In­se­cu­rity of in­vest­ment scares Nige­rian lenders away from lo­cal farm­ers

Business a.m. - - COMMODITIES & AGRICULTURE -

THE LACK OF SE CURITY on in­vest­ment into agri­cul­tural ac­tiv­i­ties in Nige­ria has been iden­ti­fied as one of the top is­sues that scare the out­flow of fi­nan­cial in­sti­tu­tion’s lend­ing to teem­ing Nige­rian farm­ers.

Fi­nan­cial in­sti­tu­tions will only de­ploy funds to eco­nomic sec­tors that prove to be prof­itable and po­si­tion as a safe out­let for credit, Emeka Emuwa, the man­ag­ing Di­rec­tor and chief ex­ec­u­tive of­fi­cer (CEO), Union Bank Plc. said at the 2018 Agri­cul­ture and Agro-Al­lied Group sym­po­sium con­vened by the La­gos Cham­ber of Com­merce and In­dus­try (LCCI).

Emuwa un­der­scored the need to es­tab­lish a point of bal­ance be­tween fi­nanc­ing needs of farm­ers, the pe­cu­liar­i­ties of farm­ing ac­tiv­i­ties and the profit in­ter­est of lenders in a pre­sen­ta­tion ti­tled “Bridg­ing the Fund­ing Gap and De-risk­ing Agri­cul­tural Fi­nance”.

He ad­vised that farm­ers struc­ture their farm­ing pro­cesses to fit in as bank­able projects with lesser as­so­ci­a­tion to risk.

Also speak­ing in the same vein, Fo­lashade Joseph, man­ag­ing di­rec­tor, Nige­rian Agri­cul­tural In­sur­ance Co­po­ra­tion (NAIC), said in­vest­ment in agri­cul­ture is con­sid­ered to be gen­er­ally vul­ner­a­ble to wide range of risks and un­cer­tain­ties sur­round­ing in­put and prices, agri­cul­tural yield, post-har­vest losses, prod­uct price fluc­tu­a­tions and whims of na­ture such as flood, drought and out­break of pests and dis­eases.

The ef­fects of these per­ils leave damp­en­ing ef­fects on the na­tional agri­cul­tural out­put, with sev­eral house­holds suf­fer­ing var­i­ous de­grees of losses, she said.

But to boost agri­cul­tural pro­duc­tion con­sid­er­ably and sub­due these risks, Joseph said the cor­po­ra­tion has con­tin­ued to de­vise mech­a­nism that bears these risks to an ac­cept­able level that farm­ers can re­turn to pro­duc­tion after suf­fer­ing such losses.

She said: “Var­i­ous risk man­age­ment meth­ods in­clud­ing risk aver­sion, in­for­mal riskshar­ing net­works, sav­ings and credit mar­kets can pro­vide pro­tec­tion against smaller shocks, but these be­come in­ef­fec­tive when these risks oc­cur in higher de­grees of fre­quency and sever­ity. This is where agri­cul­tural in­sur­ance comes in”.

lnsurance is a risk trans­fer mech­a­nism that pools re­sources from many to re­deem the loss of few less for­tu­nate mem­bers of the con­tribut­ing pool that suf­fered losses due to in­sured risks and as such, Joseph noted that the govern­ment has been work­ing at its com­mit­ment to pro­vi­sion of fi­nan­cial sup­port in the form of 50 per­cent pre­mium sub­si­dies for most classes of agri­cul­tural in­sur­ance.

Ac­cord­ing to her, govern­ment ac­cepts the li­a­bil­ity for cat­a­strophic losses in­sured by NAIC in ex­cess of 200 per­cent of the pre­mium in­come.

“One of the ma­jor pol­icy thrusts of this govern­ment is eco­nomic di­ver­si­fi­ca­tion and the pivot of that di­ver­si­fi­ca­tion drive is the agri­cul­tural sec­tor. To sta­bi­lize in­vest­ments in the sec­tor to­wards at­tain­ing the di­ver­si­fi­ca­tion goals of govern­ment, it must rest on strong pil­lars of sup­port of which agri­cul­tural in­sur­ance is one. The Nige­rian Agri­cul­tural In­sur­ance Cor­po­ra­tion (NAIC) has been play­ing var­i­ous sup­port­ing roles in the de­vel­op­ment of the agri­cul­tural sec­tor in the na­tion,” she said.

But Ba­batunde Ruwase, LCCI pres­i­dent, com­mend­ing some ef­forts im­ple­mented through the Cen­tral Bank of Nige­ria, Nige­ria In­cen­tive-Based Risk Shar­ing Sys­tem for Agri­cul­tural Lend­ing (NIRSAL), Bank of Agri­cul­ture (BoA) and Bank of In­dus­try (BoI), called for in­creased sup­port across the value chain in agri-busi­ness and agro-pro­cess­ing.

Given the growth in head­line in­fla­tion to 11.28 per­cent in Septem­ber2018 from 11.23 per­cent in Au­gust, and hike in food in­fla­tion to 13.31 per­cent in Septem­ber from 13.16 per­cent in Au­gust, govern­ment needs to re­tain fo­cus on fos­ter­ing the en­abling busi­ness en­vi­ron­ment for pri­vate sec­tor busi­nesses to thrive, he said.

“The de­vel­op­ment of a good rail net­work to fa­cil­i­tate the move­ment of agri­cul­tural prod­ucts to mar­kets can­not be over em­pha­sized. Pol­icy con­sis­tency is also re­quired to at­tract pri­vate sec­tor in­vest­ments into the agri­cul­tural sec­tor. Our re­search in­sti­tutes should be em­pow­ered to lead sur­veys and re­search projects in deal­ing with early warn­ing signs, pest con­trol and high yield­ing seedlings. The ma­jor driv­ers of the ris­ing price in­cludes rise in price of food items like yams, pota­toes, eggs, bread, tea, soft drinks, fish, meat and cook­ing oils. These prod­ucts can be pro­duced ad­e­quately in Nige­ria if we get the fi­nanc­ing and poli­cies right,” Ruwase ex­plained.

On the path of Tunji Falade, chair­man of the LCCI AgroAl­lied Group, the need for mech­a­niza­tion, ir­ri­ga­tion in agri­cul­tural ac­tiv­i­ties would only be solved through mas­sive in­vest­ment in agri­cul­ture. Hence, more ef­forts must be chan­neled to­wards en­abling ac­cess to fi­nanc­ing if Nige­ria is to at­tain self-suf­fi­ciency in food pro­duc­tion.

He said: “in ad­vanced coun­tries like the US, they have in­vested heav­ily in agri­cul­ture to the ex­tent that they have 30,000 farms with each av­er­age of about 1,000. There needs to be col­lab­o­ra­tion. We need to learn from peo­ple who have done this suc­cess­fully. Fund­ing is an in­te­gral part of agri­cul­ture just like train­ing. Peo­ple need to learn more about how to han­dle agri­cul­ture”.

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