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Optimizing the benefits of agriculture to transform Nigeria

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Optimizing the benefits of agriculture to transform Nigeria

Developing Nigeria’s agriculture sector has left the realm of political sloganeering. The government’s diversification agenda, succinctly articulated in the Economic Recovery and Growth Plan, is expected to focus attention on this important sector and drive its growth.

While the country remains ‘a huge investment opportunity’, the path to total recovery, most people agree, is to focus on new growth areas. The National Bureau of Statistics (NBS) last year highlighted such areas to include textile production, fishing, metal ore mining, agriculture and health and human services.

Agriculture, for obvious reasons, has gained the most attention. Responsible for over 75 percent of the growth in the non-oil sector, agriculture occupies a priority standing as a key driver of growth, wealth formation, revenue generation and poverty reduction. The sector provides employment for over 70 percent of Nigerians, mostly in the rural areas where more than 80 percent of the population dwell. In addition, over 75 percent of Nigeria’s total land area (about 68 million hectares) is arable. Resuscitation of the sector would also contribute immensely in reducing rural urban migration, and minimize the challenges this triggers in urban centres.

 Undoubtedly, agriculture has a huge potential to transform Nigeria’s economy as well as diversify it away from its heavy dependence on the energy sector. However, an estimated 90 percent of Nigeria’s food requirement is produced by small-scale farmers who constitute the majority of the nation’s poor. A myriad of factors are blamed for this ungainly condition, both natural and man-made. Key is the lack of access to finance and the resultant inability to invest in basic farming inputs, such as seedlings, fertilizers, implements and irrigation. As a result, their yields have remained largely stagnant, leading to pervasive hunger and poverty. Similarly, little or no commercial financing is available to those aspiring to build businesses that could enhance food production and enable farmers to earn sustainable profit.

The future of agriculture in sub-Saharan Africa, and Nigeria in particular, is clouded with several uncertainties that include increasing resource scarcity, heightened risks from climate change, higher energy prices, demand for bio-fuels and questions about the speed and depth of technical progress. However, the growth potential far outweighs the challenges. The foregoing, said Dr Demola Sogunle, chief executive at Stanbic IBTC Bank, makes it imperative for extensive collaborations and investments to drive growth of the sector.

Such collaborations, involving both the public and private sectors, would help in creating an enabling environment, developing requisite infrastructure, safeguarding investments, reducing bureaucratic bottlenecks and motivating local and international investors. The large share of agriculture in Nigeria’s GDP suggests that strong growth in the sector is necessary for overall economic growth. “There is a need and an opportunity for investment that will develop the middle ground in Nigeria’s agriculture. Africa has enormous natural potential and the continent has to unlock the potential in order to reap the benefits of its natural resources,” Jerry Gushop, Head of Agric Banking at Stanbic IBTC Bank stated.

By positioning agriculture as a business, enabling policies must consequently be put in place to establish a commercial scale agric sector in the country. Describing agriculture, SME, construction, infrastructure, power, ICT and mining as crucial for economic revival, Sogunle said what is required now is putting in place the right policies and working in collaboration with government to promote an enabling environment that would attract foreign investors who would invest in the critical sectors and ultimately leading to private sector-driven growth. A vibrant and liquid financial market is imperative, he said, because this is what will attract the capital needed to drive growth.

Surveys and investment trends have shown that despite the weak economic conditions, multinational companies are very much interested in expanding into Africa due to the higher growth rates, evolving democratic culture and improving policy and legal frameworks. “There are a lot of positive moves happening in the sector and there are superb growth opportunities in the market. What they require are proactive policy changes to support the opportunities,” Gushop stated, adding that Nigeria is already on the right path.

In tapping into the identified lucrative agricultural opportunities, an institution like Stanbic IBTC Bank has developed a medium-term model through the articulation of a medium term (3-year) vision to become a full-spectrum African agricultural company within Stanbic IBTC Holdings PLC and the Standard Bank Group. “When we say Africa is our home and that we drive her growth, it is our responsibility to extend ourselves beyond just banking: we must add value by providing exposure, information and our expertise to our clients to foster an environment that facilitates their growth and success,” Gushop added.

Stanbic IBTC Bank has a competitive agricultural advantage in view of its strategic alliance with Standard Bank Group through the provision of tailor-made agricultural banking offerings to tap the myriads of bankable opportunities and prospects in the agriculture space in Nigeria engendered by the ongoing agricultural transformation agenda of the government. Stanbic IBTC Bank is committed to the mechanization of Nigeria’s agriculture sector. “We understand the needs of everyone along the agriculture chain and the solutions to the sector’s needs.”

Stanbic IBTC is driven by the conviction that opportunities exist to provide end-to-end banking solutions for agriculture in which the bank can leverage and cross-sell a full suite of products and services, from traditional commercial banking and lending products to crop and weather insurance products. In addition, Stanbic IBTC Bank is growing its branch network in order to bring this suite of products closer to Nigerians. Many of the new branches are situated in agrarian communities, thereby bringing the bank closer to farmers, enabling easier access to finance and other banking services.

The challenge of financing agriculture, experts have said, is more than just the provision of finance. No doubt finance is very critical but it is also about providing complete solutions to smallholder farmers to ensure long-term sustainability, food security and higher standards of living. Through diligence in pursuing this objective, Nigeria’s agric revolution can kickoff on a sustainable trajectory.

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UK might need negative rates if recovery disappoints – BoE’s Vlieghe

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UK might need negative rates if recovery disappoints - BoE's Vlieghe 1

By David Milliken and William Schomberg

LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.

Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.

Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.

Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.

“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.

“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.

Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.

Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.

Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.

Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.

Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”

“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.

By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”

Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.

“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.

($1 = 0.7146 pounds)

(Reporting by David Milliken; Editing by William Schomberg)

 

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UK economy shows signs of stabilisation after new lockdown hit

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UK economy shows signs of stabilisation after new lockdown hit 2

By William Schomberg and David Milliken

LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.

A separate survey of households showed consumers at their most confident since the pandemic began.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.

Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.

Official data for January underscored the impact of the latest lockdown on retailers.

Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.

“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.

The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.

BORROWING SURGE SLOWED IN JANUARY

There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.

Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.

That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.

The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.

Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.

“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.

Some economists expect higher taxes sooner rather than later.

“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.

Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.

The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.

IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”

However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.

Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”

($1 = 0.7160 pounds)

(Editing by Angus MacSwan and Timothy Heritage)

 

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 3

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.

Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)

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