In Sub-Saharan Africa, agriculture occupies a prominent position in their national economies as the sector serves as a key driver of growth, wealth creation and poverty reduction. It is also the leading economic activity in the continent as it contributes between 20 per cent and 30 per cent of its Gross Domestic Product.
However, the future of this sector in the continent is faced with several uncertainties such as resource scarcity, heightened risks from climate change, higher energy prices, demand for bio-fuels and doubts about the speed of technical progress.
According to the World Bank, about 70 per cent of Nigeria’s estimated 150 million people, live on about $1 (N150) per day. In other words, about 105 million Nigerians live below the poverty line, with 35 per cent of this number classified as living in absolute poverty. The United Nations Human Poverty Index in 1999 scored Nigeria 41.6 percent, effectively situating it amongst the 25 poorest nations in the world.
The bulk of people trapped in the poverty web dwell in rural areas, which holds about 80 per cent of the national population. Their primary occupation is agriculture. Nigeria earns over 80 per cent of her revenue from the petroleum industry, according to several reports, but the sector actually accounts for less than 14 per cent of the Gross Domestic Product (GDP), whereas agriculture commands an impressive 41.8 per cent of GDP and generates two-thirds of employment nationwide.
Here then is the paradox: about 90 per cent of Nigeria’s food requirement is produced by small-scale farmers who constitute the majority of the nation’s poor. A myriad of factors are blamed for this ungainly condition, both natural and man-made. Key is lack of access to finance and the resultant inability to invest in basic farming inputs, such as seedlings, fertilizers, implements and irrigation. As a result, their yields have remained largely stagnant, leading to pervasive hunger and poverty. Similarly, little or no commercial financing is available to those aspiring to build businesses that could enhance food production and enable farmers to earn sustainable profit.
Governor of the Central Bank of Nigeria (CBN), LamidoSanusi, speaking at the 4th African Rural and Agricultural Credit Association conference in Abuja last year, put the state of the farming sector in perspective.
His words: “Agriculture occupies a priority status in the national economy as the sector serves as the key driver of growth, wealth creation and poverty reduction. It is the leading economic activity in sub-Saharan Africa as it contributes 20 to 30 percent of its GDP.
”However, the future of agriculture in sub-Saharan Africa is clouded with several uncertainties that include increasing resource scarcity, heightened risks from climate change, higher energy prices, demand for bio-fuels and doubts about the speed of technical progress.
Sanusi further disclosed that “The annual demand for agribusiness financing over the next 40 years is projected at $6.5 billion per annum, compared to the current annual fund supply of $1.5-$5 billion. This presents a huge financing gap which a forum such as this should be able to critically examine and develop policies and implementation frameworks to minimize the gap in the interest of agricultural development in the region.
“To this end, the fourth pillar of the banking sector reform has direct bearing on the development of the real sector as it seeks to position the banking system to contribute to the growth and development of the various sectors of the economy.
He said the spirit of this pillar is anchored on the fact that real economic growth must be supported by actual rise in physical goods and services. He added that this segment of the reform has sought to break from the classical orthodoxy of leaving the allocation of financial resources to the market forces.
“Rather, the reform has identified priority sectors and developed tailored interventions to support and promote growth in these sectors. Some of the key interventions in the real sector under this reform pillar include: the N200 billion Commercial Agricultural Credit Scheme (CACS); the N300 billion Power and Aviation Intervention Fund; the N200 billion Restructuring/Refinancing to the Manufacturing Sector/SME; the N200 billion Small and Medium Scale Enterprises Guarantee Scheme (SMECGS).
“The CACS was established by the CBN in collaboration with the Federal Ministry of Agriculture. It is being funded through the issuance of FGN Bond worth N200 billion, by the Debt Management Office (DMO) in two tranches. The first tranche of N100 billion had been raised and passed on to participating banks for on-lending to farmers. Loans made under this scheme are at single digit interest rate subject to a maximum of 9.0 per cent, while the CBN bears the interest subsidy at maturity.
“The scheme was initially to promote commercial agricultural enterprises but was later expanded to accommodate small scale farmers through the on-lending scheme of the state governments. The sum of N96.81 billion has been disbursed to 104 projects through 11 banks and 18 state governments including the Federal Capital Territory (FCT), as at end of December 2010.
The situation is not different at the continental level. The Organization for Economic Co-operation and Development (OECD) stated at the 16th session of the United Nations Commission on Sustainable Development (UNCSD-16) in 2008, that about 216 million people, translating to one out of every seven persons in Africa, are classified as undernourished. This is the condition of people whose dietary energy consumption is continuously below a minimum requirement for maintaining a healthy life and carrying out light physical activity.
Juxtapose this situation with the billions of tax payers’ money allocated to agriculture every year and the fact that most Africans depend on agriculture for livelihood. Yet again you need to pause to ask just how much funding agriculture gets in Africa, whether it is from public allocations, Direct Foreign Investment (DFI), private investments or as assistance from multilateral organizations. The answer surprisingly is, too little.
Even though 75 per cent of Africa’s poor live in rural areas and are dependent on the agricultural sector, bilateral and multilateral aid to agriculture accounts for less than 4 per cent of total development assistance. This share declined from 5.2 per cent in 2000 to 3.4 per cent in 2006. The largest decrease has been in agricultural aid from bilateral donors, from 3.7 per cent of official development assistance (ODA) in 2000 to 2.5 per cent in 2006.
This situation has heightened the agitation for local financing initiatives. One local financing initiative likely to become a turning-point for the continent is the partnership between Africa’s biggest bank, Standard Bank Group and the Alliance for a Green Revolution in Africa (AGRA), a dynamic partnership working across the African continent to help millions of small-scale farmers and their families lift themselves out of poverty and hunger. Standard Bank has teamed up with AGRA to create an innovative fund for Africa's smallholder farmers. The fund operates in Ghana, Mozambique, Tanzania and Uganda, opening loan opportunities to smallholder farmers and small- and medium-sized agricultural businesses previously considered too risky for lending.
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