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Nigeria’s inability to have an effective standardised system to access quality of agricultural commodities as well as inadequate finance for the sector has continued to limit market penetrations, experts say.
The experts who spoke at the 2019 BusinessDay’s Agribusiness and Food Security Summit held in Lagos recently said that good market penetration of agricultural commodities is crucial in the country’s quest to diversify the economy through the sector.
“Lack of grading and quality assurance and inadequate market information as well as finance are the three major factors limiting market access of agricultural commodities in the country,” said Ayodeji Balogun, country manager, AFEX Commodities Exchange.
“There is still a big issue with the quality of agricultural commodities. Aflatoxins levels in our maize are at points where they are harmful to the health,” Balogun said.
“Finance in the sector has been tilted to the supply side without financing the demand side and this is what causes price volatility. We need to have a systematic structure that balances both the supply and demand side of financing,” he added.
He grouped the risks faced in the sector under macro and micro risks. He identified food security, inflation, foreign exchange and economic diversification as macro risks while product availability, credit risks, business and cash flow risks under micro risks.
He stated that the country can address the issue of price volatility by creating a trading platform where agro commodities can be traded for the future, this according to him, will help farmers hedge against price volatility.
Speaking during a panel discussion on risk management approaches and solutions for agricultural financing and trading, Segun Anjorin, head – high local corporates, Eco Bank who was representing the managing director said that lack of a clear understanding of the sector by banks have hindered credit to farmers.
“We need to understand the key ingredients in each stage of production so that we can mitigate each level of risks in the various value chains,” Anjorin said.
“Banks need to understand each process from the downstream to the upstream in the agricultural sector. We also need to understand the market and structure so that we can understand how we recoup our loans,” he added.
He noted that there will be a tremendous shift to the sector in terms of financing owing to its enormous potential to transform the country’s economy and create jobs.
Data from the National Bureau of Statistics (NBS) selected banking report for q1 2019, shows that banks credit to the agricultural sector hits N638.5 billion.
The loan to the sector accounts for 4.2 percent of the total lending of commercial banks to the economy for the period.
Bode Abikoye, executive director, Bank of Agriculture (BoA) said that government need to fix the deficiencies along the value chains to encourage banks to lend more to the sector.
“We need to provide the infrastructures to address the inefficiencies in the sector,” Abikoye said.
He said that provision of critical infrastructure across various agricultural value chains is a prerequisite for enabling Nigeria stimulates economic growth and reach its target of diversification through agriculture.
Josephine Okojie
