Agriculture as Sustainable Economic Alternative

Obinna Chima highlights the benefits of agricultural financing to the economy

Unarguably, the Nigerian agricultural sector has gone through a chequered history. The uninspiring performance of the sector in terms of its contribution to the country’s revenue has also been a source of concern to successive governments. This had led to the creation of various initiatives aimed at taking the agriculture sector out of the doldrums.
Unfortunately, despite various policies that were created in the past, the sector’s contribution has remained insignificant.

But with Nigeria’s dwindling revenue profile, especially with the reported wide scale crude oil theft as well as the threats to global food security, more attention is being paid to agriculture. Nigeria, just like most countries and institutions have continued to push for large-scale agricultural transformation as part of efforts to achieve increased growth and reduced rural poverty.

Based on the fact that the country is blessed with favourable climatic conditions, vast arable land and fertile soils, it has never been in doubt, the significant role agriculture should play in the nation’s quest to achieve sustainable development.
That is why the Bankers’ Committee has continued to drive initiatives that would boost agricultural production in the country.

First City Monument Bank (FCMB), as one of the leading financial services providers appears to have realised the opportunities in the agric sector. A major component of the bank’s sustainability principle is on agriculture and empowering farmers with a view to reducing the level of poverty among them as part of its financial intermediation role for national development. This can be buttressed by the fact that the bank’s intervention has resulted in better access to financial resources by deserving individuals, organisations and companies.  It has also led to improved processes, better output and profitability. Much more, it has enhanced confidence in the ability of the financial services sector to drive economic growth.

Support for Farmers
FCMB’s intervention in the agri-business sector is making far-reaching impact on the crucial sector of the economy, as attested to by the Chairman of Tractor Owners and Hiring Facilities Association of Nigeria (TOHFAN), Alhaji Danladi Garba recently. The bank provided funding worth N300 million to TOHFAN for the acquisition of tractors that were distributed to farmers in Kaduna state.

The bank also collaborated with Doreo Partners to launch a support programme for farmers, known as Babban Gona (or ‘great farm’). This is an agricultural franchise model, where farmers are trained and offered specially packaged loans to carry out their farming activities. Fully conscious of the important role of key stakeholders in the agri-business chain, the bank is connecting to farmers in the Gimba, Soba and Maigana communities.

The franchise is comprised of about 3,000 farmers, developed by Doreo Partners an impact investing firm with a proven track record of exclusively investing in profitable, high growth, early stage businesses that improve the livelihood of Nigerian smallholder farmers. The financial institution’s selection of a region with a high degree of financial exclusion was predicated on bringing into the fold, the unbanked population in its pursuit of the CBN’s drive of financial inclusion for all.

One of the strategies is the provision of agnostic digital services intervention. The bank recently in addition, designed a series of training for this population of small-holder farmers for all-inclusive agro-finance empowerment with a primary objective of eliminating poverty, encouraging agriculture as an alternative source of economic recovery for Nigeria. Enrolling 68 Babban Gona farmers in Gimba, Richifa and Ikara in Soba local government area, trainings have been given to beneficiaries to expand their knowledge of financial literacy in their business, with 14 additional Babban Gona farmers and 62 field extension officers getting requisite attention.

More like a testimony, a Babban Gona member, Ibrahim Mustapha, featuring in a recent Reuters video titled: “Nigeria: Seeks Farming Revival to Break Oil Curse,” told the story of how he went from 20-23 bags of maize at harvest to 48 bags and what the increase in yield has done for him and his family.

IFC Collaboration
In order to adequately prepare itself for this role it is undertaking presently, the bank had collaborated with the International Financial Corporation (IFC). The partnership was targeted at an investment package for the agri-business and education sub sectors of the economy. By the agreement, the IFC was to route more lending to private businesses involved in the agribusiness sector, which, as already stated, is a key driver of the country’s economic growth.

The bank had reasoned that continued credit availability for agricultural-based businesses would help maintain the sector’s growth momentum. The package was a long-term senior loan of $50 million and a convertible loan of $20 million aimed at supporting the bank’s growth strategy and helping it increase financing of small and medium enterprises.

The Group Managing Director/Chief Executive, FCMB, Mr. Ladi Balogun, described IFC’s investment as a stamp of approval on the bank’s strategy and commitment to good corporate governance and risk management.
He said: “This partnership with IFC would help First City Monument Bank achieve our strategic growth objectives.”

In the same vein, the Divisional Head, Agricultural Business, FCMB, Mr. Kudzai Gumunyu, while speaking on the bank’s interest in agriculture financing, described agriculture as the first occupation for man from creation, saying it will remain the most vital until the end of days.

He stated: “The fact that agriculture has the potential to stimulate economic growth is no longer news. It is logical to expect that agricultural financing will become an important instrument of economic policy for Nigeria, in her effort to stimulate development in all directions.

“Beyond this is the fact that agriculture is the biggest employer in Nigeria and other developing economies even as it has been demonstrated that economies that are self-sustaining in agriculture have relatively lower inflation rates.

“Nigeria is blessed with fertile soils, good rainfall, reasonably priced labour and a huge demand for agricultural produce owing to a large population base. It would therefore, be unforgivable if such a blessed country does not have bragging rights as a major exporter of agricultural commodities in the world.”

Gumunyu revealed that the bank intends to continue to partner with players in the agric sector with a view to taking advantage of the many opportunities it presents and ultimately contribute positively towards economic growth, employment creation, import substitution and economic sustainability. With regards to the fears by farmers that the turn-around time and conditions attached to some credit facilities could be prohibitive, he allayed the fears, saying it is a positive experience with the FCMB facility.

“Farmers have a point in complaining about slow approval processes as their businesses are season-bound and need timely access to finance. Most complaints stem from some financial institutions not understanding the farmer’s businesses,” he said.

But he added that the bank has put in place systems and processes to improve its credit turnaround time, including the recruitment of Agriculture Credit Analysts who are dedicated to working on agric transactions and a Structured Trade and Commodity Finance team which to date, has assisted in several structured commodity finance deals that ensured prompt service delivery to customers. ‘’Every loan request is treated on a case by case basis. Requests for intervention funds from the CBN are dealt with using the attendant guidelines governing such schemes,” he explained.

He said the bank’s interventions cut across various enterprises and activities in the agriculture value chain. These include poultry, fisheries, oil palm production and processing, cassava, maize production and commodities trading, among others. The bank is also active in other value chain sections such as agrochemicals, fertilisers, seed and mechanisation, and has been deploying unique solutions for inclusive banking as well as asset financing.