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Bank of Agriculture: Hurdles Adamu should scale, By Emmanuel Ado

By News Express on 21/06/2017

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Only time will tell, if President Muhammadu Buhari handed Kabiru Mohammed Adamu a poisoned chalice or not, with his appointment as Group Managing Director/Chief Executive Officer (GMD/CEO) of Bank of Agriculture (BOA). Adamu comes with impressive credentials to lead the bank. His credentials are not the problem, however. The problem is that he needs the wholehearted support of the President to reposition the bank. If the president gives him that necessary support, then the ball will be in his court. So in a sense, Adamu's success, unfortunately, doesn't lie in his hands. But, if he fails, he will be left to carry the can all alone. After all, failure is an orphan.

For a President that is desirous of diversifying the Nigerian economy; that must do all in his power to conserve scarce foreign exchange spent on importing food items, such as rice and vegetable oil, it is in his enlightened self-interest to help the BOA succeed. And the critical ingredient that BOA needs is funding, especially as a world-class management team has been put in place. Once funding has been addressed, then we can begin to talk of a new way of doing business, commitment, the attitude of Nigerians to loan-repayment, etc.

The Nigerian economy has been hit hard, real hard, by the fall in oil prices, which has consequently affected foreign exchange earnings which, as Fela philophised, is double wahala considering the huge import bill for food. And like previous governments, the Buhari administration has come up with Economy Recovery and Growth Plan (ERGP) to diversify the economy. The key priorities include ensuring food security through agro-related manufacturing. Now is the time for President Buhari to match words with action. The challenge to increase non-oil revenue and to stop importation of food is an emergency, and should be so treated.

The greatest challenge confronting the Bank of Agriculture is lack of loanable funds to farmers. And this is because the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance have refused to inject further funds into the bank. The CBN and Federal Ministry of Finance’s argument is that they can't "continue to pump in fresh funds, without calling the shot," said a CBN source. The two ‘money agencies’ are angry that the Federal Ministry of Agriculture and Rural Development that controls the BOA has no dime in equity contribution, but it supervises the bank, appoints the management and board. Had the agriculture ministry ran the bank successfully, these issues wouldn't be raised. But the tragedy is that it had always run the bank aground. So far, Chief Audu Ogbeh, the present Minister, seems to be different from the other ministers. The fundamental problems – which, moving forward, President Buhari must frontally address – are funding and supervision of the BOA. If these two issues are not addressed, the CBN and Federal Ministry of Finance will never open the tap. So long as the Federal Ministry of Agriculture continues to run the BOA, so long will the bank continue to suffer from lack of funds.

The Federal Government of Nigeria wholly owns the bank that has an authorised share capital, with 40 per cent shares held by Central Bank of Nigeria and 69 per cent shares held by the Federal Ministry of Finance Incorporated (MOFI). But it is supervised by Federal Ministry of Agriculture that owns no stake in the bank. To date, the CBN and the Federal Ministry of Finance have only paid N4 billion and N27 billion on their respective stakes in the bank, leaving the CBN with a balance of N15.9 billion and Federal Ministry of Finance, N2.2 billion to pay up.
The House of Representatives that indulges itself with endless public hearings wants to investigate the refusal or is it the failure of the CBN and Federal Ministry of Finance to pay up their share capital. The motion by Hon Femi Fayeke shows the lack of capacity of our legislators. Interactions with key stakeholders would have revealed that the problem is that of control and supervision, and the legislative action required. In this case, an amendment to the law setting up the BOA, to give the Federal Ministry of Finance the ‘comfort’ of supervisory rights over the bank that they desire. My question for the House of Representatives is: What is there to investigate? 

Successive management of BOA had wasted valuable man-hours trying to get CBN and Federal Ministry of Finance to release money to the bank. I hope Adamu will not go that same way. The CBN and the Finance ministry will continue to dribble him or grudgingly give him something that will show a semblance of activity. Adamu is definitely caught between the devil and the deep blue sea, as he can't be seen moving against his employers – the Federal Ministry of Agriculture – who, strictly speaking, are the reason why he is in problem. 

To reposition the bank, Adamu must think outside the box. The CBN and the Federal Ministry of Finance are not the only problem confronting the bank that has had a chequered history. Some previous managements were more like buccaneers whose sole mission was the liquidation of the bank. He must lead by example. The losses recorded in 2014 and 2015 that have been put at N2.2 billion and N4.8 billion respectively calls for blockage of the system that has allowed that kind of loss. Good to know, he has set machinery in motion to review loan processes to plug gaps or, at least, stem the growth of bad loans. The Standing Product Committee that will review all the products and their performance and, if need be, redesign them in line with the present reality is a smart idea.

He must tackle the portfolio farmers, who are largely responsible for the non-performing loans that have brought the bank to its knees. If Adamu recovers the outstanding loans running into billions, he can call the bluff of the CBN and the Federal Ministry of Finance. Previous management had vowed to act in line with the directive of the CBN, to "publish details of customers whose accounts are not performing, the publication will include the names of persons, entities, directors, subsidiaries, and key sponsors of various categories of accounts, and will be forwarded to all banking regulators, including the CBN, professional bodies, embassies in Nigeria, security and other agencies as would be required,” but they did absolutely nothing. The reason they couldn't is because they are the high and mighty in Nigeria.

Despite the challenges confronting the bank, it has fashioned out collaborative schemes with federal, state governments, micro-finance institutions, etc. Necessity, as they say, is the mother of invention. Worthy of note is the fact that BOA is the main driver of the CBN’s Anchor Borrowers Programme. The joint venture, CBN/BOA, in which the CBN uses the branch network and experience of BOA to reach farmers show confidence and capacity of the BOA to deliver. It also confirms the saying that there is no permanent enemy in life, but permanent interest. Which is why the Minister of Agriculture must be sensitive to the position of the CBN and Federal Ministry of Finance. Ogbeh must "resist that temptation" to force the CBN into surrendering to BOA the various CBN Anchor Programmes. This will be the final blow, that will send the bank to its untimely death as the CBN will quietly stop the flow of funds.

The various initiatives of the CBN - designed to create jobs, reduce food importation and diversify the economy – would no doubt have remained a mirage without the BOA. This, the CBN knows from its experience with commercial banks that have continuously messed it up after collecting "cheap" funds, which they never lent to farmers, but diverted to trading, their stock-in-trade.

The key mandate of BOA: Provision of credit to support all activities in the agricultural value chain; provision of non-agricultural micro-credit to the poor segment of the society, comprising rural artisans, petty traders, etc; capacity development for the promotion of co-operatives and agricultural information systems; provision of technical support and extension services; boosting of opportunities for self-employment in the rural areas, to stem rural-urban migration, and inculcation of banking habits at the grass-roots of Nigerian society. All these make it imperative that the Buhari administration resolves the problem confronting the BOA. The Bank of Agriculture might have had a difficult past, but the future looks promising.

•Emmanuel Ado writes from Kaduna. He can be reached via mayad497@yahoo.com 

Source News Express

Posted 21/06/2017 6:55:18 PM

 

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