Nigeria: Benefits of a Sustained CBN Policy in the Agriculture Sector

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As part of efforts to revamp and improve the agribusiness sector in Nigeria, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, early in his administration, adopted a policy that refused to 43 articles access to the official foreign exchange counter. . The response from part of the public to this bold move was initially one of dismay, largely because such informed economic radicalism was rare in the country’s policy formulation and implementation.

When designing the policy, Emefiele was convinced that it will encourage the local production of these items and in doing so will achieve the ultimate goal of boosting local agricultural production, creating jobs, saving foreign currency until ‘here wasted on importing food and giving a boost to the gross domestic product (GDP) of the country. The implementation of this policy framework means that those who import these items can no longer buy foreign currency at the official counter to pay their foreign suppliers. For those who used to get things so easily, those who can only survive by deceiving the public, who always take unfair advantage of flaws in the economic structure, it was a bitter pill to swallow.

It really aimed to significantly develop the local economy. According to Emiefele, Nigeria does not need to continue importing things it can produce. Since this measure was put in place, there has been a leap forward in the production of agricultural crops such as rice, wheat, maize, millet, yam, tomato, cotton and many others. others.

The Central Bank of Nigeria (CBN), in line with its development function, introduced the Anchor Borrowers Program (ABP) which facilitated the provision of agricultural inputs in kind and in cash (for labor agricultural work) to smallholder farmers (SHF) in order to stimulate production of these products, stabilize the supply of inputs to agro-industrialists and remedy the negative balance of payments for food in the country. At harvest, the SHF supply their produce to the agro-processor (anchor) who pays the cash equivalent into the farmer’s account.

CBN’s decision to ban the importation of certain products and subsequent economic policies have indeed boosted 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 and long term. Emefiele believes in Nigeria’s potential to be a leading exporting country rather than a country dependent on others.

Since beginning his tenure as CBN Governor, he has felt the need to shift from focusing solely on price, currency and financial system stability to acting as a financial catalyst in specific sectors of the economy. , especially agriculture, in an effort to create large-scale jobs, improve local food production and conserve scarce foreign reserves. The N220 billion Micro, Small and Medium Enterprise Development Fund was to finance agricultural projects at a single digit interest rate of 9%. The objective was to create economic links between more than 600,000 smallholder farmers and reputable large-scale processors with a view to increasing agricultural production and significantly improving the capacity utilization of integrated mills throughout the agricultural value chain.

Brilliant ideas that the CBN under Emefiele brought to fruition and which have restored agriculture to its place of prominence on the economic discussion table include the use, as instruments, of the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) ; Real Sector Support Facility (RSSF); Nigeria Electricity Market Stabilization Facility (NEMSF); Entrepreneurship Development Centers (CDE).

Others are the Youth Entrepreneurship Development Program (YEDP); Export Stimulation Facility (ESF); Agribusiness/Small and Medium Enterprises Investment Program (AGSMEIS), Paddy Aggregation Program (PAS); Accelerated Agricultural Development Scheme (AADS); and the highly successful Anchor Borrowers Program (ABP) which has had a remarkable impact in terms of reducing the country’s food import bills, increasing income levels and the financial capacity of local farmers.

All of these have gone a long way in reorganizing the economy, with agriculture shifting from a way of life where people practice it for subsistence to a commercial enterprise that generates employment opportunities in abundance, not to mention the economic empowerment of local populations who now see themselves as key players in the dynamics of valuing primary products. Prior to that time, Nigeria spent a huge amount on importing food items that could be produced locally. At the height of this nonsense, N1trillion was recorded as an import bill which was obviously not sustainable.

The above efforts have contributed to increasing the contribution of the agricultural sector to the gross domestic product (GDP) of the country. According to data from the Nigerian Bureau of Statistics, NBS, the contribution of the agricultural sector to GDP increased to 22.35% in the first quarter of 2021 from 19.79% in 20215. Most notable is the real growth of 2.2% recorded by the agricultural sector in 2020. , when the economy as a whole contracted by 1.92%.

In this regard, the real growth of 3.4% recorded by the sector in Q4’2020, the strongest growth since 2017, is significant. According to analysts, the robust growth recorded by the agricultural sector in Q4’2020 helped the economy register its first growth in three quarters, and also pulled it out of recession, after the contractions recorded in Q2’2020 and the Q3’2020, which plunged Nigeria into its second recession in five years.

Citing the role of the intervention of the apex bank as a driver of growth recorded by the sector in the fourth quarter of 2020, analysts at Vetiva Capital Management Limited said that: “the agricultural sector maintained a clean sheet in 2020, supported by the Federal government response efforts The government and the Central Bank of Nigeria’s development finance activities have been powerfully continued by the Emefiele momentum, despite disruptions to agricultural activities and food transportation, caused by the floods, containment measures and security issues encountered during the year.

Similarly, FBNQuest analysts gave a graphical detail of the effects of the CBN policy on agriculture. In its report, it confirmed that “our expectation was for the contraction to slow to -1.95% and was negated by robust growth of 3.42% for agriculture, the sector’s best performance since the fourth quarter. of 2017. We have repeatedly noted that Nigeria’s performance would be more subdued than most emerging markets due to the shielding of its large informal economy from global headwinds (such as COVID-19 ).The argument still stands, but it could now be that credit interventions by the CBN, state development banks and others are starting to have an impact.”

Gilbert is an economic analyst based in Abuja

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