Ignorance of financial intricacies with respect to agriculture financing has being identified as a major challenge that has been working against Nigerian farmers in recent times.
Findings have shown that the real farmers in rural areas hardly get facilities from Nigerian commercial banks; rather, these facilities are being given to big companies who could meet their criteria for such loans – collateral.
Speaking with AgroNigeria in a chat recently, a banker-turned poultry farmer, Mrs. Edina Ogedengbe said farmers are not enlightened enough to know what loans entails; so they easily get discouraged by the intricacies in it.
Ogedengbe said for farmers to secure a loan from any bank or financial institution, they must first be committed to what they intend using the loan for to avoid distractions in the future; adding that the value of the level of the farmer’s commitment to what the loan is meant for is usually pegged at 30 percent, while the remaining 70 percent will be given to the farmer as a loan.
“To get a loan from the bank first of all it takes your level of commitment, a bank cannot give you a 100 percent loan for whatever you intend to do, they will ask you to get to some extent and they meet you along the way. So when you realise that you have your own stake in it, you will not let it go, you will be there to nurture your 30% and the bank will be there to monitor its 70%. The bank will also require collateral and good security from you. They also need to know what you are willing to put at stake for the loan in order to ensure repayment.” she said.
Ogedengbe noted that if the government invests so much energy and resources into the agriculture sector like it does to the oil industry, the Nigerian economy will blossom, and “we will be richer than the said Malaysia”.
“What we are not getting is that government is still not concentrating on the agriculture sector in Nigeria. The agriculture sector is supposed to be our own oil mill; if as a country we pay more attention to the agriculture sector the way we do to the oil industry, things will become better and easier here in Nigeria,” she said.
She identified low-based farming as the reason why the agricultural sector in Nigeria is yet to improve, noting that other agricultural countries are practicing mechanized farming system.
As regards the interest rate on loans, Ogedengbe said the government’s approved interest rate may be 2.5 percent; she however maintained that there are some hidden charges being collected by various lending institutions in the country.
“The government may announce to us that it is 2.5 percent, arriving at your assessment point, they will tell you it is 10 percent, because of hidden charges. Hidden charges is simply when you are charged an interest rate of 2.5% but when explaining to you, they will include commitment fee 1%, processing fee 2%, renewal fee maybe 2% and some other fees that will be included and before you know what is happening it has got to 10%. So it is just interest rate 2.5% but other hidden charges are included,” she stated.
She therefore advised farmers to as a matter of importance, before leaving their homes to apply for loans, think of ways through which they intend to repay such loans.
The poultry farmer also urged financial institutions saying: “There is a need to know what these farmers are doing before issuing any loan to them. There is a need to check their level of commitments, so you will be sure the farmer collecting the loan is committed to what he/she is collecting the loan for.”
Ogedengbe identified that another problem of agric financing in Nigeria is that the money do not actually get to those that will really make use of it, and if peradventure it does, the farmers are not so enlightened on how to use it and how to refund such funds.
“You know some of the farmers are educated while some are not; so you have to inform them on the intricacies for securing a loan, until you are sure they understand,” she said.