As the fall in global oil prices continues to batter oil-producing economies including Nigeria, the Central Bank of Nigeria has begun moves to encourage banks to advance more loans to stakeholders in the agriculture value chain.
As a result, the CBN has organised a workshop on ‘innovative agricultural insurance products’ aimed at making insurance companies to develop more products on agricultural lending.
The Governor, CBN, Mr. Godwin Emefiele, who gave the keynote address at the workshop, said developing more products on agricultural lending would encourage banks to allocate higher loan portfolio to players in the agriculture value chain.
He said, “As you are all aware, we are confronted, as a nation with a wide range of development challenges especially with the dwindling global crude oil prices and the nation’s dependence on it as its major source of revenue.
“There is the need to diversify the mono-cultural tendencies of the Nigerian economy by developing other sectors of the economy, especially agriculture. The development and expansion of the agricultural insurance sub-sector will go a long way in mitigating against natural disasters and eventually encouraging banks to lend to agriculture.”
Emefiele said agricultural insurance had been proven to be instrumental in transferring risks and stabilising farmers’ income.
However, he lamented that Nigeria’s agricultural insurance was still one of the less developed lines of business.
He, therefore, urged insurance companies to collaborate with relevant stakeholders to develop innovative products that would carter for the needs of farmers in their provision of agricultural insurance.
According to the CBN governor, the agric sector provides up to 70 per cent of employment in Nigeria and accounts for about 42 per cent of the country’s Gross Domestic Product.
But he noted that Nigeria is a net importer of agricultural produce with import above N630bn, adding that the nation imports large food products such as wheat, rice, flour, fish, tomato paste, textile and sugar.
Rural farmers, according to the CBN boss, contribute about 70 per cent of the food produced in the country and this is done mainly by subsistence farming.
Emefiele said, “These farmers with their small land holdings of one to three hectares are producing sub-optimally due to lack of adequate inputs, insufficient exposure to good agronomic practices and limited access to finance and credit. It is due to this subsistent level of farming that farmers do not see the importance of insuring their farming activities.
“Currently, Nigeria’s formal financial system is lending about four per cent of all formal credit to the agricultural sector compared to three years ago when only about one per cent of all credit went to agriculture. Lending is still low because of the lingering perception by banks that agriculture is highly risky.”
He added, “Expansion of agricultural insurance products has become imperative, especially now that climatic reports have it that Nigerian farmers are prone to risks from natural disaster such as flood, drought as well as different crop and livestock diseases.
“In 2011, CBN launched a new agribusiness initiative: Nigeria Incentive Based Risk Sharing System for Agricultural Lending, which is a dynamic and holistic approach to agriculture that tackles both the financial and commodity agricultural value chains.”