By Adelola Amihere
Faced with the reality of a rapidly growing population, projected to become the world’s third largest by 2050, stakeholders in the commodity and exchange market have canvassed that if Nigeria is to grow its food production to be able to feed its teeming population, financing to the agricultural sector should be increased to about at N2.5 trillion.
Country Manager, AFEX Commodities Exchange Limited, Ayodeji Balogun stated this yesterday in Abuja at the signing of a Memorandum of Understanding between AFEX and FMDQ Group to promote product innovation to Nigeria’s capital market.
He explained that the figure was based on its own research which showed a huge funding gap in the sector as the current lending from commercial banks to agric sector is about N500 billion.
According to him, “That is 4 .5%. That is the second time it has reached that height in the last 20 years and is due to the efforts of the Central Bank of Nigeria in promoting financing for agriculture. But if you compare that to the size of agriculture in the country, it is just 2% of the size of the sector. So, based on our research, at the minimum, for us to be able to grow our food production at above 4 to 5%, financing needs to be about N2.5 trillion to the sector”.
Balogun however opined that, “It is one thing is to hit this number, but it’s even more important this number is not just scaled to financing a side of the market probably the processing and export side and leaving out the production, it is primarily that this funding is available to the entire market as a whole from production to processing to export.
“On the other side is to also create innovate products that leverages technology, finance but also builds on fundamentals of good agricultural practice to ensure that these loans are heathy loan and high risk loans. Te number that we think will allow the country to grow food at a sustainable rate is 2.5 trillion and it needs to grow at about 4 to 5percent year on year.”
Reeling out the ‘three baskets’ of core areas that needs to be addressed as a way of increasing farmers productivity, he stated that financial identification of the farmers that ensures that the farmer is financially encoded , education of the farmers to seeing agriculture as a business as well as increasing farmers’ access to liquidity all form the bundle of productivity in the first basket.
He added that “We have seen that farmers are able to increase their wealth by 400% over three to four years by just being able to access these bundle and the approach that we use in the last five years.”
Continuing further, he explained that, “The other part of the equation is that you need to unlock wholesale and retail investment in terms of loans and financing for the player. So you need to solve the farmers productivity on one end you need to show innovative products on low financing. We have what we call the input note which takes farmers with similar geography, similar culture with a credit history, bundles them in to a pack and we issue a debt instrument against that and that is accessible to both institutional and retail investors to invest in which is in addition to micro-financing and commercial financing and other interventions by the federal government. We see this as the second basket of what we need to solve.
“The third basket of what we need to solve for farmers is access to markets. There has to a systemic way that he sells his products. He has to be able to get a fair share of the value he’s created”.
On his part, Chief Executive Officer, FMDQ Group, Bola Koko expressed delight over the partnership with AFEX saying “as members of the SEC’s Implementation Committee on commodities trading ecosystem, our goal at FMDQ is to support the growth of the Nigerian agricultural commodities trading ecosystem through commercial and market driven propositions.
“Through the partnership, we will be introducing new products aimed at de-risking the value chain, attracting capital market funding and diversifying the existing products available to investors in this space.
“The collaboration is how to bring agriculture and capital together. We need to build the dead capital market to ensure that monies from the pension industry, banking industry will flow to agricultural side to support supply and support demand. We believe this collaboration will help us to do a lot more. The Central bank will join this collaboration is someway and energise AFEX to be that leading commodity exchange in Africa”.