Central Bank Bids To Take Over Abuja Commodities Exchange

Concerned about the negative impact the absence of an active commodity exchange is having on agricultural commodities trading in the country, the Central Bank of Nigeria (CBN) yesterday asked the federal government to allow it take over the Abuja Securities and Commodities Exchange (ASCE) to help it deliver on its mandate.

CBN governor, Sanusi Lamido Sanusi, who was speaking at the opening of a two-day stakeholders’ conference on Nigeria’s Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) in Abuja, said if properly positioned through adequate funding and clarification of its corporate governance policies, the Exchange could provide the platform for trading in agricultural commodities.

According to Mr Sanusi, following the dissolution of the country’s commodity marketing boards in 1986, commodity merchants had exploited the dearth in the coordination of the small holder farmers’ produce, thus creating a disconnection between primary producers, processors and marketers operating in silos.

He said the break in the commodity value chain among these stakeholders has to be bridged through the establishment of vibrant and viral producers, processors and marketers commodity associations along each value chain, to boost their incomes.

Though Mr Sanusi identified agriculture as the most potent sector with the capacity to help realise Nigeria’s aspiration to emerge as one of the world’s economic giants, he noted that developing farming from the current level of subsistence has remained a challenge that requires a holistic approach to redress.

Agriculture, he pointed out, has suffered from gross under-funding over the years, with less than four percent of the federal budget allocated to the sector since 2006, contrary to the 2003 African Union (AU) Maputo Declaration that requires member countries to raise investments in agriculture to at least 10 percent of national budget by 2008.

Similarly, the governor said private sector investment in the development of the country’s agricultural value chain has remained at the lowest level owing to perceived risks, distortions and uncertainties, adding that though agriculture accounts for about 40 percent of the gross domestic product (GDP), lending to the sector hardly rises above 1.4 percent of total banks’ lending capacity.

Other challenges identified include serious fragmentation in the input segment of the sector as a result of poor coordination at state and national level, pointing out that on the average, farmers in sub-Saharan Africa use between 10 and 15 kilogrammes of fertiliser per hectare of arable land compared to only 15 percent of the 144 kg per hectare used by their counterparts in Asia.

Absence of extension workers

Besides, he also identified absence of extension services, ineffective research and development, declining productivity as well as weak backward and forward linkages between agriculture and other sectors as reasons for Nigeria’s poor crop yield being rated among the lowest in the world, with average maize yield put at about 1.4 tons per hectare as against 10 tons per hectare in Asia, America and Europe.

Bemoaning the impact of these challenges on the growth of agriculture in the country, Mr Sanusi said from her pole position occupies in the 1960s in the exportation of key crops, namely cocoa, groundnut, cotton, rubber and palm produce, Nigeria’s records in the decade have declined for over 60 percent in global palm oil exports, 30 percent in groundnut and 15 percent in cocoa.

“Today, the reverse is the case, as Nigeria’s agricultural import bill stands at N630billion annually, with large food products imports including wheat (N165billion), fish (N105billion), rice (75billion) and sugar (N60billion),” he said.

While calling for a reversal of the trend, Mr Sanusi noted that in the last five decades, agricultural financing has not got the desired result due to lack of farm expansion,

lack of assured markets and forward linkages from primary production to processing.

With a projection that the country’s agricultural sector can grow by 160 percent from its current output value of N15.25trillion to 39.4trillion by 2030. He expressed optimism that the NIRSAL initiative, which is designed to de-risk the financing value chain, would help address the gaps in the agricultural and financial sectors, by helping build long-term capacities as well as institutionalise lending incentives.

Under the initiative, N46.5million has been set aside under the risk sharing facility (RSF) to support deployment of different instruments to help reduce risk in agricultural lending; N4.65billion for insurance facility; N9.3billion for technical assistance; N1.55billion for agricultural bank rating system and N15.5billion to build long terms capacities for lending to agriculture.