Mrs. Bukola Awosanya is the Group Head, Agriculture Finance, Sterling Bank Plc. She spoke with Goddy Egene on the reforms in the agricultural sector and the challenges facing the sector in the country. As a banker involved in agriculture finance, what are your views on the state of the sector in the country Agriculture is an important sector of the economy with high potential for employment generation, food security and poverty reduction. The Agricultural sector played a key role in the economic growth of the country before the discovery of oil; however, following the discovery of oil, these potentials were largely untapped. This led to the dwindling performance of the agricultural sector both domestically and in the international scene over the years. It was the main source of the country’s foreign exchange earnings at the time. Nigeria was the leading exporter of Cocoa, Groundnuts, Oil Palm and Cotton to mention a few. Before the recent rebasing of the economy, agriculture was far the largest single contributor to the country’s Gross Domestic Product(GDP). It contributed an average 40 percent to the GDP and provided 60 percent employment opportunity in the country. The major problem with the sector came after oil was discovered as various governments shifted their focus from agriculture to oil. This led to the near collapse of the sector. This was the situation with the sector until the present government through the Minister of Agriculture came up with the reforms aimed at repositioning the sector to drive Nigeria’s economy. Through the various items under the agenda, a lot has been done to bring back the lost glory of the sector. One of the main thrust of the current government is reform programme tagged The Agricultural Transformation Agenda (ATA) which to make agriculture a main driver of the economy with adequate support from the government and the private sector. The main challenge is that a lot of people see agriculture as corporate social responsibility. However, l must confess that it is now a business, a big business for that matter which can drive itself and contribute significantly to the economic growth of the country. In addition, value chain approach has been introduced into the business. With this approach, a lot of risks associated with the business have been mitigated. Banks are now willing and more comfortable lending to the sector. Hitherto, most banks were wary of lending to the sector because of the perceived high risk associated with the sector. For instance, most banks now have designated agriculture desk with people with a rich background in agriculture appointed to man the desks and give proper advice on how to deal with the sector.
It is indeed a right step in the right direction. The ATA is to make Nigeria an agriculturally industrialised economy. It is changing the perception of agriculture as a development project and has attracted unprecedented foreign direct investment to the sector. The programme is laudable and commendable. One major item in the agenda that is key is the issue of deregulation of fertilizer. The introduction of the Growth Enhancement Scheme ensures that fertilizer is sold directly to farmers through the Agro dealers. This is highly commendable and has eliminated governments’ involvement in the direct sales of fertilizer. It has also eliminated cartels in fertilizer distribution.
Fertilizer previously got to the farmers at exorbitant prices due to the activities of middlemen. We are very happy that the honorable minister dealt with this problem swiftly. Fertilizer is now sold to farmers at market price less the fertilizer voucher discount provided by government. This has led to a significant improvement in the sector as farmers now buy fertilizer directly from designated Agro dealers at the subsidized price in their localities.
Sterling Bank has been in the forefront of the GES scheme since inception and has been actively involved in financing Agro dealers under the scheme. Part of the intervention was the introduction of Cassava bread. Do you think that this would work?
Cassava production in Nigeria is increasing yearly, but Nigeria continues to import starch, flour and sweeteners that can be made from cassava. This paradox is due to how cassava is produced, marketed, and consumed in Nigeria. It is still largely done in subsistence to semi commercial manner. What the government is trying to do is to change our consumption pattern from import dependent to local dependence. For example, wheat is not grown in Nigeria in commercial quantities and Nigeria is the highest importer of wheat with over $4bn spent annually on wheat importation annually, but we cultivate cassava in large quantities locally, hence the need for substitution with a locally grown crop that could also perform almost the same function. Wheat importation is a major drain on our foreign exchange earnings followed by Rice. The foreign exchange saved through this import substitution strategy could be channeled into development projects. This is where the issue of Cassava bread comes in. We grow Cassava in Nigeria in large quantities so Cassava bread is sustainable. Moreover, our farmers will be happy because there is a ready market for their produce.
May be not immediately because we are all used to wheat bread. However, in the long run, we would be the better for it. The same initiative is being driven in the area of rice production. Like l said earlier, rice importation takes a large chunk of our foreign exchange earnings after wheat. In order to address this, government is encouraging the mass production of paddy which is processed to produce the finished rice.
The role of the financial institutions generally is to support the economy. Today, agriculture still remains a main stay of the Nigeria Economy as it provides the majority of the populace with employment, income and food. Self-sufficiency in food production must be top priority of any government, but this cannot happen unless there exists proper financing structures. Banks provide finance and advisory services to individuals and companies that need money to finance agriculture and agro allied businesses. We finance all actors along the value chain from production to processing as well as input, transportation and marketing among others.