The Central Bank of Nigeria (CBN) has introduced a single-digit interest rate on loans for palm oil farmers. This is aimed at revamping the industry as a second foreign exchange earner in the country.
The lending will not exceed nine percent annually as the commodity has been added to the apex bank’s Anchor Borrowers Programme (ABP) and Commercial Agriculture Credit Scheme (CASC).
During a meeting with some South-South and South East governors as well as stakeholders in the value chain in Abuja yesterday, CBN Governor, Godwin Emefiele expressed his discontent with the fall of Nigeria from a world-leading producer and largest exporter of palm oil in the late 50s and 60s – it commanded a 40 percent market share during this period.
“Today we are a distant fifth among leading producers of palm oil. We barely produce up to three per cent of the global output with an estimated production of 800,000 MT while countries like Malaysia and Indonesia produce 25 million and 41 million tonnes,” Emefiele said.
High interest rates in Nigeria
The benchmark interest rate in Nigeria was last recorded at 14 percent, which is the highest in Africa. However, lending rates on bank loans in Nigeria are well over 20 percent, presenting a major hindrance to household spending and enterprise growth.
Last December, the central bank governor decried the outrageous interest rates microfinance banks in the country are charging on loans. Most are not lending at single interest rates, thus, many small and medium enterprises are unable to access the Federal Government’s loans aimed at stimulating local production and boosting non-oil export.
Even large corporations are faced with remarkably high interest rates in Nigeria, with some manufacturing companies having to pay interest rates above 30 percent on loans.
With the situation of palm oil production and supply in the country, offering relatively low interest rates comes as a lifeline to farmers at the bottom of the value chain and should help spur growth in the edible oil industry.
The decision comes after the CBN introduced similar initiatives to revive the textile and cotton industries. It had sanctioned a five percent yearly interest rate for cotton growers and other value chain operators with an extensive policy, including denying importers and smugglers of textile products banking services.