In spite of the important role of agriculture and manufacturing in the domestic, regional and global economies, operators of the two key sectors have often been hampered by high interest rates and lack of access to credit facilities.
It is in this regard that we welcome the approval of single digit lending rate for the two sectors by the Central Bank of Nigeria (CBN). Though the apex bank has not stated the exact lending rate, it has set aside N750 million and N250 million, respectively as intervention funds for the agric and manufacturing sectors. The good news on the intervention funds and the single digit lending rate was disclosed by the CBN Director, Banking Supervision, Mrs. Tokunbo Martins.
We urge the CBN to fast-track the release of the funds to the two sectors at a very reasonable interest rate, not exceeding five percent. These two key sectors are critical to government’s diversification of the economy. Sadly, the two sectors have come under pressure from foreign exchange shortage and input costs, among other constraints. Over the years, efforts by successive governments on agriculture have not yielded the desired results.
Specifically, on the N750 million agriculture intervention fund, the CBN should hasten its disbursement at an affordable interest rate, with repayment spread over a reasonable timeframe.
The fund, which was first announced in May by the Minister of Agriculture, Chief Audu Ogbeh, is part of government’s commitment to the diversification of the economy. It will be managed by the CBN.
Undoubtedly, agriculture is a veritable route out of the present economic challenges occasioned by over-dependence on crude oil, which is currently witnessing a drastic fall in its price in the international market. The fund should also be made easily accessible. It is important that farmers use the credit obtained for the cultivation of palm nuts, cocoa, cashew, cassava, rice, wheat and other staple items, which we currently spend a lot of forex importing. Nigeria can be self-sufficient in the production of these crops and also export them if we choose to.
Currently, a food crisis is looming in the country, and mechanized agriculture is one of the ways to avert it. For the fund to achieve the desired goal, it must be disbursed to the target farmers to ensure integrated agricultural development. Only recently, the Minister of Agriculture handed down a timely warning that the country could risk starvation in the near future if it fails to embrace all-year-round farming. We believe that wise investment in agriculture will avert the imminent problem of food scarcity. Besides the N750m, government should ensure that other funds such as the $2.5m from Jaiz Bank and another undisclosed amount from the African Development Bank (AfDB) are made available to our farmers.
The situation in the manufacturing sector is even worse. The sector suffers from multiple constraints such as forex scarcity, high input costs, weak consumer purchasing power, energy crisis, downward spiral of the national currency and high interest rates. These problems have forced many industries to close shop, while some have relocated to neighbouring countries.
For many years now, operators of small and medium enterprises have been held back by lack of access to funds and the high interest rates charged by banks. As a result, the Manufacturers Association of Nigeria (MAN) has repeatedly complained about the difficulties occasioned by these multiple challenges. Therefore, improving access to credit for the sector will go a long way in alleviating the problems of the manufacturers. Data from the Bank of Industry (BoI) show that only 6.7 percent of the over 17 million registered SMEs in the country had access to bank credit facility in the past two years. This is not good for the economy.
Worse still, blue chip companies are groaning under severe forex scarcity and high cost of raw materials, losing as much as N51.8 billion in the first half of 2016, according to their audited report released recently. Other unlisted equities that contribute much to the economy may have incurred even more losses during the half-year. Indeed, the fortunes of the manufacturing sector are getting bleaker every passing day.
Though the N235m intervention fund for the sector may be grossly inadequate, it can go some in helping the sector if it can be assessed at low interest rate.
We advise the prospective beneficiaries of the fund to package their business plans properly and make their loan requests bankable. This will make it easier for banks to consider their loan proposals favourably.
If the government gets the agriculture and manufacturing sectors right, it will stimulate the economy.