Diversifying Nigeria’s Economy: A Review Of FCMB’s Intervention In Agribusiness | Independent Newspapers Limited
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Diversifying Nigeria’s Economy: A Review Of FCMB’s Intervention In Agribusiness

Posted: Sep 4, 2015 at 12:00 am   /   by   /   comments (0)

By Nkasiobi Oluikpe,


In this write-up, our reporter reviews developments in the agribusiness sector of the economy, highlighting the impact First City Monument Bank (FCMB) is making in this area.

Nigeria is blessed with favourable climatic conditions, vast arable land and fertile soil. The significant role agriculture plays in any nation’s quest to achieve stainable development has never been in doubt. Besides ensuring food availability and the eradication of hunger,  agriculture, as attested to by empirical evidence, remains instrumental to effective jobs and wealth creation, as well as in spurring economic development. In other words, countries could, through agriculture, create additional agricultural value chains on the line, while at the same time, exploiting whatever other resources nature had blessed them with.

Of concern, however, is that as desirable as agriculture is to economic well-being, many countries in the sub Saharan, are yet to maximize their potentials. In the case of Nigeria, it is a combination of various factors, some of which include the relegation of agriculture to subsistence farming; non-prioritisation of agribusiness at different levels of government; lack of infrastructure- such as poor storage facilities, poor state of research, poor extension and disjointed value chains as well as the distraction occasioned by the discovery of oil.

Each of these factors has had a far-reaching impact on the development of agriculture in the country, but of much more impact was relegating agriculture to the background, the moment petroleum was discovered as a prime revenue earner. Millions of productive men and women, especially the youth, headed to the cities to work in factories and refineries, or at various administrative posts with dignified statuses.

Having realized this, governments of various countries are presently demonstrating a readiness to embrace agriculture and leverage on its potentials. However, the point still remains that the sector is still fraught with some challenges, including scarcity of resources, lack of technology, infrastructural inadequacies and climate change. What appears even much more gargantuan is the challenge of financial resources for the agriculture sector, believed to contribute between 20 and 30 per cent to the nation’s Gross Domestic Product (GDP).

From available statistics, 150 million Nigerians live on less than $1 per day, and the bulk of this poor population, ironically, are the small-scale farmers who do not have access to funds. This is in addition to other associated challenges, they are saddled with.

The former Governor of the Central Bank of Nigeria (CBN), Mallam Lamido Sanusi, had alluded to this while speaking on the nation’s agricultural sector, but stressed that of all challenges, key is the lack of access to finance and the resultant inability to invest in basic farming inputs such as seedlings, fertilizers, implements and irrigation. He said these had led to a situation where yields have remained largely stagnant, leading to pervasive hunger and poverty.

According to him, the nation’s banking sector reform has been directed to the real sector as it seeks to position the system to contribute to the growth and development of the various sectors of the economy. Sanusi further put the annual demand for agribusiness financing over the next 40 years to about $6.5 billion per annum, compared to the current annual fund supply of $1.5 to $5 billion. “This presents a huge financing gap which a forum such as this should be able to critically examine and develop policies and implementation frameworks to minimize the gap in the interest of agricultural development in the region.”

First City Monument Bank (FCMB), as a leading financial services provider, appears to have realized this early enough. A major component of the Bank’s sustainability principle is on agriculture and empowering farmers with a view to reducing the level of poverty among them as part of its financial intermediation role for national development. This is supported by the fact that the bank’s agric intervention has resulted in better access to financial resources by needy individuals, organisations and companies. It has also led to improved processes, better output and profitability. Much more, it has enhanced confidence in the ability of the financial services sector to drive economic growth.

One of FCMB’s initiatives is the collaboration with the International Financial Corporation, (IFC). The partnership is expected to yield an investment package for the agribusiness and education sub sectors of the economy. By the agreement, the IFC is to route more lending to private businesses involved in the agribusiness sector, which, as already stated, is a key driver of the country’s economic growth. The bank had reasoned that continued credit availability for agricultural-based businesses would help maintain the sector’s growth momentum. The package, a long-term loan of $50 million and a convertible loan of $20 million, is targeted at supporting the bank’s growth strategy and helping it to increase financing of small and medium enterprises.

Commenting on that collaboration, Mr. Ladi Balogun, Group Managing Director/Chief Executive, First City Monument Bank Limited, who had viewed IFC’s investment as a stamp of approval on the bank’s strategy and commitment to good corporate governance and risk management, said “this partnership with IFC would help FCMB achieve our strategic growth objective.”

In the same vein, Mr. Kudzai Gumunyu, Divisional Head, Agricultural Business Finance, FCMB while elaborating on the bank’s interest in agric financing, asserted that agriculture was the first occupation for man from creation and will remain the most vital until the end of time. “That agriculture has the potential to stimulate economic growth is no longer news. It follows that agricultural financing is an important instrument of economic policy for Nigeria, in her effort to stimulate development in all directions”.

Beyond this is the fact that agriculture is the biggest employer of labour in Nigeria and other developing economies even as it has been demonstrated that economies that are self-sustaining in agriculture have relatively lower inflation rates. Nigeria is blessed with fertile soil, good rainfall, reasonable priced labour and a huge demand for agricultural produce, owing to a large population base. It would therefore, be unforgivable if such a blessed country does not have the bragging right as a major exporter of agricultural commodities in the world.  Gumunyu revealed that FCMB intends to partner with players in the agric space with a view to taking advantage of the many opportunities it presents and ultimately contribute positively towards economic growth, employment creation, import substitution and economic sustainability”.

Allaying fears by farmers that the turn-around time and conditions attached to some credit facilities could be prohibitive, he said, with the FCMB facility, it is a positive experience. In his words:  “Farmers have a point in complaining about slow approval processes as their businesses are season bound and need timorous access to finance. Most complaints stem from some Nigerian banks not understanding the farmer’s businesses. Fortunately they will not experience this at FCMB as we have a team of experienced and qualified Agric Bankers who do not only have a holistic knowledge about agriculture, but its associated businesses, especially the fact that they are time and season bound. We are committed to providing feedback to clients on the status of their requests within competitive timelines. This is provided we are in possession of all the requisite information which can enable us make a decision. However, farmers have to realize that they also can help by providing the requisite information and that not all credit can be approved as the bank has to be satisfied with the risk and return of such transactions’’.

He added that, the bank has put in place systems and processes to improve its credit turnaround time, including the recruitment of Agric Credit Analysts who are dedicated to working on agric transactions and a structured trade and commodity finance team, which to date, has assisted in several structured commodity finance deals that ensured prompt service delivery to customers. ‘’Every loan request is treated on a case by case basis. Requests for intervention funds from the CBN are dealt with using the attendant guidelines governing such scheme.

It is equally worthy of note that FCMB’s agric financing portfolio was 0.8 per cent of the banks book in January 2012 and has grown to 6.64 per cent of the bank’s assets by 31 July 2015.  The bank’s interventions cut across various enterprises and activities in the agric value chain. These include poultry, fisheries, oil palm production and processing, cassava, maize production, commodities trading, among others. The bank is also active in other value chain sections such as agrochemicals, fertilisers, seed and mechanization, and has been deploying unique solutions for inclusive banking as well as asset financing. On what distinguishes the FCMB agric loan packages from other banks in the country, Gumunyu asserted that FCMB provides its clients with expert advice on best practices to enhance their operational efficiency and equally brings innovativeness to bear in designing its agric products. A case in point is the mechanisation product, specially structured to suit Small Holder agriculture. Also, loan packages are designed to address specific financial challenges and cost of transactions based on robust agric credit policy.

All said and done, the bank’s intervention in the agribusiness sector appears set to have far-reaching impact on this crucial sector of the economy, as attested to by the Chairman of Tractor Owners and Hiring Facilities Association of Nigeria (TOHFAN), Alhaji Danladi Garba, who commended FCMB for its support to the agric sector and farmers, at an engagement with the media in Lagos. FCMB has provided funding worth N300 million to TOHFAN for the acquisition of tractors that were distributed to farmers in Kaduna State.

The bank has also collaborated with Doreo Partners to launch a support programme for farmers, known as Baban Gona (or ‘’great farm’’). This is an agricultural franchise model, where farmers are trained and offered specially packaged loans to carry out their farming activities. The programme is still running and its impact is being felt across the country.

“It is indeed comforting that the bank’s helmsman,Mr. Balogun recently reiterated that its agric intervention is real, and that it is building a solid agric business that is at the centre of transforming the economy. We truly want to continue employing the growing population, we therefore need to not only feed Nigeria, but feed the world,” Garba said.