The lack of security on investment into agricultural activities in Nigeria has been identified as one of the top issues that scare the outflow of financial institution’s lending to teeming Nigerian farmers.
Financial institutions will only deploy funds to economic sectors that prove to be profitable and position as a safe outlet for credit, Emeka Emuwa, the managing Director and chief executive officer (CEO), Union Bank Plc. said at the 2018 Agriculture and Agro-Allied Group symposium convened by the Lagos Chamber of Commerce and Industry (LCCI).
Emuwa underscored the need to establish a point of balance between financing needs of farmers, the peculiarities of farming activities and the profit interest of lenders in a presentation titled “Bridging the Funding Gap and De-risking Agricultural Finance”.
He advised that farmers structure their farming processes to fit in as bankable projects with lesser association to risk.
Also speaking in the same vein, Folashade Joseph, managing director, Nigerian Agricultural Insurance Coporation (NAIC),said investment in agriculture is considered to be generally vulnerable to wide range of risks and uncertainties surrounding input and prices, agricultural yield, post-harvest losses, product price fluctuations and whims of nature such as flood, drought and outbreak of pests and diseases.
The effects of these perils leave dampening effects on the national agricultural output, with several households suffering various degrees of losses, she said.
But to boost agricultural production considerably and subdue these risks, Joseph said the corporation has continued to devise mechanism that bears these risks to an acceptable level that farmers can return to production after suffering such losses.
She said: “Various risk management methods including risk aversion, informal risk-sharing networks, savings and credit markets can provide protection against smaller shocks, but these become ineffective when these risks occur in higher degrees of frequency and severity. This is where agricultural insurance comes in”.
lnsurance is a risk transfer mechanism that pools resources from many to redeem the loss of few less fortunate members of the contributing pool that suffered losses due to insured risks and as such, Joseph noted that the government has been working at its commitment to provision of financial support in the form of 50 percent premium subsidies for most classes of agricultural insurance.
According to her, government accepts the liability for catastrophic losses insured by NAIC in excess of 200 percent of the premium income.
“One of the major policy thrusts of this government is economic diversification and the pivot of that diversification drive is the agricultural sector. To stabilize investments in the sector towards attaining the diversification goals of government, it must rest on strong pillars of support of which agricultural insurance is one. The Nigerian Agricultural Insurance Corporation (NAIC) has been playing various supporting roles in the development of the agricultural sector in the nation,” she said.
But Babatunde Ruwase, LCCI president, commending some efforts implemented through the Central Bank of Nigeria, Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), Bank of Agriculture (BoA) and Bank of Industry (BoI), called for increased support across the value chain in agri-business and agro-processing.
Given the growth in headline inflation to 11.28 percent in September2018 from 11.23 percent in August, and hike in food inflation to 13.31 percent in September from 13.16 percent in August, government needs to retain focus on fostering the enabling business environment for private sector businesses to thrive, he said.
“The development of a good rail network to facilitate the movement of agricultural products to markets cannot be over emphasized. Policy consistency is also required to attract private sector investments into the agricultural sector. Our research institutes should be empowered to lead surveys and research projects in dealing with early warning signs, pest control and high yielding seedlings. The major drivers of the rising price includes rise in price of food items like yams, potatoes, eggs, bread, tea, soft drinks, fish, meat and cooking oils. These products can be produced adequately in Nigeria if we get the financing and policies right,” Ruwase explained.
On the path of Tunji Falade, chairman of the LCCI Agro-Allied Group, the need for mechanization, irrigation in agricultural activities would only be solved through massive investment in agriculture. Hence, more efforts must be channeled towards enabling access to financing if Nigeria is to attain self-sufficiency in food production.
He said: “in advanced countries like the US, they have invested heavily in agriculture to the extent that they have 30,000 farms with each average of about 1,000. There needs to be collaboration. We need to learn from people who have done this successfully. Funding is an integral part of agriculture just like training. People need to learn more about how to handle agriculture”.