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Diversification, Agric Evolution and Financing Opportunities

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  • Diversification, Agric Evolution and Financing Opportunities

The Nigerian banking system plays the important role of promoting economic growth and development through the process of financial intermediation. One of the more recognised ways of creating jobs, reducing poverty and achieving economic growth and development is by the timely extension of credit to the to the agriculture sector through their activities.

The agriculture sector contributed 22.5 per cent to Nigeria’s overall gross domestic product (GDP) in the second quarter of 2016 and real agricultural GDP growth for the period was 4.53 per cent (year-on-year), according to data from the National Bureau of Statistics (NBS).

This is higher than the headline GDP figure (-2.07 per cent) suggesting that recent interventions in the sector by the Central Bank of Nigeria (CBN) and banks are paying off.

For example, DMB’s credit to the agriculture sector as a percentage of total loans has more than tripled to about 4.9 per cent today from below one per cent in 2009.

In recent years, the sum of over N1.7 trillion of seed funding, has been set aside under five CBN intervention programmes to stimulate development of various agricultural value chain segments from primary production to market access with multiplier effects that cannot be overemphasised. These programmes are meant to support small, medium and commercial/large scale agriculture.

Some of these schemes include the Agricultural Credit Guarantee Scheme (N69 billion); Commercial Agricultural Credit Guarantee Scheme (N200 billion); the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (N200 billion); and Small and Medium Enterprises Credit Guarantee Scheme (N200 billion). In addition to funds created by the CBN, commercial banks have also set up agriculture desks in their respective organisations, signaling a renewed commitment to support and sustain the growth of the sector.

The Commercial Agriculture Credit Scheme (CACS)

Tremendous progress has been recorded under the Commercial Agriculture Credit Scheme (CACS). For example, from inception in 2009, a sum of about N266.025 billion has so far been released to the economy through 20 participating banks funding about 347 projects.

The analysis of the number of projects financed under CACS by value chain showed that out of the 347 CACS-sponsored projects, production accounted for 57.06 per cent, while processing accounted for 33.14 per cent, distantly followed by marketing, storage and input supplies.

A total number of 29,046 jobs were created- 11,717 direct and 17,329 indirect employments during the period under review, while five out of the 310 private projects are owned and managed by women.

Union Bank of Nigeria and United Bank for Africa Agriculture Strides

Examples of banks offering agricultural micro-loans for farmers in Nigeria are Union Bank of Nigeria (UBN) and United Bank for Africa (UBA). Union Bank has over a sustained period of time, provided revolving micro credit to rural farmers as a means of driving investment in the agriculture sector, while UBA in 2009, floated the largest private sector funding scheme of N50 billion to support agriculture and agro-processing industries in Nigeria and targeted at all segments of the agriculture chain, from small and medium scale farmers to large, industrial farming projects in poultry, fishery, crop cultivation, production, plantation, farm machinery, and hire services.

Union Bank was recently named the “Best participating bank in Nigeria” under the CBN Agricultural Credit Guarantee Scheme Fund (ACGSF) and “Best Commercial Agriculture Bank” by Nigeria Agriculture awards. The Greener Pastures Initiative is Union Bank’s flagship agricultural initiative that provides support to small-holder farmers and cooperatives, and focuses on harnessing the relationships built through the bank’s long -standing agribusiness department.

On the other hand, UBA was also honoured recently with an award as Nigeria’s biggest lender to agriculture by the Lagos Chamber of Commerce and Industry (LCCI). UBA’s agriculture fund is part of its Food for the Nation programme, and is aimed at improving food security, poverty alleviation, and providing a timely boost to agriculture.

UBA has sustained its commitment to the agriculture sector by committing an average of seven per cent of its loan book to agriculture financing and was one of the two banks selected in 2010 to administer the N200 billion Agriculture Fund set up by the CBN because of its commitment to agricultural financing as well as its spread across the country.

The UBA facility will be available to farmers at below single-digit interest rates through three credit products- the Agriculture Credit Support Scheme, Agriculture Credit Guarantee Scheme, and Food Security Support. Beneficiaries who must be practicing farmers and belong to farmer’s associations or co-operatives throughout the entire agriculture value chain can also avail themselves of facilities provided by the scheme through any of the over 750 business offices of UBA.

Projects to be financed include rice, wheat, maize, millet, sorghum, cassava, yam, poultry – chicken and eggs, animal husbandry –cattle – as well as fish farming.

Nigeria’s agricultural revolution has been reinvigorated and deposit money banks are well positioned to provide the financial support required to make Nigeria not just self-sufficient, but a net exporter of processed food items.

• This is the second article in a series for the Bankers Committee of Nigeria. It is focused on raising awareness around Nigerian banks’ efforts and most importantly educating the public on opportunities available to them to foster their active participation in our nation’s diversification efforts.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply

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The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.

This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.

According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.

The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.

OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.

The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.

On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.

Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.

On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.

This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.

However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.

“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.

The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.

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Crude Oil

Oil Rises Over Concerns of Fuel Shortages

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Oil prices rose on Tuesday, as lingering fears of gasoline shortages due to the outage at the largest U.S. fuel pipeline system after a cyber attack brought futures back from an early drop of more than 1%.

Brent crude futures rose 35 cents, or 0.5%, to $68.67 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 49 cents, or 0.8%, to $65.41.

Benchmark gasoline futures prices rose 1 cent to $2.14 a gallon.

On Monday, Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, said it was working to restore much of its operations by the end of the week.

Right now there’s a generalized anxiety premium being built into prices because of Colonial and it’s keeping a floor under the market,” said John Kilduff, partner at Again Capital LLC in New York.

Fuel supply disruption has driven gasoline prices at the pump to multi-year highs and demand has spiked in some areas served by the pipeline as motorists fill their tanks.

Traders booked at least four tankers to store refined oil products off the U.S. Gulf Coast refining hub after a cyber attack that knocked out the pipeline, shipping data showed on Tuesday.

North Carolina, the U.S. Environmental Protection Agency and Department of Transportation issued waivers allowing fuel distributors and truck drivers to take steps to try to prevent gasoline shortages.

OPEC on Tuesday raised its forecast for demand for its crude by 200,000 bpd and stuck to its prediction of a strong recovery in global oil demand this year as growth in China and the United States counters the coronavirus crisis in India.

Meanwhile, the rapid spread of infections in India has increased calls to lock down the world’s second-most populous country and the third-largest oil importer and consumer.

India’s top state oil refiners have already started reducing runs and crude imports as the new coronavirus cuts fuel consumption, company officials told Reuters on Tuesday.

On the bullish side for crude, analysts are expecting data to show U.S. inventories fell by about 2.3 million barrels in the week to May 7 after a drop of 8 million barrels the previous week, a Reuters poll showed.

Gasoline stocks are expected to have fallen by about 400,000 barrels, analysts estimated ahead of reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.

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Markets

SEC To Ban Unregistered CMOs From Operating By Month End

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The Securities and Exchange Commission (SEC) says it will stop operations of Capital Market Operators (CMOs) that are yet to renew their registration on May 31, 2021.

This was contained in a circular signed by the management of SEC in Abuja on Monday.

On March 23, SEC had informed the general public and CMOs on the reintroduction of the periodic renewal of registration by operators.

The commission noted that the reintroduction of the registration renewal was due to the need to have a reliable data bank of all the CMOs registered and active in the country’s capital market.

“To provide updated information on operators in the Nigerian Capital Market for reference and other official purposes by local and foreign investors, other regulatory agencies and the general public, to increasingly reduce incidences of unethical practices by CMOs such as may affect investors’ confidence and impact negatively on the Nigerian Capital Market and to strengthen supervision and monitoring of CMOs by the Commission,” SEC explained.

According to the circular, the commission said CMOs yet to renew their registration at the expiration of late filing on May 31, would not be eligible to operate in the capital market.

It explained that CMOs were required to have completed the renewal process on or before April 30, however, the commission said late filing for renewal of registration would only be entertained from May 1 to May 31.

SEC also said that asides from barring the CMOs who failed to comply accordingly, their names would be published on its website and national dailies.

It added that names of eligible CMOs would be communicated to the relevant securities exchanges and trade associations.

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