The agricultural sector has over the years experienced a lot of challenges ranging from sub-optimal yields, poor funding, post-harvest losses, fluctuating commodity prices and poor adaptation to changing climate systems. COLLINS NWEZE writes on steps taken by the Central Bank of Nigeria (CBN) and commercial banks to bridge the agricultural value chain financing gaps, increase yields of smallholder farmers and achieve food security.
The Nigeria’s agricultural sector has so much to contribute to the people’s well-being and prosperity. Reason: A country that produces its food has solved more than half of its problems be it economic, health or political.
That explains why many institutions, agencies of government and private sector operators are taking steps to ensure that Nigeria becomes more productive in the agricultural sector to achieve food security.
Besides, increased focus on the agricultural sector helps in job creation and supports the objectives of the Economic Recovery and Growth Plan (ERGP) and boosts Gross Domestic Product and foreign exchange earnings.
Analysts said with world population projected to increase to 9.5 billion by 2050, there is the need to rev up food production and enhance value addition across the value chain segment of the agricultural sector and Nigeria cannot be left behind.
Embracing agriculture ensures that the needs of more than 70 per cent of rural households who depend on agriculture as their principal means of livelihood are met.
Still, there are problems at various stages of the value chain, including getting the right input and varieties, inadequate funding, slow adoption of mechanisation, and a high reliance on subsistence production techniques, including the adverse effects of the COVID-19 pandemic.
To address these problems and boost food sufficiency, financial institutions are investing in the agricultural sector. One of them is Heritage Bank. In the past nine years it has taken it upon itself to bridge the agricultural value chain financing gaps.
The bank is celebrating nine years of entrenching service delivery. It has also remained resilient in hastening the transition of agriculture from traditional, low-productivity models toward a modern, high-productivity agricultural sector.
It has collaborated with key stakeholders like the Central Bank of Nigeria (CBN) and Federal Government to prioritise the agricultural sector to attract huge investments that have continued to help drive expansion and achieve competitiveness.
The move has also boosted financing in key parts of the value chain, particularly small-holder farmers to modernise their practices and increase output.
For instance, under the various intervention of the agricultural schemes of the CBN such as Anchor Borrowers Programme (ABP), the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), Commercial Agriculture Credit Scheme, Heritage Bank has made huge success of the schemes by making funding available to small holder farmers and SMEs (Prime Anchors) to increase agricultural output, especially rice and wheat production.
Heritage Bank has opened its doors to its customers and is through its products and services, creating, preserving and transfering wealth across generations.
This line of operation is steadily yielding great results as the nation continues to move its economic base towards the future, with emphasis on thoughts about diversification.
Promoting agriculture value chain
Heritage Bank has continued to create market linkages between smallholder farmers and anchors/processors, creating an ecosystem that drives value chain financing, improve access to credit by the smallholder farmers by developing credit history through the scheme and more.
Its Managing Director/Chief Executive Officer (CEO), Ifie Sekibo affirmed that the institution is committed to promoting the development of agriculture and ensuring that its value chain could be financed profitably.
According to him, the bank had been in the forefront of the growth and development of commodities products subsector.
Recently, the CBN Governor, Godwin Emefiele, announced the apex bank’s N41 billion intervention in wheat production for commodity associations and anchor companies.
Heritage Bank has continued to work with the CBN and other stakeholders such as Wheat Farmers Association of Nigeria, processors, Marketers’Association of Nigeria, Lake Chad Research Institute, development partners, Flour Mills of Nigeria and seed firms to support over 100,000 farmers in wheat production.
Sekibo said Heritage Bank would continue to play a pivotal role in ensuring an effective platform for market linkages, among players in the agribusiness value chain, involving fast-moving consumer goods, warehouse operators, collateral managers, processors, farmers’ cooperatives to transact in a seamless way that guarantees quality, quantity, payment and delivery.
Achieving growth with partnership strategy
According to Sekibo, partnership with various critical stakeholders and institutions remain a major pillar in the bank’s strategy to realise these objectives.
These partnerships over time have brought about the support of small holders’ farmers and anchors in Oyo, Ogun, Niger, Kebbi, Kaduna and Zamfara states in food crop cultivation, cash crop/horticulture, and food processing (in rice, maize, palm oil, casava etc) under NIRSAL and Prime Anchor Borrowers Programme (ABP).
Heritage Bank has also partnered the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending to improve the agriculture value chain by increasing financing to the sector. The deal aims at identifying and securing financing of agribusinesses within the agricultural value chain.
The financing was designed to cover segments from primary production of raw materials and sustaining the processing industries to exportation of the produce.
Sekibo said partnership will avail credits at very low interest rates to commercially viable agricultural projects that have been packaged and fully de-risked.
The bank is also widening and deepening the participation of digital generation in agribusiness. For instance, Sekibo was convinced that support of NIRSAL would help the bank develop a digital agribusiness platform that will strengthen distribution of human capital that meet parameters of agribusiness.
NIRSAL agreed to serve as a catalyst for national agricultural revolution by boosting commercial agricultural productivity, competitiveness, value addition, market access and enhancing food security and will deploy a mechanism of de-risking the agricultural value chain to encourage investment by banks and the entire financial sector.
Divisional Head, Agribusiness, Natural Resources & Project Development, Heritage Bank, Olugbenga Awe said the bank has put in place measures to ensure fidelity with contract agreements and adherence to fair deals in making sure that farmers earned decent profits for their efforts, which is critical to the sustainability of the programmes.
He said: “The bank’s participation in the programme has paid off as we have a rich pool of farmers’data to support grains production.The registered farmers in our database can easily be identified and trained with the support of extension services to plant any grains as the season demands. This flexibility provides continuous cash flows to the famers and ensures that more farmers are enlisted to join the programme.’’
Awe added: “In our quest to participate in the rice value-chain through the ABP, we supported hundreds of small holder farmers in various communities in Kaduna and Zamfara State.
“The sector is driving the next set of entrepreneurs and we are committed to the development of the sector using appropriate technology and modern farm practices. We walk the talk in Heritage Bank as demonstrated in our portfolio allocation to agribusiness,” he said. He noted that the large-scale operators are enabled to expand capacities and industrialise for local consumption and export.
This scheme, however, informed Heritage Bank’s partnership with the Oyo State government in a multi-billion naira project to give agriculture a boost in the state.
Under the initiative, the bank is supporting the Oyo State Agricultural Initiative (OYSAI), a programme designed to revive agriculture, boost agro-allied businesses and create a massive empowerment programme for youths and women through the creation of thousands of jobs.
This huge and laudable project that is spread across 3,000 hectares in 28 of the 33 local government areas of the state is in three stages: food crop cultivation, cash crop/horticulture, and food processing.
For instance, N29 million was received from NIRSAL and disbursed to farmers involved in poultry farming in the state; farmers got N157 million for maize cultivation in Ogun State, among other interventions.
Heritage Bank Plc signed a N232 million pilot phase of the out-growers agreement with Biase Plantations Limited (BPL), and its joint venture partner, PZ Wilmar Limited, to produce best-in-class palm oil, using the ABP model.
CBN’s partnership for wheat expansion
Heritage Bank, in partnership with CBN, has set up plans in disbursing N41 billion to farmers in 14 states for the expansion of the wheat production project.
As part of bridging the agric value chain financing gap, the bank, however, registered the wheat farmers with the Lagos Commodities and Futures Exchange (LCFE) for the disbursement, as the farmers are expected to cover about 111, 025 hectares to attain huge milestones in wheat production.
Meanwhile, being the pioneer bank to finance the first-ever large scale rain-fed wheat production in Nigeria and also a participating financial institution (PFI) under CBN’s ABP scheme, Heritage Bank has taken steps to create an enabling environment for sustainable growth in wheat production, thereby partnering LCFE for value-chain stakeholders to interact and trade ownership titles to specific quantities of wheat by registering members for their clients on the commodity exchange platform.
Sekibo stated that the partnership is basically to consummate Wheat Seed Multiplication Project under the CBN’s Brown Revolution Initiative, to ensure due diligence on loan administration, monitoring and recovery, which would bring about increase in the domestic production of wheat and close the supply gap in the agricultural space.
Also, Awe explained that via the strategic partnerships, Heritage Bank has achieved footprints in agribusiness.
“For example, through our partnership with Triton Aqua Africa Limited and on-lending support from CBN, Heritage Bank has provided N2 billion for aquaculture to reduce our heavy reliance on fish import.
“Nigeria’s annual demand for fish is estimated at 2.7 million metric tonnes and we produce about 800,000 metric tonnes.
“With support from CBN, through Commercial Agriculture Credit Scheme (CACS), Triton is producing about 27,000 metric tonnes and their projection is to reach 100,000 metric tonnes in five years.
“From recent forecast, they will meet that projection easily.The bank is also supporting rice farmers under the ABP in Bakolori, Zamfara, Sanga in Kaduna and soyabeans farmers in Rijana, Kaduna. Heritage Bank also has ongoing projects across the country,” he said.
On Heritage Bank’s involvement in ABP, the bank provides on-lending funding to aggregated farmers to grow various products that will serve as raw materials to the processors, thereby ensuring market linkages and access to the market as well as reduce imports and conserve Nigeria’s external reserves.
It would be recalled that in 2016, N54,892,728 and N248,413,350 was sourced from CBN and disbursed as loans to 185 rice farmers and 414 soya bean farmers in Kaduna State.
In the same year, N37, 995,300 was disbursed to 259 rice farmers via 11 cooperatives in Zamfara State.
Heritage Bank’s lending to the agricultural sector has earned it many accolades.
Expectedly, Heritage Bank has received accolades for its achievements in the sector. In 2017, it received the Nigeria’s Most Innovative Banking Service Provider at the inaugural Nigeria Sustainable Banking Awards convened by the apex bank “For Sustainable Transaction of The Year in Agriculture.”
Also, the Nigeria Agriculture Awards (NAA) organised by the AgroNigeria, which regards itself as the Voice of Nigeria’s agriculture, conferred on Heritage Bank the Agric Bank of the Year award for the bank’s efforts to the success of the sector in the country.