‘Agriculture in Nigeria is a risky business’
Chief Executive Officer, Stanbic IBTC Holdings Plc, Mrs Sola David-Borha, has said investing in agriculture involves high risk even as the Federal Government is looking towards diversification through the sector.
David-Borha said agriculture involves patient money and the reality is that agriculture in Nigeria today is at high risk.
Speaking at the 2016 Stanbic IBTC Leadership forum held in Lagos recently, she said despite negative growth in several sectors of the economy, agriculture was the only sector that grew by 4.5 per cent, stating that with renewed focus, the sector is capable of helping the Nigerian economy wriggle out of recession.
She said: “what the commercial banks, the Central Bank of Nigeria together with the state governments have been able to do, is to come together and under the Nigerian Incentive Risk Base Sharing model, share the risk associated with agriculture, so that 100 per cent of the risk is not on one party like the bank.
“When the risk is shared, it is easier for the banks to lend to agriculture and since the module has been put in place, the amount of bank lending to the agriculture sector has increased and continues to increase. The key is sharing the risk. In the past, bank were expected to bear 100 per cent but that is not the case and that has enabled banks to provide more support to the agricultural sector, she said.
For instance, she said, CBN would guarantee to take part of the risk in addition that the apex bank also provided single digit interest rate lending to agriculture, which is also important because borrowing at 18-20 per cent from the mutual financing is difficult.
The eight per cent financing that the CBN put in place has also been very helpful and supportive. Those are some of the measures that when taking encourages the banks to provide more financing to this very important sector of our economy.
She reiterated the bank’s commitment to agriculture saying, “we are increasing our allocation on the sector. We have a defined risk appetite for agriculture and we dimensioned the risk and it is very important that across the value chain, the type of tenure, loan that could be given to a farmer in primary production is different from the type of financing giving to an agro processor.
We intend to continue to support that sector because we think it is critical for the economic growth of this county.
The three sector we are focusing on is agriculture, power and oil and gas. We believe that these sectors are critical to our economy.
We are in business to take risk, once you structure your portfolio to ensure that you can manage the risk because that is the most important thing.
According to her, the focus on agriculture is understandable; as the sector and its value chain have the potential to create millions of jobs, especially as over 70 per cent of Nigeria’s population is engaged in agriculture-related activities.
“We all know that agriculture is capable of creating millions of jobs across the entire value chain, drive export and much needed foreign exchange. I think the real challenge for us is unlocking opportunities that exist and making everything that we have been talking about a reality so that agriculture will be contributing to GDP across all its value chain.
She said it is not for the fainthearted, but require capital, patience and commitment to see it through, adding that the new drive into agriculture will go a long way in supporting federal government towards the drive to economic diversification.
Profiled ‘Gems in the field , the Leadership conference is specifically focused on building a vibrant and sustainable agricultural sector in Nigeria.
Managing Director of Doreo Partners, an agriculture-focused investment firm, Kola Masha, said through an approach known as ‘Babban Gona,’ a Hausa word for great farmer, his firm has been able to provide financing and advisory services to millions of farmers across the country.
He said experience has shown that even though the farmers has “no formal addresses, no bank account, no financial history, no phone, can barely read and write,” the firm has recorded a credit repayment rate of 99.9 per cent from the farmers, adding that with new approaches to agriculture, Nigeria can be the next Brazil in the nearest future.