Impact of CBN Intervention in Agriculture, Other Non-oil Sectors


Bayo Akinloye writes on the contribution of the Anchor Borrowers’ Programme and other development finance initiative of the Central Bank of Nigeria aimed at raising productivity in the agriculture sector

In order to develop other sources of revenue as well as to protect the economy from perennial shocks occasioned by the drop in crude oil prices, the federal government has been paying more attention to the agricultural sector.

Indeed, that has prompted the Central Bank of Nigeria (CBN), through its Anchor Borrowers’ Programme (ABP), under its development finance function to continue to seek for ways to support operators in the agricultural sector in order to create job opportunities and help preserve foreign exchange (forex) revenues.

The ABP was also one of the reasons why the non-oil sector’s contribution to the country’s Gross Domestic Product figures released recently by the National Bureau of Statistics.

Specifically, the non-oil sector contributed 92.94 per cent to real GDP in the fourth quarter (Q4) of 2018, slightly higher than the 92.65 per cent recorded in Q4 2017. The sector grew by 2.70 per cent in real terms within the review period. This was 1.25 per cent higher than the growth rate recorded in Q4 2017, and 0.38 per cent higher than the growth rate recorded in Q3 2018.

On an annual basis, the non-oil sector recorded a growth rate of 2 per cent in 2018, performing considerably better than 0.47 per cent in 2017. For 2018, annual contribution of the non-oil sector was 91.40 per cent compared to 91.33 per cent in 2017.

A breakdown of the sectoral contribution to growth showed that agriculture contributed 26.15 per cent to overall GDP in real terms in Q4, compared to 29.25 per cent in the preceding quarter but slightly higher than the 26.13 per cent recorded in Q4, 2017.

The pilot phase of the ABP with rice cultivation that commenced in Kebbi State had proven to be a success, which was extended to other states.

The ABP programme was designed and introduced by the Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, to assist small scale farmers to increase the production and supply of feedstock to agro-processors.

The programme is aimed at creating an ecosystem to link out-growers (small holder farmers) to local processors, increase banks’ financing to the agricultural sector enhance capacity utilisation of agricultural firms involved in the production of identified commodities and as well as the productivity and incomes of farmers. The anchor borrowers’ programme is also a platform to build capacity of banks in agricultural lending to farmers and entrepreneurs in the value chain, reduce commodity importation. It is also expected to reduce the level of poverty among small holder farmers and create jobs while assisting rural small-holder farmers to grow from subsistence to commercial production levels.

In terms of the modalities for implementation, the programme was hinged on three pronged approach namely the out-grower support programme; training of farmers, extension workers and banks; and risk mitigation. In addition, the major stakeholders in the agricultural value chain worked with financial institutions, including the insurance industry and CBN, to create the linkages required to sustainably ramp up production.

The second leg is the training of farmers, extension workers and banks. The training component involved customised value-chain finance modules for banks and an agri-business training protocol for farmers that is consistent with the aspiration of the ABP.

Disbursement under ABP

The CBN recently said it has so far cumulatively disbursed N174.48 billion through 19 financial institutions under the programme since 2015.

The Director, Corporate Communications Department of the Bank, Mr. Isaac Okoroafor, said the programme had supported 902,518 farmers working with 194 anchor companies. He said the scheme has so far created 2.8 million and 8.4 million direct and indirect jobs respectively. He explained that the scheme initiated in 2018 was to facilitate access to credits in various sectors, adding that the Bank had supported several interventionist programmes including the micro, small and medium enterprise development facility, Commerce Agricultural Credit Scheme that had contributed to the economic growth.

Emefiele had explained that the far reaching objectives of the CBN in the implementation of schemes and programmes for real sector development focuses on the inherent potential in the sector vis-a-vis the Bank’s  conviction that the sector has sufficient employment capabilities, high growth potential, would contribute significantly in accretion to foreign reserves, expand the industrial base and apparently diversify the growth potential of the economy.

“The ABP programme ensures that Nigeria emerges from being a net importer of foods such as rice, to becoming a major exporter of rice; supplying key markets in neighbouring countries. For instance, the data from the Thailand Exporters Association indicates that in 2012, about 1.2 million metric tonnes of rice was exported to Nigeria, however, in 2016 which is the first one year of the implementation of our anchor borrowers scheme, rice import to Nigeria had dropped to less than 1000 metric tonnes.

“Activities in the manufacturing sector also witnessed a significant improvement between august 2016 and as the Manufacturing Purchasing Managers’ Index grew in 23 consecutive months, from 42 points in August 2016, to about 57 points in February 2019. This development was attributed to the sustained supply of foreign exchange and the stability of the naira.”

 The Minister of Agriculture, Chief Audu Ogbeh, had described the ABP as revolutionary.

According to Ogbeh, with the ABP, rice revolution has started in the country. Ogbeh noted that the ABP remains one of the greatest achievement by the CBN in the last 50 years.

For instance, he pointed out that there had been tremendous pressure on the government to import rice in order to meet the demand for the commodity, which was an indication that those mounting such pressure never believed that the ABP was working.

Ogbeh said that it does not make any economic sense to continue to spend scare foreign exchange resources on rice importation and other produce the country has huge potential to grow rice in commercial quantity, noting that each ship load of rice imported into the country displaces 12, 000 farmers from employment. According to him, the CBN ABP initiative is making rural dwellers rich.

Other Agric Sector Intervention

Also in the agriculture sector, the central bank has through other schemes have continued to support farmers.

For instance, the total amount released by the central bank under the Commercial Agriculture Credit Scheme (CACS) from inception to the participating banks for disbursement stood at N596.44 billion for 576 projects as at the end of the fourth quarter of 2018. Of the total number of projects, 34 were in respect of state governments.

The CBN disclosed this in its Economic Report for the fourth quarter of 2018, released recently. A total of N852.15 million was guaranteed to 5,454 farmers under the Agricultural Credit Guarantee Scheme (ACGS) in the fourth quarter of 2018. The amount represented a decrease of 40.1 per cent and 5.9 per cent below the levels in the preceding quarter and the corresponding period of 2017, respectively. 

The report noted that the cessation of rainfall led to widespread dryness of severe to-extreme intensity across the country in fourth quarter of 2018. Generally, the predominant agricultural activities during the review quarter were the harvesting of tubers, grains and vegetables, while pre-planting operations in preparation for dry season planting commenced.

In the livestock sub-sector, farmers engaged in the fattening of cattle and stocking of broilers to take advantage of yuletide season sales.

Sub-sectoral analysis of the ACGS showed that food crops got the largest share, amounting to N369.54 million (43.4per cent), guaranteed to 2,373 beneficiaries; followed by mixed crop sub-sector, which received N162.75 million (19.1per cent), guaranteed to 1,710 beneficiaries N138.44 million (16.2per cent) was guaranteed to livestock sub-sector in favour of 564 beneficiaries; while cash crop, fisheries and ‘others’ sub-sectors got N105.28 million (12.4per cent), N58.82 million (6.9per cent), and N17.32 million (2.0per cent), guaranteed to 542, 175 and 90 beneficiaries, respectively.

Analysis by state showed that 30 states and the Federal Capital Territory benefited from the scheme with the highest and lowest sums of N95.83 million (11.3 per cent) and N1.99 million (0.2 per cent) guaranteed to Ogun and Bayelsa states, respectively.

Therefore, considering sustained efforts by the central bank under Emefiele to support the federal government’s drive to reposition the sector and increase its contribution to revenue generation and economic development in the country. Emefiele’s leadership at the CBN  has been phenomenon to say least. It is to his credit that he aggressively redirected focus to the agricultural sector and actually spearheaded initiatives and unique programmes that have greatly contributed to the growth of the economy. Even those who don’t like him grudging concede to his tireless efforts to ensure that Nigeria’s economy is diversified from over-dependence  on oil as source of revenue.