The recent announcement by the Bankers’ Committee of the Central Bank of Nigeria {CBN) that banks are henceforth to set aside five per cent of their profits after tax to finance the agriculture sector and non-oil exports should have been cause for cheers nationwide.
But, few people will take the declaration seriously because it pretends to offer a solution to the perennial under-funding of agriculture without actually doing it. Habitually, governments and the people of Nigeria recognise that agriculture is the backbone of our economy. In addition to providing food to keep the populace alive, it employs more people than the other leading sectors. Agriculture also contributes a far greater share to our Gross Domestic Productivity (GDP) than oil and manufacturing.
Yet, it receives next to no support from governments and banks compared to other sectors. The oil sector, for instance, had gobbled trillions of naira in subsidy payments by successive administrations if just ten per cent of these huge, corruption-riddled payouts had been diverted to agriculture in an effort to diversify the economy, we would have successfully escaped the sledgehammer of recession when oil prices nosedived.
The CBN announcement is even more cynical because it failed to acknowledge that all attempts since 1960 to compel banks to set aside stated percentages of either loans or profits (before or after tax) to fund agriculture had ended in dismal failures. The previous attempts failed even when there were penalties for failure to comply with the guidelines by banks. Almost without exception, the banks preferred to pay the penalties because governments were often so lenient that they virtually promoted non-compliance.
Nothing in the attitudes (and general financial standing) of banks at the moment would lead anybody to believe that they will actually set aside the funds as required, especially when the five per cent is meant to fund non-oil exports as well. In the end, the banks will most probably not comply, or, they will allocate the lion’s share of the funds to non-oil exports which have the added advantage of earning foreign exchange. Agriculture may still get next to nothing.
Our annual food import bills prove conclusively that despite all the high-sounding pronouncements by governments, Nigeria is falling steadily behind in food production to feed a population growing at close to three per cent per annum.
For banks to be able to perform this function, the initiative must come from the government. Government must, through policies empower the banks and use the CBN to ensure that funds channelled through them are administered for the benefit of farmers, not diverted.
This partnership between government and banks to increasing funding for agriculture will eventually convert exportable agricultural products into foreign exchange earners, and the banks will eventually have no problem funding agriculture on a profitably sustainable basis.
