The Federal Government of Nigeria plans to capitalize the Bank of Agriculture (BoA) with 1 trillion naira and will allow the lender to take deposits as Africa’s most-populous nation seeks to boost farming output and reduce food imports.
The Minister of Agriculture and Rural Development, Audu Innocent Ogbeh in an interview this week in Abuja said “We are looking at 25 million farmers” as stakeholders or depositors.
“We are probably going to take a major step by the end of this year, and by February, March, have a structure in place for the changes we want to carry out.”
Nigeria’s economy contracted in the first 9 months of last year as the output of oil, the government’s main source of revenue, dropped due to attacks by militant groups on pipelines in the Niger Delta and prices remained low on the spot market.
Farming, which mostly consists of crops including cocoa, accounts for more than 25% of gross domestic product (GDP) and has expanded every quarter of 2016, while factory output and mining, which includes the oil industry, shrank, according to the National Bureau of Statistics.
The Minister said: “The BoA will start lending for farming projects at an interest rate of less than 10%, or less than half of commercial market rates”
The bank, created in 1972 to provide credit and technical support to farming projects, lent at least N41 billion to 600 businesses across Nigeria over 10 years, according to information on its website.
The division head for agriculture at Fidelity Bank Plc, Musa Tarimbuka said on phone that: “It’s good to invest in the bank, but they should ensure they have proper management to improve its performance and efficiency.”
“They have disbursed a lot of money over the past 40 years, and the non-performing loans are very high.”
The Central Bank of Nigeria kept its benchmark rate unchanged at 14% on November 24 as it seeks to support an economy forecast by the International Monetary Fund to contract 1.7 percent this year.
It’s also trying to curb inflation, which quickened to an 11-year high of 18.3% in October.
Food prices rose 17.1% from a year earlier, partly due to the high price of imported food after the naira lost almost 40% of its value against the dollar following the abandonment of a currency peg in June.
The government plans to distribute 110 rice mills across the country over the next two months at a subsidy of 40 per cent, Ogbeh said.
These measures will help boost production and reduce food imports, which were worth about N1.2 trillion last year, according to statistics bureau data.