Nigeria

Nigeria: Agricultural Financing In The Face Of Global Economic Meltdown

Eko John Nicholas

If there is any seeming beneficial aspect of the current global economic crunch to a petro-dollar economy country like Nigeria, it is that it has again rekindled interests in agriculture. Recently, there has been hubbub of voices within government circle and the private sectors about the needs to diversify the economy from petroleum, which currently accounts for over 95% of our foreign exchange earnings to agriculture. This latest sing song about economic diversities is not new in Nigeria or elsewhere around the world. The capitalist ruling elite at every historical period, when capitalism has been severely threatened by the logic of the system due to unresolved contradictions, have had cause to seek relieves in other sectors of the economy as safe haven for capitalists to guarantee continuous ruthless exploitations of both human and natural resources. This was the kernel of the relocation of companies by investors from Western Europe and United States of America, before the current global economic meltdown, due to increasing threats by workers for wage increments and better working conditions, to Asia China, Eastern Europe etc, where there are cheap labours. This was due to ruthless attacks by the ruling elites of these regions on worker’s rights, leading to weak industrial unions, with complete disregard for labour laws. Hence, there is low cost of production in China and its resultant cheap Chinese products.

The same profit motive also explains the recent announcement by President Barack Obama of the United State of America that in the coming period emphasis will be on renewable green energy. The US confronted with the frequent volatility in the Middle East, which disrupt regular supply of oil from the Gulf Nations and the militant activities in the oil rich Niger Delta region of Nigeria is seeking refuge in renewable green fuel. It is the same logic that partly accounts for the recent noise about the need to beam search light on the Nigerian agricultural sector of the economy, which has been abandoned by the successive governments, and remained largely primitive and undeveloped.

The hitherto financial bubble was burst by sub-prime mortgage loans whose defaults have now thrown open the floodgates of global economic meltdown and financial crisis. This has so far brought down some of the biggest financial institutions in Europe and the US. Various governments have been forced to partially nationalise some of the world biggest banks to stem the devastating tides and its associated negative impacts on the economy. The crisis has also led to the collapse of some of the world biggest automobile industries in Europe and US, with governments coming with bailout packages for these companies. The tidal waves of the economic meltdown is also sweeping across countries around the world, with attendant adverse infects on employment, life pension savings, prices of goods and services, etc.

In Nigeria, though loosely connected to the global economic highways, the slump in crude oil price, its sole sources of foreign exchange earnings, has made impacts of the global crisis to be felt on its economy. The country is largely import dependent, except for the exportation of petroleum products whose price has plummeted at the international market in recent times, selling below $45 per barrel against all time high of $147 per barrel last year. Another sector where the negative effects of the global economic crisis seem visible is the banking sector, though there seem to be other factors beyond the present global economic crisis. The near collapse of the stock market, where equities used to collect loans from banks have now lost over 70% value of its shares values, has led to loss of over N900 billion by the various banks. With this background in mind, it has become clearer why agriculture long abandoned, comatose and moribund, now became the beautiful bride being courted by governments and the banking sector.

The agricultural sector of the economy which has been in doldrums over the years, due to dearth of investments by successive governments in Nigeria no doubt requires all the resources that can be mustered by the government at all levels to make it productive, and beneficial to all and sundry. But this rekindled interests in agriculture by governments and private enterprises is far from altruistic motives, rather it is borne out of the neo-liberal pro-rich policies of the government, tailored towards making big businesses owned by few individuals amass supper profit, against the needs of the poor mass majority. This informs the recent anti-poor policy of the government, which was announced through the minister of agriculture and water resources, Dr Sayya Abba-Ruma , to remove fertilizer subsidy. According to him, this will allow the private sector to effectively drive growth of the fertilizer sector, hence the decision by Federal Government to stop direct procurement and distribution of fertilizers with effects from 2010! The implication of this counter-productive policy by government is that the farmers will now be at the whims and caprices of these private profiteers to exploit the poor hapless farmers by charging them whatever they deemed appropriate pricing for fertilizers. This, in no time, will price fertilizer an indispensable farm input for crop production out of the reach of poor farmers, jeopardising the very same sector it is pretending to develop.

This is a pointer to what will become of the N200 billion funds that the federal government through the Central Bank of Nigeria has concluded arrangements with 24 commercial banks in the country, to support agricultural growth. The funds which according to Dominic Eke, CBN director for banking supervision, will be supposedly used for commercial farming and that some banks would be selected by CBN to supervise the disbursement of the funds, which he said is meant specifically to ensure food securities in the country.

The federal government confronted with the crash in crude oil prices internationally, and the depleting volumes of the external foreign reserves, have been compelled to launch loan scheme to assist farmers. But at the end of the day, these funds might never get to the genuine poor farmers scattered round the country that are sincerely committed to food production, but lacks the resources to finance such projects on commercial basis. Rather, a sizeable amount of the money will be cornered by government officials using front farms and agro-allied companies; a large chunk of the money will go to profiteers in the agricultural industries that are connected to the corridors of power; and the remaining sums will go for political patronage, as settlements for party faithful. The unconnected poor farmers constitute 70% of the total number of farmers in the country, but condemned to subsistent farming, barely producing enough to feed their family members.

An international donor agency, World Banks’ Fadama 111 Project has also released $440 million, for its agricultural projects in Nigeria, which it said is expected to benefit small-scale farmers, including poultry. This money, which is expected to be giving to various state governments for disbursement as loans to farmers in respective states, will suffer similar fates as federal government loans or even worst. This is because, most states including Lagos state will deliberately place undue bottle-neck, red tape and official bureaucracies to scuttle the chances of genuine poor farmers across the states from benefiting from these funds. Like the recent rice farming project in the states, where beneficiaries where strictly selected among party faithful connected to government officials and traditional rulers within the states. This made nonsense of the well thought out scheme at the end of day.

Some banks have also floated various agricultural loans, all purportedly meant to support farmers across the country, so as to boost food production! The United Bank for Africa (UBA) Plc has announced its intention to give out a sum of N50 billion as loans in support of various forms of agriculture. The scheme, which the bank claimed commences immediately, is allegedly “targeted for crops like rice, wheat, maize, millet, sorghum, cassava, yam, plantation agriculture, poultry (chicken and eggs), animal husbandry (cattle) and fish farming. According to the deputy managing director, Philip Oduoza, the scheme will entail making the facility available at single digit, with effective interest rate of 8%.The scheme, he claimed, is available to all cadres of stakeholders, from small holdings to mechanised farmers. He disclosed that the fund is available, and pointed out that the bank would have gone into the programme even if there was no crash in the petro-chemicals industry and the attendant drop in price, but however, he acknowledged that the oil price crash has acted as a catalyst to the bank’s decision (my emphasis).The objectives of the scheme are to support food security, national economic development, poverty alleviation, wealth creation and empowerment, employment opportunities, and rural development ( The Guardian, Sunday, March 1,2009).

In addition, First Bank Nig. Plc has re-launched its Farmer’s First loan scheme advertisements in the National Dailies. Fidelity Bank has equally launched agricultural loan facilities recently. All this shows the renewed interests the agricultural sector of the economy has been receiving in recent times. The stock market crash and dwindling prices of crude oil at the international market have meant that there is serious crisis for profiteers that have invested heavily in these unproductive sectors of the economy in anticipation for fabulous profit. Hence, the make-believe interest banks and government are showing toward developing the agricultural sector of the economy. This is also with the erroneous belief that the sector will be a safe haven for investors, whose ultimate goal is to amass profit instead of producing enough food for the hungry majority.