AGRICULTURAL FINANCE POLICIES IN NIGERIA

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					        AGRICULTURAL FINANCE
          POLICIES IN NIGERIA
                    BEING PAPER PRESENTED
                            AT THE
         3RD AFRACA AGRIBANKS FORUM:
        “AFRICA VALUE CHAIN FINANCING”
                             HELD IN
                          NAIROBI, KENYA

                          BETWEEN
                      OCTOBER 16-19, 2007

Central Bank of Nigeria
                          1.0         INTRODUCTION
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                            Agriculture is the mainstay of Nigeria’s majority
                            population.
                            It was the major foreign exchange earner before
                            the advent of oil in 1970s. It could still be in that
                            position if adequate attention in terms of policies,
                            finance and provision of rural infrastructure is
                            addressed.
                          INTRODUCTION CONT’D

                          Agriculture’s specific role in Nigeria’s economy include:
                           Provision of adequate food for increasing population;
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               
                          Supply of adequate raw materials to a growing industrial
                           sector;
                          Major source of employment;
                          Generation of substantial foreign exchange earnings, and
                          Provision of a market for the products of the industrial
                           sector.
                          INTRODUCTION CONT’D
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                              One of the major problems of Nigeria’s
                               agriculture is inadequate funding by:
                                 a) Government budget;

                                 b) Private sector

                              About 65% of Nigeria’s economically active
                              population lack access to formal financial
                              services, hence various efforts by government
                              at all levels to address the issue.
               2.0        RATIONALE FOR GOVERNMENT
                          AGRICULTURAL FINANCE POLICIES
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                      2.1 Developmental Goals
                             Food security;
                             Poverty reduction;
                             Employment generation;
                             Reduction in rural to urban migration;
                             Less Dependency on importation of food items;
                             Increase in foreign exhance earnings
                          2.2 Objective of Agricultural
                              Financing Policies in Nigeria
                              To establish an effective system of
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                          
                              sustainable agricultural financing schemes,
                              programmes and institutions – that could
                              provide micro and macro credit facilities for
                              the micro, small, medium and large scale
                              producers, processors and marketers.
                            3.0 PLETHORA OF GOVERNMENT’S POLICY
                                INITIATIVES ON THE PROVISION OF
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                                AGRICULTURALFINANCE SERVICES
                          3.1   The Policy initiatives include Schemes,
                                Programmes and Institutions
                                1970 – 1996 Sectoral allocation of credits
                                1972 to date Nigerian Agricultural Co-
                                                operative and Rural
                                                Development Bank Ltd.
                                                (formerly Nigerian
                                                Agricultural Co-operative
                                                Bank)
                                1977 to date Agricultural Credit
                                              Guarantee Scheme
                          Policy Initiatives cont’d.
                          1977 – 1991     Rural Banking Programme
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                          1977 – 1996     Lending as a percentage of
                                         savings mobilised in rural
                                         areas to rural dwellers
                          1980 – 1987    Concessionary interest rate
                          1990 – 2002    Peoples Bank of Nigria (PBN)
                          1990 to date   Community Banks
                                         (CBs)/Microfinance Banks
                                         (MFBs)
                          1996 to date   Nigerian Agricultural Insurance
                                         Corporation
                          Policy Initiatives cont’d.
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                             1997 – 2001 Family Economic Advancement
                              Programme (FEAP)
                             1999 to date National Poverty Eradication
                              Programme (NAPEP)
                             2001 to date Small and Medium Enterprises
                              Equity Investment Scheme (SMEEIS)
                             2002 to date Refinancing and Rediscounting
                              Facility (RRF)
                             2005 to date Micro Finance Policy
                             2006 to date Agricultural Credit Support Scheme
                              (ACSS)
                          3.2 Reasons For The Failure of
                              Past Initiatives
                             Lack of adequate skills to deliver services
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                              effectively;
                             Unwillingness of conventional banks to support
                              micro enterprises;
                             Paucity of loanable funds;
                             Absence of support institutions in the sector –
                              legal, infrastructure, training, etc.
                             Incompetent management, poor corporate
                              controls, poor credit administration and asset
                              quality;
                             Low management capacity of clients.
                               4.0   CHALLENGES OF AGRICULTURAL
                                       FINANCING IN NIGERIA
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                          o   Most schemes, programmes and institutions
                              are not adequately funded for effective
                              performance;
                          o   The schemes, programmes and institutions do
                              not fund projects with long gestation period,
                              processing, warehousing and marketing;
                          o   Private financial institutions are still skeptical
                              about government agricultural programmes due
                              to cumbersome processing procedures and
                              high transaction cost;
                          o   Undue political influence on lending
                              procedures;
                          o   Inadequate infrastructure.
                          o   Weak legal system.
                          5.0 THE WAY FORWARD
                             Adequate budgetary provisions/prompt payment of
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                              government’s proportion of shared capital;
                             Making NACRDB a wholesale agricultural financing
                              institution;
                             Establishment of Microfinance Development Fund;
                             Review of existing institutional, schemes and programme
                              policies to enable them support value addition to farm gate
                              output i.e. processing, warehousing and marketing;
                             Drafting of financing policies that are targetted at some
                              agricultural output – aimed at improved raw material for
                              industry, reduction of import, earning of foreign exchange;
                              where the country has comparative advantage.
                          6.0 Conclusion
                              Having discussed the various policies put
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                          o
                              forward by Government to enhance
                              agricultural financing, there is need to
                              build synergy among the various credit
                              delivery institutions (both public and
                              private) for effective credit delivery to the
                              agricultural sector.
                      Thank You



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