The weak link in CBN intervention in agricultural sector
In this review, analysts at United Capital Plc, an investment banking group examine the CBN N190 billion intervention to boost food production in the country. In their conclusion, they said “except the structural and strategic challenges confronting the Agric sector are resolved, the inefficiencies in the Agric sector are unlikely to disappear overnight.”
In the last 5 years, the Central Bank of Nigeria (CBN) and the federal government have been pumping billions of naira into the Agric space. A total of N190.0bn has been disbursed under the Anchor Borrowers Program (ABP) since its inception in 2015.
The scheme is proposed to be the largest ever in the history of the ABP with loans worth N432.0 billion expected to be disbursed to 1.1million farmers across the country.
In addition to the above, the CBN announced a reduction of interest rate in all intervention fund for the Agric sector from 9.0 percent to 5.0 percent as well as a moratorium on all Bank of Agriculture loans to players in the Agric space.
The above notwithstanding, Agric Sector output growth, though resilient, has weakened significantly. Recently, the NBS released the inflation figures for Sept-2020.
Notably, the food inflation sub-index rose from 16.0 percent y/y in Aug-2020 to 16.66 percent y/y in Sept-2020- Highest since March 2018.
Clearly, the sustained increase in food prices reflects supply shortfall in the system amid border closure and rising demand.
Despite intervention efforts by the authorities, domestic supply has remained below demand, thus hurting prices.
While a concerted effort by both the fiscal and the monetary policy authorities must be commended, an impact assessment of government intervention funds on the Agriculture sector out will provide insight into what is really going on.
For us, except the structural and strategic challenges confronting the Agric sector are resolved, the inefficiencies in the Agric sector are unlikely to disappear overnight.
We reiterate that Nigeria must invest in training and education of farmers, storage facilities, and transportation network to facilitate the movement of crops from farm to market, as well as R&D to boost Agricultural yield.