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| President Muhammadu Buhari |
As it
is well known, food and feeding are very basic and essential. No nation, as a
matter of reality, can be great without being able to feed its people. And for
any country with high import taste, earning of foreign exchange is important
for sustainability. Thus, every investment in agriculture value-chain portends
good for this nation if properly planned and diligently executed.
These
are some of the germane reasons President Muhammadu Buhari’s directive “to
raise funds to support agriculture and industry at single digit interest rate”
deserves support. The Minister of Agriculture and Rural Development, Chief Audu Ogbeh, who said this the
other day at an agribusiness conference in Abuja, explained that President
Buhari gave the directive at the Federal Executive Council meeting. He lamented
inaccessibility of finance for agriculture, inability of farmers to borrow
money at an astronomically high 25% interest rate for any meaningful productive
activities and Nigeria’s federal system of government that makes it impossible
for the Federal Government to intervene in the affairs of the states. He also
canvassed the need for “the private sector to put pressure on state and local
governments to do the right thing”- whatever that ‘right thing’ means.
President
Buhari’s directive is an excellent pointer in the right direction except that
it seems not to have been directed at any specific individual, group(s) or
organisation(s). The directive is to the whole universe with the attendant
result that no one is targeted to be held responsible and accountable. And that
is where the failure of the directive may begin from. Even, the minister was
unable to pin responsibility on his ministry, ministry of finance, Debt
Management Office, Central Bank of Nigeria (CBN), Development Finance Institutions
(DFIs) or Deposit Money Banks (DMBs). Furthermore, in giving the directive, it
is not clear whether Mr. President was anticipating a reversal of deregulation
and liberalisation of the financial markets, that is, a return to direct
control or simply an official intervention in interest rate management.
Nevertheless, the paramount question is, has the All Progressives Congress,
APC-led government not yet tried to find out why lending rates in the country
are in double digit? If it has, is the President’s directive the primary
feasible solution to the problem?
It
should be apparent that with deregulation and liberalisation of the financial
markets, the days of official policy fiats have long been confined to history.
The markets, as presently operated in the country, are supposed to be ruled by
operative market forces. That is what is expected to happen except there is
some meddling by government.
Consequently,
if the government desires single digit lending rates for the development of
agriculture and industry, it can intervene by raising substantial funds and
disburse same at preferred single digit rates. In truth, the government has
been intervening in these directions through the various funding provisions and
schemes by the CBN alone or in collaboration with other institutions,
establishing and funding Bank of Agriculture (BOA) and Bank of Industry (BOI),
among others. Even, government’s recent pronouncements indicated that it plans
to set up and fund a new agriculture bank.
CBN
for instance, has over the years, put in place huge amounts of money running
into hundreds of billions of Naira, at single digit interest rate, to support
agriculture and industry. Such funds and schemes include: N200 billion
Commercial Agriculture Credit Scheme (CACS); N300 billion Power and Airline
Intervention Fund (PAIF), N213 billion Nigeria Electricity Market Stabilisation
Facility (NEMSF); N220 billion Micro, Small and Medium Enterprises Development
Fund (MSMEDF); N200 billion Small and Medium Enterprises Credit Guarantee
Scheme (SMECGS); N300 billion Real Sector Support Fund (RSSF); Agriculture
Credit Support Scheme (ACSS); and The Nigeria Incentive-based Risk Sharing
System for Agricultural Lending (NIRSAL). In addition to these, the CBN in
collaboration with banks has set up a fund for agriculture and non-oil exports
which businesses can access either as equity (interest-free) or loan (at single
digit interest rate). The fund is a contribution of 5% annual profit after tax
of banks who are members of the Bankers Committee.
Considered
against the foregoing and with the billions of cheap intervention funds made
available by the CBN, albeit, the government, fund availability appears not to
be the problem. But given the size of the country’s economy, much is still needed
for optimum performance. The question, however, is whether the funds are being
easily accessed by the needy target organisations, and if they are, to what
extent. Further, are they making the desired impacts?
According
to CBN reports, most of these funds have never been fully disbursed. Some
observations suggest that most farmers and industrialists find it difficult to
access the funds as a result of the conditions. This is particularly so because
the funds are operated through banks who are made to be primarily responsible
for the repayment of the facilities. Consequently, the banks set some
safe-guards that make access difficult for intending borrowers. The fact that
most of the funds are not fully disbursed tends to support the fact that there
are obstacles, hence the need for thorough review in order to identify those
obstacles to accessibility and their solutions.
Since
the President’s directive is for funds to be sourced and availed at single
digit interest rate, perhaps government wants to borrow (notwithstanding its
already huge outstanding debts) or make budgetary allocations for the purpose.
These could be used to enhance the funding of BOA, BOI and similar development
finance institutions. Government may also wish to float some long-tenured bonds
(whether the market will accept the coupon rate will be another matter given
on-going Treasury Bills rates and Monetary Policy Rates). Aside from the
foregoing highlights, where else will the country be focusing in raising the
desired cheap funds in substantial volumes? These are some of the issues the
government should give serious consideration.
The
actual and sustainable solution to the problem of high interest rate is
managing the economy to be productively functional. With regard to solving
agriculture problems, in particular, Nigeria needs to return to the tested
models that had worked in this country. Marketing Boards should be
re-introduced for quality standards and price stability; Agric- Extension
Officers should be re-introduced and empowered. Large Agro-industrial Parks
should be created and funded across the country; functional Agric-insurance is
needed; all forms of abuses/short-cuts must be avoided and of course, a lot of
cross-country awareness and sensitisation programmes are compulsory. Finally,
all stakeholders – public and private – need to understand and play their parts
sincerely and transparently. (Guardian)
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you heard this? Many Nigerian exporters have been defrauded of huge amount of
money in the process of exporting commodities to foreign countries. Do you know
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