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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.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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