A leap of faith in agribusiness lending

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Ladi Balogun

In December 2020, Nigerian agribusiness sighed in relief with a N74.10 billion loan to the sector. The loan, from First City Monument Bank (FCMB), which represents 10 percent of the bank’s total loans, is one of the highest in the banking industry, hence a laudable feat, as it has grown its loan portfolio to the agriculture sector in Nigeria to N74.10 billion.

The feat, which was achieved in December 2020, is a signal that the deliberate strategy and sustained support of the lender to agribusiness are yielding the desired results and that the bank’s deployment approach has been widely appreciated.
It also represents another milestone and bold step by the bank to further expand and deepen its support to agribusiness, its value-chain and the overall growth of the Nigerian economy.

A breakdown of the N74 billion loans disbursed to agribusiness so far, as at the end of December 2020, shows that the bank’s corporate banking group gave out N38.82 billion, which represents 52.40 percent. On regional basis, the South-West disbursed N19.06 billion; Lagos region, N11.11 billion; South-East and South-South, N3.06 billion, while Abuja and North region disbursed N1.10 billion.

Analysts have already seized this achievement, expressing broadly positive views of its impact for both the lender and stakeholders in agribusiness. An operator described it as: “A positive move and a statement of intent from FCMB to effectively position and benefit more from the current and emerging opportunities in the agric sector to drive business and national prosperity”.
The lender is seen as making far-reaching impact in agribusiness funding and capacity building through its various intervention programmes, including in the areas of digitisation and agritech.

These actions have resulted in better access to finance, research and manpower development by deserving individuals, farmers, organisations and companies in the agric sector, with a multiplier effect on the economy. A major component of bank’s sustainability principle is on agriculture, with a clear focus towards creating employment and empowerment opportunities, especially for farmers, to reduce the level of poverty.

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This intervention in agribusiness financing has led to improved processes, better output, and profitability and enhanced confidence in the ability of the financial services sector to drive economic prosperity. The lender has consistently upscaled its funding and technical support to major companies in the agric sector.

For instance, it extended a N20-billion loan to Olam International to bolster its operations and productivity. It also played a significant role in the establishment of the company’s 36,000 metric tons (per annum) capacity milled rice facility located in Nasarawa State, thereby contributing to the Federal Government’s goal to achieve rice output self-sufficiency.

Flour Mills plc, the largest miller by market capitalisation in Nigeria, equally received $30 million credit facility and N1.50 billion overdrafts from the lender to help support its working capital. Funding worth N300 million was provided some years ago by the bank to Tractor Owners and Hiring Facilities Association of Nigeria (TOHFAN) for the acquisition of tractors that were distributed to farmers in Kaduna State.

In realisation of the gap that exists in agribusiness financing as well as other challenges, it has in place an enhanced agro-commodity trade finance facility for agribusiness operators. The revamped facility is designed for agro-commodity merchants with supply contracts to multinationals, large corporates and processors of agro-commodities.

Targeted commodities are cocoa, cashew nut, sesame, ginger, palm oil, grains (maize, sorghum, soya beans, and paddy rice). Under this trade finance facility, which is structured in the form of a working capital, the minimum amount that can be accessed by a qualified customer is N100 million, while the maximum is N2 billion.

Commodity producers and traders stand to benefit immensely from this facility, because it is a veritable and convenient opportunity to access funds. This ensures consistent cash flow for maximum productivity all through the farming season.

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The lender runs an integrated agency banking model to provide financial services to farmers, especially in remote communities with no access to conventional bank branches. To further bridge this gap, the financial institution is in partnership with some global organisations, including World Savings and Retail Banking Institute (WSBI), German International Development Cooperation (GIZ), Technoserve and DFID-LINKS.

For instance, the aim of the partnership with WSBI, which started two years ago in five states (Kaduna, Kano, Nasarawa, Ogun and Oyo), is on course to reach the target of 2 million farmers nationwide by the year 2023.
These collaborations have gone a long way to deepen agency banking and financial inclusion in the informal and agribusiness sectors, thereby making it easier to effectively profile farmers and execute funding schemes that require their use of bank accounts.

It is also worthy to note that the highly acclaimed partnership between the bank and Doreo Partners, which birthed the Babban Gona (or great farm) agricultural franchise model, is waxing stronger. The initiative, which started few years ago with just 100 farmers, has now grown to over 20,000. The Babban Gona model offers enhanced training, credit, agricultural input, harvesting and marketing support to member farmers to help them increase their productivity and profitability. It has also become an avenue for employment and wealth creation for youths who engage in agribusiness.
These facilities are designed for agro-commodity merchants with supply contracts to multinationals, large corporates and processors of agro-commodities.

Explaining the rationale behind the introduction of the facility in an enhanced form, Kudzai Gumunyu, the divisional head, agribusiness of FCMB, states that the bank recognises the gap that exists in agribusiness financing as well as other challenges faced by operators, including farmers, in the sector.

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According to Gumunyu, “We realise there are millions of agro-traders and processors across the country that need credit at convenient and affordable rates, considering the level of attraction the agric sector has garnered. Our decision to introduce a revamped agro-commodity trade finance facility is part of our intervention in the agribusiness space to ensure agribusinesses and other stakeholders are empowered with the requisite funds and enablers to boost production and marketing of agricultural commodities.
“Commodity producers and traders stand to immensely benefit from this facility, because it is a veritable and convenient opportunity to access funds that ensure cash flow is available for maximum output. We urge all to take advantage of this offering.”
The lender is focused on being a strategic partner in the agric sector to drive the diversification of the Nigerian economy, food self-sufficiency, employment and export earnings, he promised.

Further highlighting its contributions to the agric value chain, he notes the bank had sustained the tempo of support through numerous cutting-edge initiatives through innovative products, saying in 2018, it provided lines of credit that peaked at 8 percent of the bank’s total loan book to the agric sector with the intention to improve on this this milestone.

Farming contributes the biggest share of Nigeria’s economic output and employs more than half of the country’s estimated 200 million population, most as small-scale farmers. The government of Africa’s most populous nation has put in place several policies and programmes to diversify the economy from the oil and gas sector to non-oil products.

The bank is a member of FCMB Group plc, which is one of the leading financial services institutions in Nigeria with subsidiaries that are market leaders in the irrespective segments. Having successfully transformed to a retail banking and wealth management led group, FCMB Group expects to continue to distinguish itself through innovation and the delivery of exceptional services.

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