Against the backdrop of the latest report by the National Bureau that bank credit to the agricultural sector dropped by N35bn, stakeholders and experts have said that the development will greatly affect the growth of the sector in the current year.
The NBS in its analysis of the banking sector credit had stated that there was a drop of N34.45bn in the credit granted by the Deposit Money Banks to the agriculture sector from October 2016 to September 2017.
It specifically stated that the credit from banks to the sector declined from N525.9bn to N491.49bn within the period, adding that as of the end of the fourth quarter of 2016, the total credit received by the agriculture sector was 3.26 per cent of the entire banking sector credit to the economy.
The figures, however, declined by 150 basis points to 3.11 per cent as of the end of the third quarter of 2017.
Following the country’s battle with recession in 2016, bank credit to the agriculture and the manufacturing sectors rose very high as the government encouraged investment in agriculture as an alternative to oil; and banks were urged to support the economic diversification efforts by making credit available for agricultural development.
Commercial banks reportedly lent a total of N2.7tn to the manufacturing and agricultural sectors, with both accounting for N2.21tn and N525bn, respectively in the last quarter of 2016.
The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said that cutting credit to the sector would impact negatively on its growth.
He said a sector that contributed over 23 per cent to the Gross Domestic Product ought to receive greater attention so that the growth could increase and be sustainable.
He said, “The fact that credit to the agriculture sector is about three per cent does not speak well of an economy that wants to diversify. It shows that there is no alignment between credit delivery and the long-term objective of diversification.
“It is pertinent to look at the constraints to credit to the agriculture sector if we really want to boost the GDP of the sector.”
Yusuf maintained that in the age of mechanisation and the push to involve more youths in the agriculture sector, funding was necessary to achieve maximum success.
“If agriculture remains at the primordial mode of hoe and shovel, mechanisation cannot be achieved and credit is needed to drive mechanisation in agriculture,” he stated.
According to him, in the face of the ban on food importation, if agriculture is not growing locally, people will go hungry and food inflation will continue to rise.
The President, Nigerian Association of Small and Medium Enterprises Cooperative Multipurpose Society, Mr. Adams Adebayo, confirmed that commercial banks were reluctant to grant loans to farmers because they perceived the agriculture sector as a high-risk sector.
He said farmers who were unable to access the Central Bank of Nigeria’s intervention funds could not survive because of the high cost of production and farm inputs.
He said, “Some farmers who were aided through the FADAMA scheme failed because they collected their counterpart funds from the microfinance banks. The farmer spends N40,000 for ploughing an hectare of land; fertilizer is N9,500 a bag and six bags are needed for that space of land; a tonne of rice, for instance, needed for planting in that space is N120,000.
“The yield is only two tonnes; some as low as 1.5 tonnes. By the time you remove all the cost, what is left as profit for the farmer after four months of toiling is little or nothing. It is not even enough to service the loan.”
Adebayo advised the government to stop emphasising on credit and focus on subsidising inputs and farm equipment.
He said since the price of the produce was cheaper and purchasing power of consumers had dropped, the farmers were not getting anything for their labour, adding that it would be helpful if marketing boards could regulate the prices of farm produce so that farmers would not lose so much.