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As part of efforts to revamp and enhance the agro-processing business in Nigeria, the Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, early in his administration, came out with a policy that denied 43 items access to official foreign exchange window. The response of a section of the public to that bold step was, initially, that of consternation essentially because such informed economic radicalism was scarce in the nation’s policy formulation and implementation.
In designing the policy, Emefiele was convinced that it will encourage local production of those items and, in the process, achieve the ultimate aim of boosting local agricultural production, create jobs, save the foreign exchange hitherto wasted on food importation and give a boost to the nation’s Gross Domestic Product (GDP). Putting in place that policy framework implies that those who import those items can no longer buy foreign currency from the official window to pay their overseas suppliers. For those who were used to getting things so easily, those who can only survive by milking the public till, who are always taking undue advantage of the loopholes in the economic structure, it was a bitter pill to swallow.
It was genuinely intended to significantly grow the local economy. According to Emiefele, Nigeria does not need to keep importing things she can produce. Ever since that measure was put in place, there has been a quantum leap in the production of agricultural crops like rice, wheat, maize, millet, yam, tomato, cotton and many more.
The Central Bank of Nigeria (CBN), in line with its developmental function, established the Anchor Borrowers’ Program (ABP) which facilitated the provision of farm inputs in kind and cash (for farm labor) to small holder farmers (SHFs) to boost production of these commodities, stabilize inputs supply to agro-processors and address the country’s negative balance of payments on food. At harvest, the SHFs supply their produce to the Agro-processor (Anchor) who pays the cash equivalent to the farmer’s account.
CBN’s decision to ban the import of some products and the subsequent economic policies that followed has indeed stimulated the local economy. There is a growing sense of the need to produce what we eat, not only because it is economically reasonable but because it is possible and much more beneficial in the short to long term. Emefiele believes in the potential of Nigeria to be a leading export country rather than one dependent on others.
From the beginning of his tenue as CBN Governor, there has been a felt need on his part to shift from concentrating only on price, monetary, and financial system stability to act as a financial catalyst in specific sectors of the economy particularly agriculture, in an effort to create jobs on a large scale, improve local food production, and conserve scarce foreign reserves. The N220 billion Micro, Small and Medium Enterprises Development Fund was to finance agricultural projects at a single-digit interest rate of nine per cent. The aim was to create 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 across the agriculture value chain.
The bright ideas the CBN under Emefiele practicalised and which have returned agriculture to its pride of place on the economic discussion table include using, as instruments, the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL); Real Sector Support Facility (RSSF); The Nigeria Electricity Market Stabilization Facility (NEMSF); Entrepreneurship Development Centres (EDCs).
Others are Youth Entrepreneurship Development Programme (YEDP); Export Stimulation Facility (ESF); Agri-business/Small and Medium Enterprises Investment Scheme (AGSMEIS), Paddy Aggregation Scheme (PAS); Accelerated Agricultural Development Scheme (AADS); and the very successful Anchor Borrowers Programme (ABP) which has made an outstanding impact in terms of reducing the nation’s food import bills, boosting the income levels and financial capacity of local farmers.
All these have helped in no small measure in revamping the economy with agriculture shifting from a way of life where people practice it for sustenance to a business enterprise that is generating employment opportunities in quantum not to mention economic empowerment to the local people who now see themselves as key players in the drive to add value to primary products. Before this time, Nigeria spent a huge sum on the importation of food items that could be produced locally. At the peak of that senselessness, N1trillion was recorded as importation bill which obviously was not sustainable.
The above efforts have helped to increase the contribution of the agriculture sector to the nation’s Gross Domestic Product (GDP). According to data from the Nigeria Bureau of Statistics, NBS, agriculture sector’s contribution to GDP rose to 22.35 per cent in Q1’21, from 19.79 per cent in 20215. Most notable is the 2.2 per cent real growth recorded by the agriculture sector in 2020, when the economy as a whole contracted by 1.92 per cent.
Significant in this regard is the 3.4 per cent real growth recorded by the sector in Q4’2020, the highest growth since 2017. According to analysts, the robust growth recorded by the agriculture sector in Q4’2020, helped the economy to record its first growth in three quarters, and also eased it out of recession, following the contractions recorded in Q2’2020 and Q3’2020, which sent Nigeria into its second recession in five years.
Citing the role of the apex bank’s intervention as a factor in the growth recorded by the sector in Q4’2020, analysts at Vetiva Capital Management Limited stated that: “the agricultural sector maintained a clean sheet in 2020, supported by intervention efforts of the Federal Government and the development finance activities of the Central Bank of Nigeria powerfully pursued by the Emefiele momentum. This was despite the interruptions to farming activities and food transportation, caused by floods, lockdown measures and the security challenges experienced during the year.
Similarly, analysts at FBNQuest, gave a graphic detail of the effects of the CBN policy on agriculture. In its report, it averred that “our expectation was a slowdown in contraction to -1.95 per cent and was undone by robust growth of 3.42 per cent for agriculture, the sector’s best showing since Q4 ’17. Several times we have made the point that Nigeria’s performance would be more muted than that of most emerging markets due to the protection its large informal economy enjoys from global headwinds (such as COVID-19). The argument still holds but it could now be that the credit interventions of the CBN, state development banks and others are starting to have an impact.”
Gilbert is an Abuja based economic analyst
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