With plentiful natural resources and favourable weather, sub-Saharan Africa’s continued rise to economic power will be driven by agriculture as global interest in the continent’s assets grows. Nigeria is the latest African country to realise the role large-scale farming will play in its ongoing development.
In the West African country, agriculture contributes to about 22% of the national GDP. The crucial challenge, however, exists in the fact that the sector is dominated by small-scale farming, accounting for 50% of employment in the informal sector.
Though this situation presents a number of challenges, experts argue that it also offers lucrative opportunities that can be exploited for Nigeria’s gain if agriculture is viewed as a business venture, rather than a development programme.
The government has already taken steps in this regard; its ban of the importation of goods that can be produced locally prove its strong focus on agricultural diversification as opposed to an oil-based economy. Indeed, Chief Audu Ogbeh, Nigeria’s Minister of Agriculture and Rural Development, has emphasised that the global decline in oil prices has made it critical for the country to diversify.
However, though the above will somewhat boost the bottom lines of farmers and agricultural investors, what’s really holding back the industry is lack of financial access: financial constraints prevent farmers and entrepreneurs from investing in the basic inputs that influence productivity, such as good seeds, fertilisers and irrigation systems. Consequently, agricultural production remains at subsistence level, barely benefitting the farmer, and not at all benefitting the greater economy.
Recognising this challenge, the Central Bank of Nigeria introduced a number of funding initiatives to encourage local banks to finance agriculture, thus reducing costs for agric entrepreneurs. Among them are the Commercial Agriculture Credit Scheme, the Real Sector Support Fund and the Anchor Borrowers Programme. All provide finance at a low interest rate, and all are backed by international agencies that provide technical support for the critical aspects of the agri-business value chain.
But to truly unlock Nigeria’s agricultural wealth – and the sector’s transformative potential – Nigeria must seek funding from within its own financial landscape. Presently, several local banks are providing financial and other means of support to those in the industry. Stanbic IBTC Bank is one of them, currently collaborating with Tata Africa Services and John Deere Financial to provide various financing solutions to Nigerian John Deere customers.
“Regarding agriculture, the opportunity is immense,” said Dr Demola Sogunle, the Bank’s CE. “Though much is required, and a collective inertia still remains, there are increasing signs of how agricultural transformation can change the country’s fortunes. The current economic situation, especially with strong government backing, makes agriculture an attractive prospect for the country.”
Currently in the grips of an economic recession, there’s no better time for Nigeria to leverage the potential of its agricultural sector, as greater production may revive the economy, as well as diversify it, facilitating long-term sustainable growth.