CBN and Nigeria’s Quest for Food Security

Obinna Chima highlights efforts by the Central Bank of Nigeria to support the country’s quest for self-sufficient in food production

The global food security challenge is for the world to be able to feed nine billion people by 2050.

By then, it is estimated that the demand for food will be 60 per cent greater than it is today.

Owing to this, the United Nations had set zero hunger as the second of its 17 Sustainable Development Goals (SDGs) for the year 2030.

Indeed, everybody needs food. But the complexity of delivering sufficient food to a national population and to the world’s population shows why food security is such a priority for all countries, whether developing or developed.

For Nigeria, a country of over 200 million people, and projected to be about 450 million in a few decades, the Covid-19 pandemic has shown that dangers lie ahead if the country does not begin to depend largely on what it produces locally.

Indeed, threat to food security in the country is also being worsened by numerous factors, including communal clashes, activities of bandits, climate change, poor funding, among others.

To address the situation, the Central Bank of Nigeria (CBN) has increased its intervention in the agriculture sector, especially through its Anchor Borrowers’ Programme (ABP).

The ABP which was launched by President Muhammadu Buhari in 2015, was designed to assist small-scale farmers to increase the production and supply of feedstock to agro-processors with the aim of creating an ecosystem to link out-growers (smallholders) to local processors.

The programme has increased banks’ financing to the agricultural sector, enhanced capacity utilisation of agricultural firms involved in the production of identified commodities as well as the productivity and incomes of farmers. The anchor borrowers’ programme has also assisted rural subsistent farmers to reach commercial production levels.

The thrust of the ABP is the provision of inputs in kind and cash (for farm labour) to smallholder farmers with a view to boosting the production of rice, maize, poultry, sorghum, cassava, tomatoes, cotton, palm oil, Soybean, among others.

The idea is to stabilise input supply to agro-processors and address the country’s negative balance of payments on food. It is a loan to farmers without collateral and the benefitting farmers are given farm input and cash to cultivate their farms, including the experiment on rice.

According to the structure of the ABP, a farmer who wants to repay his loan can either do so with cash or give the central bank his /her produce of same value, after which officials of CBN’s Development Finance Department would sell and recover the loan.

CBN’s Focus

The CBN Governor, Mr. Godwin Emefiele, has said the bank would sustain its intervention in the agriculture sector through its development finance mandate, in order to help catalyse growth in critical sectors of the economy such as agriculture and the manufacturing sectors.

As of January 2021, the CBN had disbursed N554.61 billion to 2,849,490 farmers to boost food security under the ABP since 2015. According to Emefiele, more than N300 billion had been disbursed to companies operating in the southern part of Nigeria, just as he appealed to farmers to pay their loans in order to sustain the programme.

The CBN governor explained that under the Anchor Borrowers’ Programme, every farmer with a good repayment record would be eligible to get a solar home system that will provide electricity to power their essential home appliances. He expressed hope that the incentive would improve the standard of living of farmers in Nigeria, motivate prompt loan repayment and ultimately enhance the sustainability of the programme.

“Loan repayment is the hallmark of every credit cycle and the sustainability of the programme is hinged on farmers’ ability and willingness to repay their loans, and we are constantly engaging with them to enhance their trust in the system,” he said.

Emefiele explained further that over 3.1 million farmers have been financed for the cultivation of crops across twenty-one agricultural commodities captured under the Anchor Borrowers’ Programme (ABP) since inception.

“A total of 3,107,890 farmers had been financed for the cultivation of 3,801,397 hectares across 21 commodities through 23 Participating Financial Institutions in the 36 States of the Federation and FCT, from the inception of the programme till date,” he said.

Beyond the ABP, intervention schemes by the bank continued to focus on enhanced credit delivery to critical sectors, in a bid to enhance productivity and stimulate the real sector of the economy. Similarly, in a bid to further strengthen its intervention into the agricultural sector, the CBN, amended the Agricultural Credit Guarantee Scheme Fund (ACGSF). The amendment allowed for increase in the share capital of the Fund from N3 billion to N50 billion, as well as increase the maximum amount granted to both collateralised and non-collateralised loans under the scheme.

The amendment also allowed the scheme to finance all aspects of the agricultural value chain.

Similarly, to further increase agricultural productivity and ensure sustained income for farmers, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), developed a Hybrid Multi-Peril Crop Indemnity-Index Insurance (HM-II). The new product, which was an outcome of NIRSAL’s long-term commitment to the development of innovative agricultural insurance products and expanding coverage for agricultural lending across the entire agricultural value chain, was designed to protect farmers from losses during planting season caused by bad weather, pest outbreak, disease outbreak, fire outbreak and permanent disability or death of farmers.

The improved credit delivery and intervention programmes are expected to stimulate output, thereby easing inflationary pressure, particularly, food inflation. The intervention effort by the bank is crucial given the prevailing macro-economic development and is capable of further sustaining the goal of the bank towards ensuring price stability.

Also, Emefiele recently appealed recently to bandits and others involved in unlawful activities to drop their arms and embrace the central bank’s ABP.

According to Emefiele, his appeal to criminals to embrace family is because there is a linkage between security and economic growth.

“If you want an economy to grow, the level of insecurity must be low because if there is a high level of insecurity like what we see today, the economy will suffer. I, therefore, would like to appeal to our brothers, who decide that they want to live in bushes and forests, that they should please, begin to retreat, drop their arms and come and embrace the anchor borrowers’ programme. If they do so, it will help them,” he appealed.

Also recently, the CBN Governor called on governors to make their states economically viable in order to reduce their dependence on allocations from the Federation Account.

Emefiele, at the inauguration of the Rivers State Cassava Processing Plant in Oyigbo Local Government Area of the state, lamented that notwithstanding the country’s position as the largest producer of cassava in the world, it spends over $580 million to import its by-products, adding that the country can no longer afford to support continued importation of items that can be produced locally.

Emefiele said the CBN had set aside N1.5 billion for land clearing and urged the states, particularly those in the southern region, to take advantage of the facility to open up their respective economies.

He also advised the governors to woo private investors to help resuscitate their economies to generate employment through agriculture, adding that this will help the states boost internally generated revenue.

He explained: “We seize this opportunity to encourage our states, particularly the southern states, that there are facilities available for you to draw to involve in land clearing.
“At least, N1.5 billion is available for land clearing. It may seem small but it’s a seed that we can start with.

“We need to see to how we can open up our states for the good of our people and also for the economic viability of out states.

“Please, help to make your states economically viable so you can depend less on revenues from FAAC so that you can grow your economy.”

According to him, the cassava project could help drive economic growth, reduce unemployment as well as induce other wealth-creating activities in the state.

He said the guaranteed off-take would encourage participating farmers to improve their output per hectare in order to earn additional income.

He also said the project provided them with a verifiable platform to access finance from the CBN and other financial institutions through the ABP, among other benefits.

Emefiele said the current situation had made it imperative for the central bank to work towards supporting programmes to enable greater cultivation and processing of key agricultural commodities.

He said so far, the apex bank’s developmental finance initiatives had been focused on creating an enabling environment to drive both public and private sectors’ participation in the real sector with strategic deliverables around price stability, job creation, financial inclusion, import substitution and accretion to foreign reserves, among others.

He added that the bank’s interventions seek to improve access to credit for households and businesses, which will enhance productivity and create value across a wide range of economic activities.

The CBN governor explained that through programmes such as the ABP, the Commercial Agriculture Credit Scheme and the Bankers Committee Agri-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS), the apex bank has improved access to markets for farmers by facilitating greater partnership with agro-processors and manufacturing firms in the sourcing of raw materials.

“As a result, manufacturers have integrated local options in sourcing their raw materials.

Partnerships forged through contracts between farmer cooperatives and agro-processors have also helped to support improved production of agricultural commodities such as rice, cotton and maize.

“In order to address some of the challenges faced by local farmers and manufacturers, we embarked on measures to discourage smuggling and dumping of restricted items into the country, by imposing restrictions on the use of financial institutions in Nigeria by identified smugglers, as their activities undermined the growth of our local industries.

“These measures are aiding our efforts to support local cultivation in rice, cotton and fish, etc.,” he disclosed.

Emefiele believes the bank’s on-going interventions, especially in agriculture, would, “help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2 billion in 2018 to $12 billion by 2023.”

Also, the President of the Dangote Group, Alhaji Aliko Dangote, called on Nigerian youths and graduates to explore opportunities in the agricultural sector, adding that if seen as business, the high level of unemployment in the country would be addressed.

“Nigeria youths and graduates should look at agriculture in its total supply chain. There are many innovative ideas they can explore and engage in to get substantial income. From technology, IT, Logistics, marketing, distribution, inputs supply, markets research, irrigation systems supply and also quality assurance,” Dangote stated.

Also, the Minister of Agriculture and Rural Development, Alhaji Sabo Nanono, said the country must strive to grow its food despite the current security challenges facing it.

“Obviously, we cannot succumb to our security challenges, we have to eat, we have to farm whether there is security or not and that is absolutely necessary.

“The security matter is not affecting agriculture alone but the entire country, and I think in spite of all the security issues people have been raising, agriculture has been growing in this country even last year. This season’s dry farming will multiply what we have done last year,” Nanono added.