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CBN to increase loans to agricultural sector to 10% of total bank credit

The CBN continues with its support for the agricultural sector.

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CBN to increase loans to agricultural sector to 10% of total bank credit, Agritech, Efficient Power: Addressing a Critical Element in Nigeria’s Agro-Industrial Revolution

The Central Bank of Nigeria (CBN) has revealed that the country needs to increase its level of bank credit to the agricultural sector by over 50% within the next 4 years to boost food production.

The implementation of this is expected to drive the allocation to the sector to 10% of the entire credit in the banking sector from the current 4%.

READ: Fitch says Nigerian banks have a risk indicator of 12.14, explains why

This disclosure was made by the CBN Governor, Godwin Emefiele, on Tuesday, September 15, 2020, at the 13th Annual Banking and Finance Conference, organized by the Chartered Institute of Bankers (CIBN) in Abuja.

Emefiele said that the banking sector should focus on increasing its support for the agricultural sector, as the coronavirus pandemic has caused disruptions on global supply chains and food supply from other countries.

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The CBN boss stated that some of the opportunities in the agricultural sector that banks should explore include addressing some of the existing gaps in the agriculture value chain like storage centres, transport logistics and technology platforms, that can enable rural farmers to sell their produce directly to the markets.

READ: Explained: CBN’s powers to seize bank account of criminals

Emefiele also disclosed to bankers that currently, loans to the food sector accounts for around 4% of the total credit in the banking sector. He said the pandemic had exposed the risk of relying on food and drug imports, as most countries are reluctant to export goods to other countries.

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Nairametrics had reported on President Muhammadu Buhari’s directive to CBN not to allocate foreign exchange for food and fertilizer imports. He said the Federal Government would rather empower more local farmers and use agriculture as a means to create more employment among Nigerians.

READ: Consortium of Western investors to inject upwards of $5 billion in Nigeria’s renewable energy sector

Nigeria is reliant on imports, including food items, to meet its needs due to limited manufacturing capacity. It has been struggling to reduce its $20 billion annual food import bill as it finds it difficult to diversify the economy away from oil.

Emefiele told bankers that currently, loans to the food sector accounts for around 4% of the total credit in the banking sector.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

1 Comment

1 Comment

  1. Chyke Umegbolu

    September 17, 2020 at 2:58 pm

    Please how do we farmers access this grant or loan to help us in agricultural sector.

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Financial Services

CIBN renews NDIC Academy accreditation

The NDIC academy has had its accreditation renewed by the CIBN.

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NDIC Academy accreditation renewed by CIBN; recertified as a training provider for the banking industry

The Chartered Institute of Bankers of Nigeria (CIBN) has renewed the accreditation of the Nigeria Deposit Insurance Corporation (NDIC) academy and its status for training service providers for various professionals in the banking industry for three years.

This was disclosed in a statement issued by NDIC, seen by Nairametrics and signed by Sunday Oluyemi, the Director of Communication and Public Affairs.

It stated that the recertification is sequel to previous outstanding performances recorded by the institution since its accreditation in 2016 and subject to further periodic monitoring.

Assessing the outstanding performance recorded by the academy so far, NDIC Managing Director/Chief Executive, Mr Umaru Ibrahim disclosed that the academy had so far trained a total of 13,368 participants cut across the NDIC’s workforce.

It had also trained 135 participants from relevant stakeholders, including the Economic and Financial Crimes Commission (EFCC), Securities and Exchange Commission (SEC), Assets Management Company of Nigeria (AMCON), National Pension Commission (PENCOM) and Nigeria Financial Intelligence Unit (NFIU).

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(READ MORE: CBN to increase loans to agricultural sector to 10% of total bank credit)

On the international sphere, it has also trained 19 employees from other deposit insurance agencies in Africa. In recognition of its stellar performance, the NDIC academy was earmarked to host the African Centre for Studies on Deposit Insurance System (ACSDIS) recently established by the African Regional Committee (ARC) of the International Association of Deposit Insurance (IADI).

Mr. Ibrahim further remarked that the recertification is a big boost to achieving NDIC’s ultimate goal of enhancing customers deposit guarantee and public confidence in the Nation’s banking system through a center of excellence that prioritize capacity building and continuous high-level training.

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He added that the recertification would further help the academy assert itself as a leading human capacity building institution in Africa, drawing from its rich course content and structure.

The Nigeria Deposit Insurance Corporation (NDIC) was established on 15th of June 1988 to strengthen the safety net for the newly liberalized banking sector, following the recommendation of former Central Bank of Nigeria governor Ola Vincent. The NDIC provides a safety net for depositors in the newly liberalized banking sector.

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Financial Services

How foreign exchange risks and others affect the Nigerian pension industry 

A report has analysed risks militating against the Pension industry in Nigeria.

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This is why you should make voluntary contributions to your pension fund

Despite being one of the fastest-growing sectors in the Nigerian financial services industry, the Nigerian pension industry has been affected by various riskssuch as the volatility in the foreign exchange and other factors.

However, these risks have harsh consequences on the retirement income of contributors. For example, in Nigeria, whilst the pension assets in the last decade have grown by 21% annually, the growth in the value of assets when converted to USDhas been about 11% over the same period. 

READ: PenCom recovers N17.51billion from defaulting employers, imposes penalties

This is according to a recent report released on Pension Sector Forum by ARM Pension, with the theme “Pension Assets Risk Management in the Face of Uncertainties 

All other things being equal, the findings revealed that the Defined Contribution Pension scheme assets on a 10- year time frame, grew faster than Defined Benefits (CAGR 8.4% pa vs 4.8% pa). Increased member coverage and higher contributions were probable factors responsible for the growth In addition, most retirees might not have enough funds to maintain a decent standard of living, as retirement risk has been transferred to them. 

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Other risks outlined in the summit includeinterest rate risk, political risk, operation risk, and key macroeconomic risks such as unemployment, GDP, inflation, currency among others. 

READ: Is Zenith Bank thriving on the strength of sound financial indices?

With regards to who bears the retirement risk, 68% of the risk is borne from one’s sources, while 38% is from outside sources. 

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The report also stated that the total pension contributions received in the industry from 2017- 2019, was almost equally split between the private and public sectors at the end of Q3 2019 

Explore Economic and Financial Data on the Nairametrics Research Website

Way Forward 

In mitigating the risks inherent in the Nigerian pension industry, experts at the summit called for increased collaboration among stakeholders, engagement with all regulators, increased advocacy for corporate governance, increased awareness, and sensitization of contributors by stakeholders among others as viable options going forward. 

Key Highlights  

  • As of June 2020, only 11.3% of the Nigerian labour force had opened retirement savings accounts (RSAs), while pension assets stand at less than 10% of GDP. 
  • The total number of funds under management currently stands at N11.1 trillion. 
  • There are currently over 9.04 million subscribers and 32 operators. 

READ: Why May was bad for your Pension funds

To view the report, click to download HERE

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Financial Services

Nigerian fintech companies raised $600 million in five years – McKinsey Report 

McKinsey report has revealed that Nigeria’s fintech companies have raised over $600 million in funding in the last six years.

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fintechs, commercial banks, Events in FinTech industry in 2019, Nigeria's fintech industry 2020: The growth frontier of the new decade

In a space of five years, Nigeria’s fintech companies have raised over $600 million in funding, attracting 25% ($122 million) of the $491.6 million raised by African tech startups in 2019 alone – second only to Kenya, which attracted $149 million.  The period under review is 2014- 2019.

This information is contained in a recently published report by McKinsey titled “Harnessing Nigeria’s Fintech Potential.” The report highlighted the combination of youthful demographic, increasing smartphone penetration, and concerted efforts to driving financial inclusion as factors that interplay to produce conducive and thriving enabler or platform for the fintech firms in Nigeria.

READ: BOOM: CBN issues new circular that could force banks to lend to nearly everyone.

The report outlined some of the feedback against fintech companies ranging from poor user experience, underwhelming value-added from using some of the financial products, low returns on savings, and limited access to investment opportunities.

The report also showed that Nigerian fintech companies are primarily focused on payments and consumer lending,  having allotted an aggregate of 39% on payments to consumers, SMEs, and corporate FSP, and an additional 25% to consumer lending. The breakdown is depicted below.

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READ: Banks Vs Fintechs – Who should be Afraid? (Part Two)

On the driving factors behind the increasing choice of payment and consumer lending as an area of concentration by fintech companies, a part of the report read thus;

“The factors driving growth in each of these segments vary. Payment-focused solutions have surged over the past two years, spurred in part, by the central bank’s financial inclusion drive and favorable regulatory policies, including revised Know Your Customer (KYC) requirements for lower-tier accounts and incentives, to accelerate development of agent networks across the country. Paga, OPay, Cellulant, and Interswitch’s QuickTeller compete with mobile banking applications and bank unstructured supplementary service data (USSD) channels to send and receive transactions and bill payments.

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READ: PenCom recovers N17.51billion from defaulting employers, imposes penalties

“Fintech activity in lending is picking up, thanks to the fact that fintechs are able to leverage payment data to determine lending risk more easily, and utilize smartphones as a distribution channel. For example, fintech startups such as Carbon and Renmoney have successfully leveraged alternative credit-scoring algorithms, to provide instant, unsecured, short-term loans to individuals. A few fintechs, such as Migo, have also stepped up to offer unsecured working-capital loans to SMEs with minimal documentation. Banking fintech solutions have been fast followers here, with leading banks launching digital lending platforms like Quick Credit by GTBank and Quickbucks by Access Bank.”

In general, access, convenience, and trust have all played key roles in the increasing use of fintech products. For example, in the last six months, 54% of consumers have reported increased usage of their fintech products

READ: Key ‘side-hustles’ Nigerian Bankers supplement their income with

Why this matters

In line with the National Financial Inclusion goals of 2020, and owing to the fact that despite the remarkable progress recorded by traditional banking institutions, the vast majority of consumers are underserved.  Hence, the issue of accessibility especially in remote areas, affordability, and user experience have been a front-burner issue.

The aforementioned issues have created an opening that fintechs have been quick to take advantage of, providing enhanced propositions across the value chain, to address  major points in affordable payments, quick loans, and flexible savings and investments among others.

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READ: CBN grants licenses to 3 Payment Service Banks

Conclusion

Fintech accounted for only 1.25% of retail banking revenues in 2019, signaling a room for development. Despite recording a growth of fintech investments in Nigeria to the tune of approximately $460 million in 2019, majority of these investments were from external investors. This was only a small fraction (1.27%) of the $36 billion invested in fintech globally.

READNew report details how Nigerian fintech companies are expanding their business scopes

The report opined that full optimization of fintech companies in Nigeria can stimulate economic activity, by creating a multiplier effect, and can drive progress towards development goals. Economic impact will primarily come from expanding revenue pools and attracting foreign direct investment to the country. The sector can unlock a plethora of  economic benefits by driving increased fintech productivity, capital, and labour hours through digitization of financial services.

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