Dataphyte’s latest research brief titled “From Farm to Future: Thoughts on Food Security, Farmers’ Prosperity and Fiscal Stability in Nigeria” has revealed that very few agricultural households own bankable agricultural assets. This is a challenge especially for access to finance as lack of bankable assets often means no collateral to access finance even where it exists.
According to the report, the Nigerian government’s interventions in the agric sector have had little effect in increasing ownership of critical assets that could increase productivity and improve the positioning of farmers for accessing agricultural loans.
In agricultural households, assets like tractors, boats, planters, pickup trucks, sprinklers and outboard motors are the least owned agricultural assets. Cutlass, sickle, wheelbarrow and sprayer are the highest owned assets by agricultural assets. The assets that are the highest-owned agricultural are neither bankable nor are they collateral assets.
Bankable assets are assets that can be used as stand-ins for loans or as collateral for loans in a bank. Farmers can use bankable assets or agricultural collateral assets to access loans from banks, hereby solving the credit constraints hindering the expansion of agriculture.
The report highlights the importance of bankable agriculture assets in increasing credit and advance to the agricultural sector.
Today in Nigeria, only 2% of rural farmers have access to institutional finance, and this may be connected to the lack of ownership of agricultural assets as the report revealed that only 5.15% of total bank loans and advances were given to the agricultural sector despite the sector’s 26.84% contribution to the economy.
Policy interventions have done little to solve challenges like poor access to agricultural equipment and assets and access to credit or loan facilities, facing the agricultural sector. Majority of farmers in Nigeria are smallholder farmers, cultivating on less than 2 hectares of land and do not have the economic capacity of purchasing heavy agricultural assets.
The research brief recommends improved access to credit facilities and improved fiscal and monetary policy to adjust access to credit to increase the number of agricultural households that own collateral assets and further boost agricultural output and productivity. Agriculture provides 30.6% of jobs in the country and as such should receive even more priority economically.