(Bloomberg) -- Nigeria plans to capitalize its state-owned Bank of Agriculture with 1 trillion naira ($3.2 billion) and will authorize the lender to take deposits as Africa’s most populous nation seeks to boost farming output and reduce food imports.
“We are looking at 25 million farmers” as stakeholders or depositors, Agriculture and Rural Development Minister Audu Ogbeh said in an interview Monday in the capital, Abuja. “We are probably going to take a major step by the end of this year, and by February, March, have a structure in place for the changes we want to carry out.”
Nigeria’s economy contracted in the first nine months of the year as the output of oil, the government’s main source of revenue, dropped due to attacks by militant groups on pipelines in the Niger River delta and prices remained low. Farming, which mostly consists of crop production, including cocoa, accounts for more than 25 percent of gross domestic product, and has expanded every quarter of 2016, while factory output and mining, which includes the oil industry, shrank, according to the National Bureau of Statistics.
The Bank of Agriculture will start lending for farming projects at an interest rate of less than 10 percent compared to commercial market rates, which are currently more than double that, Ogbeh said.
The central bank kept its benchmark rate unchanged at 14 percent on Nov. 24 as it seeks to support an economy forecast by the International Monetary Fund to contract 1.7 percent this year while trying to curb inflation, which quickened to an 11-year high of 18.3 percent in October. Food prices rose 17.1 percent from a year earlier, partly due to the high price of imported food after the naira lost almost 40 percent of its value against the dollar following the abandonment of a currency peg in June.
The government plans to distribute 110 rice mills across the country over the next two months at a subsidy of 40 percent, Ogbeh said. These measures will help boost production and reduce food imports, which was was worth about 1.2 trillion naira last year, according to statistics bureau data, he said.
To contact the reporter on this story: David Malingha Doya in Abuja at dmalingha@bloomberg.net. To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Michael Gunn
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