Stories by Blaise Udunze
NIGERIA is endowed with abundant natural resources such as solid minerals, oil and gas as well as arable land for agriculture, among others. But despite being the seventh most populous country in the world with abundant youth workforce, reports show rising youth unemployment and only about 40 per cent of Nigeria’s arable land is being cultivated, thus leading to food supply deficit and huge food import bill.
Worried about dwindling revenue from crude oil, which accounts for about 80 per cent of Federal Government’s revenue, past and the present administrations’ have made concerted efforts to diversify the economy from oil and gas as the mainstay of the economy.
Indeed, agricultural development in the country has remained sluggish and agrarian, with farmers using crude implements and women being mostly hit with low farm yield, inability to access funds from financial institutions, limited access to land and lack of requisite knowledge on how to improve yields in their farms.
As at 2011, the country’s total spend on the importation of rice, wheat, fish and sugar stood at over N1.1 trilion but following aggressive measures to redress agricultural production level by government between 2011 and 2014, national food production grew by over 21 million metric tonnes leading to a sharp reduction in food imports. Nigeria’s food import bill fell from an all-time high of N3.19 trillion in 2011 to N635 billion in 2013, representing 403 per cent reduction. Also, direct farm jobs rose by 3.56 million between 2012 and 2014, making agriculture an exciting sector attracting the attention of financial institutions.
Federal Government’s policy initiatives
Not comfortable with the huge food import bill, which drains about 20 per cent of government earnings, the Central Bank of Nigeria (CBN), over the years, launched various finance initiatives to support Federal Government’s agriculture policy thrust. These were mainly to facilitate increased flow of financial services to the sector and drive the growth and development of agriculture.
These initiatives generally take the form of guarantee schemes – Nigerian Incentive-based Risk Sharing
System for Agricultural Lending (NIRSAL) and Agricultural Credit Guarantee Scheme Funds (ACGSF), which guarantee banks’ loans to agribusinesses and provide interest rebates to borrowers and on-lending schemes; Commercial Agriculture Credit Scheme (CACS), Micro Small and Medium Enterprise Development Funds (MSMEDF); the Real Sector Support Funds (RSSF) and the Export Support Fund (ESF) are funds the CBN provides to agribusiness through banks.
For instance, the Agricultural Credit Guarantee Scheme Fund (ACGSF) is the oldest intervention established by the Federal Government to guarantee credit facilities availed to small holder farmers by banks and to pay interest rebates to farmers with good and timely repayments of full loan amounts. NIRSAL on the other hand focuses on providing guarantees and interest rebate on loans to medium to large scale agribusinesses.
Diamond Bank takes the lead
Several banks operating in the country are presently lending to their customers involved in agriculture under these schemes for new investments/expansion of commercial agricultural enterprises. In the last five years, agricultural funding by banks has more than doubled.
In 2010, Diamond Bank made “a measured” entry into financing the agriculture sector by engaging an international consulting firm to assess the risks and opportunities across all agricultural value chains of crops and livestock of economic importance in Nigeria.
The outcome formed the basis for setting up the bank’s Agrifinance desk ahead of the CBN’s directive to all commercial banks to set up specialised desks focused on lending to agriculture.
Diamond Bank adopts a commercial approach to lending to agribusinesses focusing on gaining market share that follows the main investment trends; non-oil exports, import substitution, agro-processing, retailing and engaging in partnerships with catalyst agencies to develop markets and specific value chain financing products.
Consequently, the bank has provided improved access to finance through key considerations into its pricing, products, underwriting processes and marketing strategies with more than N100 billion disbursed to over 400 agribusinesses across the various nodes of the agricultural value chain in the last five years.
Diamond Bank’s Head of Agric Finance, Lois Sankey, stated that the bank is very passionate about growing and driving financial inclusion through proven agricultural value chain financing models especially in the rural areas.
“The programme we are currently working on, the Rice Anchor Borrower Programme, has direct impact on financial inclusion and rural financing. And we have N2.5 billion as portfolio exposure appetite to this programme alone. That is a lot of commitment considering that the cost of production per hectare is a mere N178,000,” Sankey stated.
According to her, the bank is leveraging its partnership with USAIDMARKETS2 and other agencies on the project to support and improve capacity and livelihoods of small holder rice farmers in target states across Nigeria.
Agric finance milestones
Some of the major milestones in Agrifinancing at Diamond Bank include signing of $33 million Agrifinance agreement, two years Agric Technical Assistance programme with International Finance Corporation (IFC) targeting 2000 small holder farmers and $33 million small holder loans; training of 60 key members of staff along the agriculture value chain within the bank in partnership with USAIDMARKETS2 programme, engagement with Africa Cocoa Inputs Finance pilot with Technoserve. More than N5 billion has been disbursed to 15 projects under CBN’s CACS, active participation in other previous and ongoing CBN and Federal Government intervention programmes and currently working to support about 750 small holder rice farmers in Benue State under the Rice Anchor Borrower Scheme with MIKAP Ltd.
Focus on women farmers
According to the Food and Agriculture Organisation (FAO), women make up to 43 per cent of the agricultural labour force in developing countries. Research shows that on the average, their yields are about 20 per cent to 30 per cent lower than those of men because they have less access to land, improved seeds, equipment and most importantly, finance and information.
Diamond Bank in a strategic move is focusing on female farmers by providing free technical training and financial grants to rural women involved in agriculture. The initiative, which is called Beta Life for Female Farmers is aimed at empowering female farmers across the 36 states of the country and reducing poverty level.
The bank’s chief spokesperson, Ayona Trimnell, stated that the its strategic move to help female farmers in rural areas improve their crop yields and farming method is rooted in the fact that increased farm yield by women can significantly help in reducing the current food gap.
“Women form a large pool of farmers in the country today and they contribute significantly in the food production basket. But they are hardly considered when measures for increased yields are being introduced by either the government or other investors. We believe that if women farmers are fortified with the necessary knowledge on how to improve their yields and have access to funds, they will do well and the food import bill will reduce significantly,” Trimnell stated.
Q1:Banks’ earnings drop to N452.6bn
ALL appears not to be well with the Nigerian banks in the first quarter as their total gross earnings fall to N452.602 billion from N461.132 billion recorded same period last year.
The six banks that pooled the figure this year in their unaudited results submitted to the Nigerian Stock Exchange (NSE) are UBA, Union Bank and GT Bank.The rest are Ecobank, Zenith Bank and Access Bank.
A breakdown of the results showed that two of them – Zenith Bank and Access Bank – recorded N6.256 billion as both recorded N164.48 billion, while the remaining four reported cumulative losses of N14.609 billion in their total gross earnings of N288.302 billion when compared to N302.911 billion in the corresponding period of 2015.
Zenith Bank ended the period with gross earnings of N84.177 billion, up from N81.421 billion, while net interest income stood at N58.157 billion as against N42.631 billion in 2015. It recorded impairment charges of N2.557 billion, up from N2.1 billion in 2015.
Access Bank recorded 4.5 per cent rise in gross earning, which stood at N80.3 billion compared to N76.8 billion, while making a 42 per cent rise in its profit after tax, which stood at N19.418 billion compared to N13.66 billion, which it made in the comparable period of 2015.
The Q1 result of the bank released yesterday showed that while its interest income was on the rise, its interest expense dropped contributing to its PAT performance.
GTBank said the decline in trading and revaluation gains occasioned by foreign exchange paucity rubbed off on the impressive performance recorded with a 4.6 per cent decline in gross earnings to N75.39 billion s against N79.02 billion same period last year.
UBA posted gross earnings of N54.941 billion, showing a decline from N58.669 billion in the corresponding period of 2015. Net interest income rose from N30.783 billion to N34.421 billion. Pre-tax profit stood at N18.083 billion, showing a decline from N18.389 billion in 2015, while after tax profit increased from N16.956 billion to N16.986 billion.
Union Bank grossed N26.6 billion as earning down from N29 billion in 2015, excluding gain on sale of subsidiaries, at par with prior year at N26.6 billion.
Heritage Bank introduces customer reward programme
IN line with its commitment to deliver exceptional support to its customers, Heritage Bank has instituted two customer reward programmes.
Christened ‘MyHeritageReward’ and HB Concourse, the two programmes, which were flagged off at the bank’s head office in Lagos are meant to encourage and show gratitude to its teeming customers.
While ‘MyHeritageReward’ is a loyalty programme in which customers win prizes as they use the various electronic channels of the bank, the HB Concourse is a meeting room fully furnished with relevant office equipment and designed to afford the small business owner or beginner, who are customers of the bank, space to hold brief business meetings and conclude deals with his own clients at absolutely no cost.
The Managing Director/Chief Executive Officer of the bank, Mr. Ifie Sekibo, who spoke about the introduction of the programmes, said “Heritage Bank was founded on the commitment to support customers in wealth creation, preservation and transfer across generations.”
According to him, “these programmes are some of the innovative ways through which we can show appreciation to our customers for being part of our success story.”
For ‘MyHeritageReward’, customers are required to sign up online, using their mobile phone numbers, which enable the creation of a customer profile with a pass-worded access.
From this point on, the customer earns points which enable him to graduate from class to class while winning commensurate prizes as he actively uses the bank’s PoS, internet and mobile banking, ATMs and cards, among other eBanking products.