15 Feb 2009 |
|
That agricultural bond should be used to finance cash crop production Ayo Akinfe All of a sudden, bonds are the name of the game in Nigeria with both federal and state governments floating them left, right and centre, in a bid to raise capital for infrastructural development. In what appears to be a case of our administrators just waking up from a slumber, governors and ministers all seem to have realised how valuable a tool bonds can be as a means of generating cash. In the past, by and large, our intellectually lazy politicians and soldiers alike just relied on government handouts from oil proceeds and if that was not enough to fund projects, the masses just went without. Over the last 12 months, however, the rate at which bonds are being flogged is astounding. Last week, we had the latest one with the federal government announcing plans to float a N200bn bond to fund agriculture. In August of last year, the Lagos State government announced plans to float a N275bn bond through the Central Bank of Nigeria (CBN) to pursue its infrastructural development. This year, the state has launched a N50bn bond, which was so successful that it was over-subscribed to the tune of N8.9bn. Do not get me wrong here. Bonds are not entirely new to Nigeria as in 1978, the then Bendel State government issued a N20m bond on behalf of the Bendel State Development and Planning Authority to finance housing estates and shopping centres. That 10-year 7% coupon rate bond was fully subscribed when it debuted. In 1985, Ogun State followed by floating a N15m 12% coupon rate government water project bond, which was under-subscribed by nearly a quarter when it debuted. In 1987, the Oyo State government floated the N30m 16.5% Adamasingba Shopping Centre and sports complexes bonds, which was very successful. In the same year, Lagos State’s N30m 17.5% Lekki Peninsula Residential and Commercial Construction Bond was also a big hit. In recent times, Imo State has floated the N40bn Ugwuta Lake Bond for the development of a resort facility at Ugwuta Lake. The essence of going over this historical matter is not to bore you with mundane statistics but to show that in the past, bonds have been spaced out, have generally been one-offs and they have always been for specific purposes. In most cases, they have been used well for the purposes for which they have been intended, so on the whole, we can say that whoever initiated the idea in Nigeria was a very wise person. It is this uniqueness for which bonds are generally floated, however, that is giving me concern when it comes to the most recent N200bn agricultural bond. According to Alhaji Suleiman Barau, the CBNs deputy governor of operations, who revealed the details of the plan at the second annual Eurofinance Conference on Treasury, Risk and Cash Management in West Africa, in Lagos recently, the decision to float the bond was borne out of the awareness that agriculture plays a major role in the growth and development of the economy and in boosting gross domestic product. That sound good but what worries me about this statement is its vagueness. In fact, it sounds so similar to the talk about food security, which is part of President Umaru Yar’Adua’s Seven Point Agenda. Like a lot of other government promises and soundbites, this particular policy lacks any emphasis about what crops should be produced, for what markets and over how long a period. As has been the case with most agricultural programmes in the past, I suspect that the emphasis will be on food crops like maize, yam, beans, etc. All this is based on the erroneous assumption that Nigeria has a food security problem and we need to raise farming output to feed our hungry masses. If our administrators had done a little research before launching these grandiose projects, they would have found out that Nigeria actually produces a food surplus. We grow more food than we consume and our biggest problem is that as much as 40% of what we cultivate goes to waste during storage and transportation. It would be handy if Dr Sayyadi Abba Ruma, our esteemed minister of agriculture and water resources came out to explain what exactly he intends to use the N200bn raised from this bond offer for. My advice to him would be to spend it on commercial cash crop production, as that is where we seem to have a problem. Nigeria is simply too rich in arable land to have a food security problem and will never have the kind of crisis we have seen in Ethiopia, Sudan, Chad, Niger or Somali, where under-production is their main problem. The only time we ever had such a headache was during the civil war when Ojukwu’s refusal to allow food into Biafra led to mass starvation and kwashiorkor. One just needs to look across the West African region where the likes of Liberia, Sierra Leone and Ivory Coast have not had food security problems despite years of civil war to appreciate this point. We are not a country located within the desert or the harsh sahelian arid zones of the globe, so fears that our masses will starve is a misplaced phobia. Where we have a serious problem is producing cash crops that will diversify our economy, generate foreign exchange earnings and lead to the development of allied processing and manufacturing industries. I would suggest that before the money from the N200bn bond starts rolling in, Dr Ruma should get his plans well ironed out and earmark funds for specific projects. He needs to prioritise certain cash crops in which Nigeria has a competitive advantage like cocoa, palm oil, rubber, ginger, cassava, coconuts, cashews, ginger, groundnuts, sesame seed, soyabeans, acre nuts, macadamia nuts, etc and come up with programmes for their widespread cultivation. His priorities should be to get smallholders to form co-operatives, to attract foreign plantation companies, to get into semi-processing, to aspire towards manufacturing, packaging, branding and retailing and above all, to woo the likes of Cadbury, Nestle, Unilever, Kraft, etc to relocate some of their large plants in Nigeria. Large commodity trading houses like Cargill, Archer Daniels Midland, Louise Dreyfus and Bunge should also be encouraged to locate sizeable facilities in the country. More importantly, Dr Ruma should set clear export earnings targets as the rest of the world is yearning for raw materials, which Nigeria can and should be producing and exporting in commercial quantities. Getting our priorities wrong on this one could have severe long-term repercussions. This could be the determining point, which decides whether we successfully diversify our oil-based economy or not. We cannot afford to mess this one up. Ayo Akinfe aakinfe@aol.com
|
||||||||||||||||||||||||||||||||||||
# 
Your Comments
Please make The Square an enjoyable experience for everyone by refraining from gratuitous ad-hominem contributions, defamatory comments and off-topic posting. Such posts will be removed.