The Chairman, Chartered Institute of
Bankers of Nigeria, Mr. Abolade Agbola, says a controversial clause in
the Land Use Act is the main reason why banks reject rural parcels of
land as collateral for loans.
He said, “The Land Use Act made it
difficult for rural farmers to access agricultural loans using lands as
collateral. The Land Use Act says if your land is acquired for public
purpose, the only compensation you will be given is that of development
on it. But If I clear the land, it’s a development.
“If you clear10,000 hectares of land
today as far as the Land Use Act is concerned, it’s only when there are
economic trees on it that you can be compensated. So, that land has no
compensation. And that is one of the reasons why rural lands are not
presentable as collateral.”
Consequently, the CIBN chairman called on
the Federal Government and the National Assembly to take a second look
at the Act with a view to reviewing it.
“So, the real transformation we need is
to actually make any land within the Nigerian landscape accessible as
collateral and have a value, not just development on it; and that is the
only way the rural farmers can use their land as collateral to obtain
loan,” he said.
He added, “But as long as that Land Use
Act is there, it’s only when there is development on it. This means
there would be constraint in a number of available collateral that the
farmers can give. So, I think our challenge is on how to use rural land
as collateral for agricultural loan. Something has to be done on the
Land Use Act.”
The Bankers’ Committee had last month
agreed to fund rice production in the country as part of the
contribution to food production.
But Agbola believe lending to agriculture should be wholesome, cutting across the various value chains.
Also, the government needs to establish a
list of crops in which the country has comparative advantage and put in
place incentives to boost the production of such crops.
The banker explained, “If we have
established the fact that we have the comparative advantage in certain
crops, it is also necessary for us to produce them. I believe that the
lending of banks should cover every crop that we have comparative
advantage to produce. And that is the only way we can have true food
security.
“For instance, we’ve liberalised
importation of maize. Maize is also what we can produce, and the process
of producing maize is not as cumbersome as that of rice. I think the
critical thing for us in all this is how to ensure that our farmers are
low-cost producers and that we have assured market for them.”
He further said, “It is very important
for us to focus on a number of crops that we can produce locally and
meet our needs, either for domestic consumption or for export. It’s a
good thing that the banks want to fund rice production, and I think the
critical thing for the banks is to also have agriculture credit
department. I think that is the area the CBN governor must focus on.
“Banks need agriculture credit department
that will be manned by trained agriculturist, who can give supervised
credit to farmers. And also, we should find a way that land in rural
areas can be used as collateral and it can have secondary market and a
value.”
