Minister of Agriculture and Rural Development Alhaji Sabo Nanono had cause last week to lament about the distressed state of the Bank of Agriculture. He was particularly disheartened to note that a bank established to cater for the needs of Nigerian farmers was in such a poor state and nothing was being done to address it.
Nanono’s comment is quite significant bearing in mind that agriculture is one of the key areas which the present administration pledged to pay close attention to in its economic diversification programme. That the Bank of Agriculture, which is a very important enabler in the sector, is in such a state calls to serious question the administration’s commitment towards attaining this objective.
As the Minister noted, the bank has been in a critical state for quite some time now. The genesis of this state of affairs could be traced to 1987 when the Bank took a loan in millions of dollars from the African Development Bank, ADB, which it disbursed to farmers in naira. The naira exchange rate to the dollar however fell drastically afterwards and although farmers paid up their loans to the Bank, the bank could not repay ADB due to the new naira to dollar exchange rate. The Bank thus found itself in debt and with compound interest on the loan. Over the years, BOA also accumulated bad loans that were given politically-exposed “farmers.”
A look into the Bank’s current challenges indicate that it is saddled with low capital base, obsolete IT infrastructure, poor staffing capacity and productivity, non-performing assets, poor financial reporting and decaying infrastructure. The bank has also not been immune to the issue of political interference with its loan disbursement. Over the years it was discovered that a huge chunk of the beneficiaries of its loans were politically connected persons from whom the bank found it difficult to recover its loans.
The most challenging of these is the low capital base of the Bank. With a debt overhang of 8 billion naira, the Bank is not able to raise the 10 billion naira needed to get the license for banking operations. As a result, it is not able to fulfil its core mandate of agricultural financing, rural development and financial inclusion. At present the bank has not been able to do its part in implementing the Federal government’s agenda for green alternative and the initiative for food security, job and wealth creation, economic diversification and import substitution.
It is not all negative though for the bank. From available records, the bank has been able to return a very positive performance on the government’s Anchor Borrowers Scheme (ABP). As at August this year, with a credit portfolio of 104.2 billion naira, the bank was able to reach out to 425,251 farmers with total hectares of 466,323.18. All this led to the creation of 4,252,510 indirect jobs across the country.
This goes to show that with proper business realignment and prioritization, the bank can still play its role in the development of the agriculture sector. We must not lose sight of the fact in many countries around the world, agriculture is one of the key drivers of economic development contributing substantially to the Gross Domestic Product (GDP). Indeed in Nigeria, agriculture contributes more to GDP than oil and it generates the highest employment. However, we have not grown this vital sector to its full potential for the benefit of the country.
In this wise, we agree with the minister that the Bank of Agriculture needs to be reorganized and repositioned. We also agree with the minister that selling the bank now in its distressed state would amount to a fire sale which will yield neither the buyers nor the government any meaningful dividends. The proper thing to do under the circumstances is to recapitalize the bank but with stringent safeguards in order to prevent a repeat of what brought it to where it is now.