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Agriculture lending in Nigeria is growing — Adesina

By BusinessNews Staff on June 8, 2014

The successes recorded in the agricultural sector under the Agriculture Transformation Agenda (ATA) have led to increased lending to the sector by banks within and outside the country.

The Minister of Agriculture, Dr. Akinwumi Adesina, disclosed that agricultural lending as a share of total bank lending rose from 0.7 % to 5% within two years of the ATA.

Speaking at the International AgrikExpo in Lagos, Adesina said the financial sector is seeing the profitability and viability of the sector and are lending more than ever before as the default rate has been zero per cent.

“Bank lending to seed companies and small agricultural input retailers rose from zero in 2011, to $ 10 million in 2012 and $53 million in 2013. Bank lending to fertilizer companies rose from $ 100 million in 2012 to $ 500 million in 2013. It is remarkable that the default rate has been zero percent over the past two years.”

The Minister added that the various reforms in the agricultural sector have captured the attention of external investors as the sector has attracted $4 billion in executed private sector letters of commitment to invest in the country’s agricultural sector in the last two years.

“We have also received significant financial backing from the World Bank, the African Development Bank and the International Fund for Agriculture Development, the UK Department for International Development, United States Agency for International Development, United Nations Development Program, the Bill & Melinda Gates Foundation and the Ford Foundation.”

Dr. Adesina explained that to drive and provide much needed equity financing for small and medium scale agribusinesses, the ministry has jointly established a $100 million equity and quasi-equity fund with the Ministry of Finance and the German Development Bank, KFW.

While reeling out what the government has been able to achieve under the ATA, Dr. Adesina said investors have chosen confidence in the various sector of the industry through investment spanning areas like rice, cassava, fertilizers, and horticulture among others.

“Teragro, a local private firm, has established a $6 million plant to process oranges into concentrate. Dansa Foods, another local private firm, is investing $35 million in the establishment of a tomato processing plant. The company is also investing $45 million to set up a 6,000-hectare pineapple plantation and processing plant.”

The Minister disclosed that investors are moving massively into local rice production and milling as Olam has invested $70 million in a fully mechanized rice farm and will soon commission its 210,000 MT integrated rice mills, the largest in Africa.

“Dangote has committed to invest $300 million for large-scale rice production and world-class rice milling, while high quality rice from the $40 million Dominion farms will soon hit the market.”

He added, “Our reforms of the fertilizer sector and the gas industrialization policy have combined to open up the sector to new investors. Today, $5 billion of new investments in fertilizer manufacturing are ongoing by Dangote, Indorama and Notore. Nigeria expects to become a net exporter of fertilizers within three years.”

Dr. Adesina said as part of plans to unlock wealth from agriculture in rural areas, the ministry is developing staple crop processing zones (SCPZ), which are new agricultural infrastructure-enabled zones to attract agribusiness investors into rural areas.

He explained that Staple Crop Processing Zones will solve the infrastructure challenges and constraints of the agro-processing industry, drive social and economic impacts, offer a superior operating environment for downstream players as well as create a new platform for private sector investment in agriculture.

“ Fourteen SCPZs will be developed across the country and master plans have already been completed for six of them. A leading international company is considering investment of over $100 million for the establishment of a 65,000 MT starch plant in one of these zones.

“Dangote group plans to invest $300 million in rice SCPZs to boost the nation’s rice production and processing capacity. The World Bank, African Development Bank and other development finance institutions plan to commit up to $ 1 billion towards the development of these zones.”

[Vanguard]

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