It was recently confirmed that Jacques Taylor, director of agricultural banking at Standard Bank, has relocated to Nigeria on a three year assignment. Taylor left his Johannesburg office to take up the reins as head of agriculture at the bank’s Nigerian unit, Stanbic IBTC, in Lagos.

“The move to Nigeria was based on the market and growth opportunity that exists in West Africa, and Nigeria specifically,” Taylor responded to a question regarding the reasons for his relocation.

“Close to 50% of the agricultural potential of Standard Bank’s [current footprint] in Africa (excluding South Africa) is in Nigeria. When adding Ghana, the potential in these two countries accounts for more than 60% of the growth potential,” he added.

“Looking at the size and value of the agricultural sector in Nigeria (size in terms of contribution to GDP and value as a percentage of GDP) as well as production output, we found that Nigeria’s total production is three times as much as total production in South Africa,” Taylor noted.

Commenting on the current state of agriculture in Nigeria, Taylor said that the sector is, similar to many other African countries, a dualistic environment with the bulk of local production coming from smallholder agriculture. “There is currently a strong focus on developing and coordinating the agricultural value chain in Nigeria, whilst looking at ways to commercialise the sector. Improving efficiencies with regard to inputs, actual production, marketing and processing will be important to unlock the potential,” he explained.

In an effort to boost lending to the agriculture sector, the Central Bank of Nigeria (CBN) at the end of May ordered all banks in the country to establish agricultural finance departments within the next six months. Banks that fail to comply face sanctions from the CBN.

Nigerian banks are notorious for their reluctance to finance the real economy, sectors such as manufacturing and agriculture, preferring to lend to the oil and gas industry as well as speculators on the stock exchange. This behaviour was partly responsible for the near collapse of the sector in 2009. After the CBN commissioned a special audit of the banking sector, it declared nine of the country’s 24 banks ‘unhealthy’ due to liquidity, asset and capital adequacy concerns and poor corporate governance practices. It bailed out the troubled lenders to the tune of US$4 billion and introduced various reforms aimed at boosting stability of the sector.

According to the new directive, Nigerian banks will have to appoint qualified agricultural graduates and other professionals with relevant experience to handle all farming and agribusiness related lending activities. Banks are required to lend to the entire agricultural value chain, including agricultural input supply, production, storage, processing and marketing.

Taylor told How we made it in Africa that Standard Bank welcomes the CBN’s decision. “The CBN introduced a number of programmes to support commercial banks in lending to agriculture. Given the specialised nature of this sector, it is fair to expect a dedicated team of specialists to ensure banks develop relevant products and solutions as well as mitigate and manage risks.”