.
It said with the pressure points arising from the heightened cost of farming inputs, lack of storage system, the FX illiquidity, transportation havocs, and unfavourable weather conditions, the sector is expected to continue to perform below potential.
Agric. Sector to Disappoint despite Private Sector-led Scheme, Firm Says
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