The Pacesetter Frontier Magazine

Tag: Food insecurity

  • Food Insecurity, Food Inflation and a Dwindling Manufacturing Sector in Nigeria: A National Threat to Sustainable Development

    Food Insecurity, Food Inflation and a Dwindling Manufacturing Sector in Nigeria: A National Threat to Sustainable Development

    By Ikenna Igwe

    The issue of food inflation and food insecurity have continued making the news headline in today’s Nigeria. To be fair, the issue of food insecurity is not something that is alien to Nigerians but with the current administration of President Tinubu, things seem to be going south.

    According to the National Bureau of Statistics (NBS) reports, food inflation rates stand at 33.93% on a year on year basis, that is 10.18% higher compared to the rate recorded one year prior. According to the bureau, the rise of food inflation on a year on year basis was caused by an increase in the price of common household food items like beans and cereals, milk, eggs, yam and other tubers. The headline inflation rates increased in January 2024 when compared to the same ones in the preceding year.

    Furthermore the report shows that on a month on month basis, the inflation rate in January 2024 was 2.64% which was 0.35 higher than the rate recorded in December of 2023 (2.29%). Still on the report, the food inflation rate in January 2024 quickened to 35.41% on a year on year basis, which was 11.10% higher compared to the rate recorded in January 2023 (24.32%).

    This whole state of affairs became more complex after the announcements of the removal of fuel subsidy. These brought about an upward trend in the price of basic commodities as well as other products which have played a major role in weakening the naira and in the reduction of the purchasing power of many citizens.

    Forex scarcity orchestrated by exponential demand for Dollar by Nigerians, as well as unremitted Forex backlog by the Central Bank of Nigeria have further mounted pressure on the naira.

    As the inflation rate clocked a 28 year high when it rose to 29.90% in January, so many sectors of the economy were deeply affected and one of those sectors was the manufacturing industry.

    The Manufacturing Association of Nigeria (MAN) has released a disturbing trend within the industry revealing that about 765 manufacturing companies have shut down while 335 experienced distress in 2023. This development is attributed to various economic difficulties including exchange rate volatility, rising inflation and a general worsening of the investment climate. These advertises have taken a toll on the manufacturing industries, significantly impacting its performance and sustainability. 

    Downturn in Capital Utilization

    The manufacturing industry, as reported by MAN stated on their report: “Capital utilization in the sector have declined to 56%, interest rate is effectively above 30%, foreign exchange to import raw material has dried up and production machinery inventory of unsold finished products have increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2,000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion”.

    A country that has a shrinking manufacturing industry, Forex scarcity to import, rising inflation, growing population and a worsening food crisis and poverty, is. Country urgent need of a reform. 

    Bold Step in the Right Direction

    Senator Abubakar Kyari, the Minister of Agriculture and Food Security on the 11th March, 2024 released a statement in which he said that the Federal Government had secured a €995 million deal between the Brazilian government and the German Deutsch bank group to finance a green imperative program in Nigeria.

    The program aims to create Mechanization Hubs in each of the 774 local government areas in Nigeria as part of its implementation plan. This comes as the administration of President Tinubu remains committed to ensuring food sufficiency and protecting local industry for sustainable economic growth. Part of the memorandum of understanding between the Federal Government and the John Deer group, a subsidiary of Tata Equipment clearly states: “The manufacturers have signed to deliver 10,000 units of tractors and implement in tranches of 2,000 units per annum for the next five years”.

    This is a welcomed development given the fact that the Nigerian agricultural sector recorded just a miniature 0.50% of the total foreign capital import of 2023. Amidst soaring food inflation and complaints of food shortage being experienced across the country, the need to quadruple investment and efforts as regards to agricultural output can’t be overemphasized.

    As we are preparing for the second quarter of the year, we are optimistic that more investments, programs, interventions and empowerments will be pushed into the agricultural sector and the manufacturing sector in order to have a sustainable economy. 

  • Food Insecurity Ravaging Nigerians (A Country at the Verge of Starvation)

    Food Insecurity Ravaging Nigerians (A Country at the Verge of Starvation)

    By Ikenna Igwe

    Nigeria is Africa’s biggest economy and its largest population with over 200 million people. One of the world’s largest youth population is at risk of running out of food and facing a possible economic collapse.

    Recent reports from the Food and Agriculture Organization (FAO), a UN specialized organization on food, estimates that approximately 25 million Nigerians are experiencing a hunger epidemic. This is a projected increase from the estimated 17 million people currently at the risk of food insecurity. Food access has been affected by the persistent violence in the Northeast states of Borno, Adamawa and Yobe and armed banditry in states such as Katsina, Sokoto and Niger. Also a detailed report from the National Emergency Management Agency (NEMA) stated that widespread flooding in the 2022 raining season resulted to the destruction of 676,000 acres of farmland, with the accompanying diminished harvest and increased food insecurity for families across the country.

    Major Causes of Food Insecurity

    -Armed violence and banditry: Top of the list would have to be the relentless wave of attacks against farmers in Nigeria by armed groups. This has hindered critical food supplies and has threatened to push the country deeper into a devastating hunger crisis.

    Report from “Save the Children” stated that the increasing attack against farmers across parts of the country is leading to displacement, market disruption and loss of livelihood. According to the “Nigerian Security Tracker”, armed groups have killed more than 128 farmers and kidnapped 37 others across Nigeria between January and June 2023. In addition, an estimated 2 million children under five across the northern Nigerian states of Borno, Adamawa and Yobe are likely to be pushed into acute malnutrition in 2023 with about 700 children on the brink of death.

    As many farmers are fleeing their farmlands and leaving acres of arable land to lay waste because of these attacks, the whole country’s economic framework is not just threatened but at risk of total collapse because a country which can’t feed majority of its population is doomed to fail. On a scale of preference base, the issue of food security should be on the frontline of all government policies.

    -Climate change: As weather fluctuations are causing harsh weather patterns, droughts, extreme temperature and flood, agricultural productivity and food production are being affected not only in Nigeria but also globally.

    Data from the Nigerian Meteorological Agency (NiMet) shows that the duration and intensity of rainfall has changed from normal across some states over the years with devastating impact on agricultural practices. Last year, Nigeria witnessed one of its worst flood as hundreds of villages and urban centers were submerged in water which displaced over 2.4 million people.

    According to NiMet official statistics, over 600 Nigerians died in the disaster while expansive acres of farmland were destroyed with ripple effect on the country’s food availability, affordability and safety.

    Optimistic Approach to Combating Our Current Plight

    In response to the food insecurity plus soaring inflation rates and the removal of the fuel subsidy, on the 13th of July 2023, the Federal Government declared a state of emergency on the food insecurity in the country. It unveiled a comprehensive intervention plan to create available, affordable and safe food for the nation. Some of the intervention plans stated were:

    * Immediate release of fertilizer and grains to farmers and households. 

    * Increased security measures for farmers and farms. 

    * Activation of 500,000 acres of land for farming and river basins for continuous farming.

    * Improvement of transportation and storage facilities for agricultural products.

    However there are concerns that have been expressed in various quarters about the willingness of the government to deliver on these commitments and promises in a timely and organized manner. In a statement, Fisayo Kayode, a senior manager at Sahel Consulting Agriculture and Nutrition Ltd, believes that the declaration is not anything novel because Nigeria has been in a food crisis for a long time.

    Food security she said, is not only focused on affordability, it also includes accessibility and food safety. She noted that over 40% of food produced in Nigeria get wasted due to poor logistics and infrastructure for proper aggregation, storage and processing. Adding that distributing fertilizers and seeds as captured in President Tinubu’s plan for farmers every planting season will not solve the problem. 

    At the final analysis, we implore every Nigerian to try as much in their power to grow their own food especially those in the rural areas with more access to fertile lands as we hope that the implementation of the proposed plans to address the food insecurity by the government are properly executed after we have experienced repeated failure by past governments. 

  • Food Insecurity: A mammoth that needs to be defeated

     

    The Central Bank of Nigeria (CBN) is exercising its power to reflate the economy through funding support for key sectors especially the agricultural sector. The Anchor Borrowers’ Scheme, Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS), Commercial Agricultural Credit Scheme (CACS), the Agricultural Credit Guarantee Scheme (ACGSF) and other initiatives were introduced by the apex bank to support local farmers in making food available to the population, encourage the consumption and patronage of Nigeria farm produce and supporting domestic economy,

     

    Before now, farmers were the least that banks would consider for loans. Such loans, if approved, were deemed lost from the outset, especially when advanced to smallholder farmers.

     

    Today, the story has changed. Both the smallholder farmers and commercial farmers can access long-term loans from banks at a single interest rate.

     

    Also, lenders, which previously saw agricultural credits as high risk, are now seeing the potential of how much a well-priced facility can add to their balance sheets and profitability.

     

    The new thinking in agriculture credit and access to loans by farmers was made possible by several intervention programs instituted by the Central Bank of Nigeria (CBN) to lift the agricultural sector and support food sufficiency.

     

    The Anchor Borrowers’ Scheme, Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS), Commercial Agricultural Credit Scheme (CACS), the Agricultural Credit Guarantee Scheme (ACGSF) among others are few examples of the CBN’s footprints in the agricultural sector.

     

    The CBN Governor, Godwin Emefiele said the apex bank has disbursed funds under its various agricultural interventions towards improving food supply in Nigeria.

     

    He said the Anchor Borrowers’ Programme (ABP), launched in Birnin Kebbi, Kebbi state capital, in 2015 to ensure easy loan access to farmers.

     

    According to Emefiele, under the ABP, farm inputs are provided in cash and kind to smallholder farmers (SHF), thus guaranteeing input supply to agro-processors. During harvest, the farmer supplies produce to the agro-processors (anchors) who then pay the cash equivalent to the farmer. Rice, a major commodity under the ABP, is the third-most consumed staple food in Nigeria — after maize and cassava — and has become a food security crop due to its increased significance in the country.

     

    Emefiele explained further that over 3.1 million farmers have been financed for the cultivation of crops across twenty-one agricultural commodities captured under the ABP since inception.

     

    “A total of 3,107,890 farmers had been financed for the cultivation of 3,801,397 hectares across 21 commodities through 23 Participating Financial Institutions in the 36 States of the Federation and FCT, from the inception of the programme till date,” Emefiele said.

     

    He added that under the 2020 wet season CBN-Rice Farmers Association of Nigeria (RIFAN) partnership, the bank also financed 221,450 farmers for the cultivation of 221,450 hectares in 32 States.

     

    Emefiele expressed hope that the incentive would improve the standard of living of farmers in Nigeria, motivate prompt loan repayment and ultimately enhance the sustainability of the programme. “Loan repayment is the hallmark of every credit cycle and the sustainability of the programme is hinged on farmers’ ability and willingness to repay their loans, and we are constantly engaging with them to enhance their trust in the system,” he said.

     

    Taofik Ibrahim, a rice farmer, said the ABP has been of great support to his farm, as the yield per hectare has improved with one hectare yielding an average yield of 90 bags of rice paddy on optimally performing land. The minimum was about 75 bags.

     

    He explained that with ABP, farmers are provided with six bags of fertiliser per hectare, a water pumping machine, and herbicide, then cash support.

     

    According to him, more people in Kebbi, including civil servants, have gone into farming because of the opportunity provided by the CBN through the ABP.

     

     

    How intervention funds are disbursed

     

    CBN data showed the apex bank disbursed N107.60 billion to 548,109 farmers cultivating 703,619 hectares of land between the fourth quarter of 2020 and the first quarter of 2021 to boost dry season output in support of agricultural value chain development.

     

    Total disbursements as of end-February 2021 amounted to N1.487 trillion under the various agricultural programmes, of which N686.59 billion was disbursed under the Commercial Agricultural Credit Scheme (CACS) and N601.75 billion under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers to support food supply and dampen inflationary pressures.

     

    The CBN also authorised commercial banks to give up to N2 billion maximum loan to youths interested in going into agriculture.

     

    The loan, which comes under the Accelerated Agriculture Development Scheme (AADS) at a five per cent interest rate per annum was created by the regulator in collaboration with state governments to engage 370,000 youths in agricultural production.

     

    According to the loan guidelines signed by CBN Director Development Finance Department, Yusuf Yila Philip, the maximum loan accessible under the scheme is N2 billion per obligor.

     

    Philip said the country’s population pyramid is bulging around the youth segment, with an estimated 75 per cent of the population which is below 35, saying a large segment of this population would have eked out a living if adequate opportunities were harnessed in agriculture given its potential of employing over 70 per cent of the workforce.

     

     

    AGSMEIS funding limit

    To the success of the AGSMEIS scheme, the CBN has pegged non-interest banks’ funding of agricultural programmes at a maximum N2 billion equity.

     

    The investment is set at 40 per cent of the investee company’s equity subject to a maximum of N2 billion and tenor of up to 10 years. It has an initial lock-up period of three years.

     

    The new rule is contained in the guidelines for the Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS) for Non-Interest Financial Institutions (NIFIs) released by the apex bank.

     

    The guidelines, signed by CBN Director, Financial Policy and Regulations Department, Kelvin Amigo, described AGSMEIS as an initiative of the Bankers’ Committee supporting the government’s policy measures and efforts for the promotion of agricultural businesses.

     

    “The AGSMEIS Non-Interest Fund will be domiciled in a dedicated account with the CBN while each Non-Interest Deposit Bank, full-fledged or window, shall set aside five per cent of its profit after tax (PAT) annually as a contribution to the fund”.

     

    “Also, each Non-Interest Deposit Bank shall transfer its contribution to the CBN not later than 10 working days after the Annual General Meeting (AGM) of the participating bank,” the guideline said.

     

    The eligible activities under the scheme include businesses across the agricultural value chain, covering production, inputs supply, storage, processing, logistics and marketing. Also captured in the scheme are (MSMEs) in the real sector including manufacturing, mining and petrochemicals; MSMEs in the service sector including information and communication technology (ICT) and the creative industry and other activities as the Central Bank of Nigeria (CBN) may determine from time to time.

     

    A Special Purpose Vehicle (SPV) shall be established to manage and monitor investments/projects under the scheme. The guidelines also said the application of the fund shall be categorised into three broad components: debt ( 50 per cent), equity (45 per cent) and developmental components (five per cent).

     

    The debt component shall constitute 50 per cent of the fund which shall be d isbursed to eligible businesses through Non-Interest Deposit Money Banks.

     

     

     

     

     

    Source: www.thenationonlineng.net