Banks and N100b agric fund
By Sun News Publishing

Editorial Index



The disclosure that two leading commercial banks in the country, First Bank Plc and UBA Plc, have refused to disburse a hefty N100 billion lodged with them by the Federal Government as intervention fund for the agriculture sector, is deeply shocking. It is, indeed, objectionable. The fund has been with the two banks for the past six months and, perhaps more disheartening, is the revelation that they have made an astonishing profit of N6 billion since they began warehousing the N100 billion.

The regrettable act by First Bank and UBA came to light during a recent tripartite meeting of the Central Bank of Nigeria (CBN), the Governors’ Forum and the Federal Ministry of Agriculture and Natural Resources. A substantial amount of the fund is set aside as soft loans to commercial farmers across the country.

The farmers are partners with government in its food security policy and a total of 215 commercial farmers reportedly applied for the loan, and 106 were successful. Nine viable projects that would boost agriculture production were also approved by the Federal Ministry of Agriculture and Natural Resources. But the hiccup is the non-disbursement of the fund by the two banks.

The banks were alleged to have imposed stringent conditions before they could release the fund to the farmers. One of the conditions is a demand for 20 percent equity contribution. This, government insists, is not part of the conditions for the disbursement of the funds.
We view the shylock behaviour of these two banks as most reprehensible. This largely explains why the agric sector which is supposed to be the engine of growth of our economy remains where it is today – comatose.


The three weeks ultimatum given to the two banks to commence immediate disbursement of the funds or face sanctions, is fast running out without any report of compliance. We urge the government to impose the maximum sanction against the banks if they fail to do so. De-listing the them as facilitators of key government policy initiatives as the CBN has threatened to do, will be a welcome deterrent measure.

Indisputably, the action of the two banks is a direct assault on one of the President’s Seven Point Agenda, – which is food security and agriculture. Clearly, the action is a strong disincentive to local food production and processing and an invitation to continued massive importation of basic staple food items. The local commercial farmers are encouraged to bridge food production gap through such intervention fund. This is the case in many countries.

Disturbingly, at present, according to statistics, Nigeria imports about 65 percent of its domestic staple food items such as rice, beans and other grains. Between 1999 and 2003 alone, we imported over 600,000 metric tonnes of rice annually. This is a massive drop in 40 years when Nigeria, in 1969, achieved a level of sufficiency in local rice production with 99 percent self-sufficiency.

Considering the impact of agriculture on the economy and food security, a potential food crisis is likely if the action of the banks is not visited with corresponding deterrent measures. They should not be allowed to continue sitting on the fund for the selfish purpose of making profits. They should equally be compelled to cough up the profits already made.
Henceforth, a mechanism should be put in place to prevent a recurrence of this kind of transaction.

http://www.sunnewsonline.com/webpages/opinion/editorial/2009/nov/10/editorial-10-11-2009-001.htm

too bad