N500bn bond legislation for agriculture credit fund underway

The National Assembly is about to commence debate on a piece of legislation which seeks to raise up to N500 billion for the take-off of Agricultural Credit Fund presently before the House of Representatives.

The regulatory framework seeks to “promote commercial agriculture in Nigeria and provision of credit support for production, storage and processing of target commodities, develop market and agricultural enterprise and for other related matters.”

The fund, according to the bill, will complement other special initiatives of the Central Bank of Nigeria (CBN) in providing concessionary funding for agriculture, to fast-track development of the agricultural sector of the nation’s economy by providing credit facilities to commercial enterprises at a single digit interest rate.

The scheme is aimed at reducing the cost of credit in agricultural production to enable farmers exploit the potentials of the sector; increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

Sponsored by Senator Mao Ohuabunwa, the bill seeks the scheme to cover rice, cassava, cotton, oil palm, wheat, rubber, sugar cane, jatropha carcus, fruit and vegetables, fisheries, livestock (dairy, poultry and piggery, among others).

Eligible beneficiaries under the scheme as stipulated in section 81) of the bill include: corporate and large scale commercial farm/agro enterprises; integrated large scale farms or agro-base enterprises with assets not less than N350 million with prospects of growing the assets to N500 million within three years; non-integrated commercial farm/agro enterprises with assets not less than N200 million with prospect of growing the assets to N350 million within three years.

Reacting to the initiative, Tony Ejinkenoyen, president of Abuja Commerce Chambers Limited (ABUCCI), noted that if well implemented, it would give a new lease of life to the agricultural sector.

“The proposed N500 billion bond is quite a commendable venture, especially now that the world is facing serious economic recession which Nigeria is not excluded,” Ejinkenoyen told BusinessDay.

“I believe that if properly managed, the scheme will assist in developing the sector and it will be far-reaching enough to rejuvenate the agricultural value-chain of our dear country and also ensure food security for all.”

The scheme also provides opportunity for state governments and the Federal Capital Territory (FCT) to access up to 20 percent of the fund through specialised agencies or secretariats established for the purpose of on-lending such funds to cooperative unions, cooperative societies, self-help groups and agricultural commodities association, in their respective states.

Section 10(1-5) which stipulates the modalities, provides that agricultural credit from participating banks shall be in form of loans or overdraft; interest on loan shall not exceed 5% inclusive of all charges; loan tenure shall be a maximum 10 years; enhancement of credit facility, extension or rescheduling of payment shall be approved by the project management committee, while “the interest subsidy shall be borne wholly by the CBN.”

To guide against infractions, section 15(i) provides that “diversion of funds by the participating bank(s) shall attract penalties at the bank’s average lending rate at the time of infraction. In addition, such participating banks shall be barred from further participation under the scheme.

“Non-rendition or false returns shall attract the penalty stipulated by the banks and other financial institutions Act, section 60 and charging interest rate higher than prescribed shall attract the penalty stipulated by banks and other financial institutions Act section 60.

“Why I brought in the issue of management was borne-out of the fact that often times mismanagement and poor legislation have succeeded in turning good policies into instruments of hardship for citizens. You may recall that not too long ago, there was an alleged introduction of N200 billion commercial agricultural credit scheme by the Federal Government.

“The scheme was part of government’s response to perceived global economic recession,” Ejinkenoyen explained.

“The fund was a bond floated through the Debt Management Office (DMO) with the assistance of the Central Bank of Nigeria (CBN). The aim was to enable farmers to exploit the untapped potentials in the agricultural sector, lower cost of agricultural production, generate surplus for export, increase foreign earnings and diversify the revenue base of the government.

“Now, my question is embedded on the fact that, given the capital requirements for the assessment of the fund, how many farmers were able to access the fund? Also were the stakeholders co-opted in the course of disbursement and management of the fund?

“It is imperative for our law-makers in the business of legislation to consider the capital requirements and all the relevant stakeholders in the management of the proposed N500 billion bond when floated, so as to ensure that they meet the required objectives which are aimed at reviving the agricultural sector, especially now that we are experiencing economic down-turn as a result of dwindling oil prices.

“I reiterate that the proposed bond is an excellent development. If well articulated and implemented, it will thrive. It is viable to bank on good agricultural policies so as to give way for economic development through sustainable agriculture and still realise our target for vision 20-2020,” Ejinkenoyen told our Correspondent.

KEHINDE AKINTOLA