Dr. Akinwunmi Adesina
By Obinna Chima
The Minister of Agriculture and Rural Development, Dr. Akinwunmi Adesina has advised the Asset Management Corporation of Nigeria (AMCON) and the National Pension Commission (PenCom) to invest part of their funds in agricultural bonds in order to boost financing of the agric sector.
Adesina, made this call in an address presented at a workshop tagged: “Financing Nigeria’s Agricultural Revolution,” organised by the Securities and Exchange Commission (SEC) in Lagos at the weekend.
According to the minister, a lot of countries had raised long-term bonds to finance the growth of their agric sector. He pointed out that the agric sector was able to attract $8 billion of private sector investment this year.
Adesina explained: “I believe the time has come for Nigeria to consider raising long-term bonds to finance the agricultural sector. Today, if you look at the amount of money we have - AMCON alone, has over N3 trillion in funds, pension funds have trillion of naira looking for sound investment.
“I believe that as we are modernising agriculture, as we are opening up opportunities in the value chains, as we are lowering transaction cost and reducing risks, AMCON and pension funds need to invest in agricultural bonds to diversify their portfolios to provide low interest financing for the agricultural sector.
“We must address the issue of term financing because in agriculture, you need long-term loans. So if you are taking short-term deposit and lending it for long-term, it is not possible. What the United State did was that they raised long-term bonds, backed by government guarantees, to finance the agricultural sector.”
Adesina further disclosed that the ministry has developed a new programme christened the ‘Nigerian Agricultural Entrepreneurs,” explaining that the initiative would lead to the creation of 760,000 young commercial farmers in the country in the next five years.
These emerging young farmers, according to him, would require capital, adding that “the capital requirements that they would need alone from the banking industry would be roughly N3 trillion. This is a lucrative a opportunity for forward-looking financial institutions in Nigeria.”
He also revealed that his ministry would soon create Marketing Co-operations. “Those marketing co-operations would play the same role that the Marketing Boards played in the past, except that they would not be run by government, but by the private sector and they would coordinate the sector,” he declared.
Continuing, he said: “This year alone, we are adding to the domestic food supply, a total of 8.1 million metric tones of food. When we started, we said we are going to add 20 million metric tones of food to domestic food supply by 2015. We are in our first year alone.
“I have seen what private sector financing can do for agricultural development. I have seen small farmers in Kenya, expand their production base and access to markets. I have seen how Tanzanian farmers were able to double their production in the northern part of Tanzania because they were able to have access to cheap financing from an agro-allied facility that was set up by the National Microfinance Bank of Tanzania.
“That facility was $10 billion and that facility alone helped the entire northern farmers in Tanzania to grow more maize in one year, than the entire country and I believe we can do that in Nigeria.”
He said the federal government would continue to work with the private sector to develop programmes and services that would reduce the perceived risk of lending associated with the agric sector.
“I believe that this sector, will in the next 10 years, be the most dominant sector in this country. The financial sector needs to be more innovative and also more proactive. Banks and other private lending institutions have the responsibility to develop credit instruments that are tailored to the risk and cash flow pattern of the agriculture sector.