In what is perhaps the biggest news to come out of the agricultural sector in decades, the Central Bank of Nigeria (CBN) recently announced lending rates of 9 percent for the sector along with players in the  Medium and Small Scale Enterprises (MSME). The move is commendable giving the dire need to diversify the economy away from oil and Nigeria’s comparative advantage in the agricultural sector.
Under the new policy called, Guidelines for Accessing Real Sector Support Facility (RSSF) through Cash Reserve Ratio (CRR) and Corporate Bonds, agricultural and manufacturing sectors considered as growth and employment stimulating, can borrow long term as much as N10 billion at consolidated nine per cent interest rate.
Against the background of a high inflation economy and high interest rates regime of between 25 and 30 percent, this initiative is  a novelty. Indeed, It is testament that the authorities can bend over backwards and apply some innovation to  the economy’s most niggling problems.
For decades, it has been harped that government needs to diversify the economy away from the oil sector, which produces more than 90 percent of the country’s revenue but contributes less than 10 percent in GDP in favour of agriculture that produces more than 24 percent. The wisdom behind that reasoning is not farfetched as the oil sector is prone to dislocation due to its boom bust pattern. When oil prices are good, the economy benefits but when prices are low, the economy suffers lacerating backlash. Hence the need to create buffers for the economy and agriculture appears the low hanging fruit.
Besides, agriculture is the predominant occupation of Nigerians and provides most jobs in the economy. Most rural folks are into agriculture and therefore provide a sure-fire way of lifting millions out of poverty when well targeted by policy. That apart, agriculture is the most cost effective enterprise in the economy, giving the economy a comparative advantage over more developed economies.
It is in recognition of the place of agriculture in the economy that may have propelled the CBN into taking this action that would  well-nigh be a revolutionary one if well implemented. It is recalled that the CBN towed a similar path in 2015 in the Anchors Borrowers Programme (ABP) that caused a revolution in rice production which pushed its production to 3.5 million tonnes from 2 million tonnes within two years.
The biggest lacuna for small time farmers has always been paucity of funds and unwillingness of financial institutions to lend to them as they are considered risky business that are not able to tender requisite collateral. With the new CBN initiative this will be a thing of the past. Farmers will be able to access loans that will help them stay in and scale their businesses.  What is also interesting about the move is that it also covers small scale manufacturers who naturally are the next in the value chain in the transformation process of raw agricultural products to value added forms crucial for accelerated GDP growth.
We hope this initiative will find willing collaborators in the banks that had in the past practically ignored CBN directives to lend a certain percentage of their funds to the agricultural and MSME sectors. Billions of naira laid fallow in their vaults that were meant for this purpose but the unattractiveness and risks of the sectors held back their hands. But we are encouraged because the new initiative was a collective decision by the Bankers Committee.
But there are fears in many quarters that the real farmers especially those in the hinterlands may not benefit from the programme because they are not connected with the high and mighty in government. These fears are not out of place given frequent cases of abuse of government initiative. This calls for eagle eyed supervision of the process by the Central Bank so that funds do not leak to emergency farmers and to persons who do not qualify especially politicians who may want to exploit the window for their political ambitions.
It also behoves of the central bank to ensure that there are no hidden rates and charges in addition to the 9 percent that would make it cumbersome for farmers to realise the purpose and benefits of the programme.
We believe that the policy, if well implemented has potential to transform Nigeria’s largely agrarian society to one with strong linkages to the manufacturing and export markets that will in turn accelerate development in Africa’s biggest market by GDP terms.