AGRO-ECONOMIC, CBN POLICIES DRIVING NIGERIA’S ECONOMIC RESILIENCE
Some agro-industrial stakeholders have attributed the resilience of Nigeria’s economy, which is recently rated as the largest in Africa, to a few policies implemented in the agro-economic sectors despite the general uncoordinated economic policies and activities of the Muhammadu Buhari-led administration.
Notwithstanding extremely poor electricity supply, inefficient transportation system and expensive factors of production, among other barriers, the available data for 2019 stated that Nigeria’s Gross Domestic Product (GDP) grew the most since 2016 Recession. The economy advanced 2.55 per cent year-on-year in the fourth quarter of 2019 compared to 2.28 per cent rise in the previous period, making it the strongest expansion since the third quarter of 2015.
Also in 2019, the non-oil sector increased 2.26 per cent, quickening from a downwardly revised 1.84 per cent advance in the prior period, boosted by telecommunications & information services (10.26 per cent vs 12.16 per cent in Q3), crop production (2.52 per cent vs 2.41 per cent), financial services (22.33 per cent vs 0.61 per cent and manufacturing (1.24 per cent vs 1.10 per cent). In 2019, the economy expanded 2.27 per cent, the largest since 2015, and compared to 1.98 per cent in 2018.
Some of the polices that stakeholders pinpointed as helping the economy to withstand challenges include the import substitution/restriction, lower interest rates, forex restriction, levies on agricultural produce like palm oil, ban on some products, closure of land borders and other deliberate policies to develop the agro-industrial sectors.
via banned/restricted imports
The list of banned imported agro-products include live or dead birds, including frozen poultry (H.S. Code 0105.1100); pork, beef (H.S. Codes 0201.10); bird eggs (H.S. Code 0407.11, excluding hatching grand-parent breeder eggs); refined vegetable oil (1507.10-1516.20.90); cocoa butter, powder and cakes (H.S. Codes 1802.00) and cane or beet sugar and chemically pure sucrose, in solid form containing added flavouring or colouring matter (H. S. Code 1701.91.10).
Crude vegetable oil is however not banned from importation, but an additional levy of 25 was added to 10 per cent tariff.
From 2015 to 2019, the CBN increased items removed from foreign exchange window from 36 to 50, insisting that whatever the country could produce should not be imported into the country.
On the restriction/ban policy, the CBN governor, Mr Godwin Emefiele, had said in 2019 that, “The CBN will get even more aggressive to see to it that any or all food items that can be produced in Nigeria and consumed in Nigeria and are currently being imported into Nigeria; that we would go through our records and once we convince ourselves that these products can be produced in Nigeria, we will place them on the FX restriction list.
“It means that you cannot source foreign exchange from Nigeria foreign exchange market to import those items into Nigeria. If you have free dollars, you can bring it in but you will not be able to even make payments for those goods with dollars from the Nigerian foreign exchange market. This is because we think that the initiatives that CBN has put in place in the past to cut imports and diversify the structure of the Nigerian economy is yielding results and we will continue to be that aggressive.”
A crude palm oil producer and refiner, Mr Ajibola Adebutu, had explained to The Guardian that policies introduced by the CBN had helped to stabilize demand and helps to stimulate backward integration investments to close the gap between production and demand of the palm products.
interest rates/Anchor Borrowers’ scheme
As the lender of last resort, the CBN introduced a one-digit interest rate to the real sectors, including agriculture. Though many farmers’ associations have lamented the inability to access the loan, a good number of agro-industrialists have attested to the workability of the interested regime, with a moratorium of about two years, and the impacts such facilities have on production, processing and trading capacity of value chain players.
However, farmers lament the inability of the Federal Government to recapitalise the Bank of Agriculture (BOA) which could serve broader interests in agricultural financing at lower interest rate rates to different subsectors of agriculture.
If the Muhammadu Buhari-led administration has got some things right, one of the things is the Anchor Borrowers’ scheme. The scheme, through the CBN, simplifies and lowers the cost of getting financial supports and market linkage to off-takers.
Through the scheme, the use of collateral security is eliminated for farmers holding less than five hectares, inputs are footed by the end-users called off-takers, and the farmer gets his or her profit after the cost of inputs is deducted at a pre-agreed buying price for the commodity. The is used for rice, maize, and other agricultural products where off-takers are readily available.
The Central Bank of Nigeria (CBN) initiated Anchor Borrowers’ Programme (ABP) during the dry season farming season in Birnin-Kebbi, Kebbi State, on Tuesday, November 17, 2015, when President Buhari frowned on the huge importation of food items that could be produced locally, stressing that the N1 trillion importation bill was not sustainable.
The CBN, Mr Godwin Emefiele, said the bank got worried about the high foreign exchange spent by Nigeria importing food items.
The allocation of foreign exchange to the importation of items such as rice, wheat, milk and fish, among others, he had lamented, had contributed to the depletion of the nation’s foreign reserves, especially in the face of low oil revenue resulting from falling oil prices.
He said the ABP aims at creating economic linkages between over 600,000 smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilisation of integrated mills.
Emefiele said the CBN had set aside N40 billion from the N220 billion Micro, Small and Medium Enterprises Development Fund for farmers at a single-digit interest rate of nine per cent.
However, some farmers have alleged exclusion or inability of the administrators of the agro-economic scheme to extend the empowerment to them. For instance, a former National President of the Catfish and Allied Fish Farmers Association of Nigeria (CAFFAN), Mr Rotimi Oloye, disclosed to The Guardian that the association had not able to incorporate commercial fish farmers into the scheme on the ground that there are no off-takers.
The fish farmers called on the Federal Government, through the CBN and other agencies, to find ways of including them in the scheme to ensure fish value chain development, sector growth and maximum socio-economic advantages.
Meanwhile, Professor Emmanuel Ajani, Dean, Faculty of Renewable Natural Resources, University of Ibadan, commended the scheme and blamed CAFFAN over failure to develop the market. He said CAFFAN should look for off-takers because the government has stated the conditions for getting incorporated into the scheme, one of which is the involvement of the end-users as the off-takers.
“Fish producers should come together. I will not blame the government. The fish farmers should develop the market because fish farming is private sector-driven. The farmers have an association. Let them look inward and create the market. The Fishery Society of Nigeria should come in too to create a farmer-user linkage.
“The government too should interact with real farmers and professionals in agriculture, not politicians who have no farm but parade themselves as farmers. For example, The Standards Organisation of Nigeria (SON) tries to develop standards for fish feeds but they are not interacting with real people. They are interacting with ‘proposal writers’. The programme will fail,” he warned.
The President of the All Farmers Association of Nigeria (AFAN), Mr Ibrahim Kabir, said though the Anchor Borrowers’ scheme been helping some of the farmers, loans should be real farmers. AFAN, he added, should be part of the implementation of the scheme to reach real farmers for more impact.
He advised that the CBN should recapitalise the Bank of Agriculture by paying its equity and letting farmers buy shares so that it could become a farmers’ bank providing revolving and sustainable financing for farm operations.
On border closure, the AFAN boss said the policy had helped Nigeria’s farmers to increase productivity and get more value for their work and investments. This, he argued, had increased the resilience of the Nigerian economy.
However, Kabir said a perpetual closure of the land borders would also affect the Nigerian farmers and processors as they would be unable to export products to other neighbouring countries. He called on the custom service authorities in Nigeria and other neighbouring countries to live up to expectations by manning the borders effectively.
A former Minister of Trade, Commerce and Investment, Mr Charles Ugwuh, said despite the commendable interventions through the policies of the CBN, the economy is badly managed because Nigeria lacks a formidable economic management team now.
The major issue, he also identified, is a gap between demand and supply in virtually all products. And now that international trade and movements are restricted because of the pandemic coronavirus, it becomes more difficult for the country despite the resilience the economy has built, he said.