AGRICULTURAL MECHANISATION: GOVERNMENT IS INJECTING 10,000 TRACTORS INTO THE SYSTEM – Ahmed Adekunle, NAMEL BOSS
The President Muhammadu Buhari administration has continued to demonstrate passion for the attainment of not just food security for the nation, but a renewed drive for mechanization of agriculture which will no doubt result in an increase in agricultural output in the country.
Chief Executive Officer of the Nigerian Agricultural Mechanization and Equipment Leasing Company (NAMEL) Dr Ahmed Adekunle reveals how the federal government is partnering with the private sector to increase agricultural productivity through mechanisation as well as his organisation’s mandate to ensure food security for Nigerians.
WHAT IS NAMEL AND ITS CORE MANDATE?
NAMEL is the Nigerian Agricultural Mechanisation and Equipment Leasing Company. It is a child of necessity because in the past seven years I have been in the Ministry advising the former Honourable Minister of Agriculture, Dr Akinwunmi Adesina who is now the president of African Development Bank as his Special Adviser on Mechanization. Before my exit from the ministry to become CEO of NAMEL, I was also advising the current minister, Chief Audu Ogbeh in the area of mechanization.
The former minister wanted to deliver mechanization at the farm gate without the farmer necessarily owning mechanization out then he realized that having one or two hectares will be very difficult to mechanize. But then they wanted to make sure that the hoes and cutlasses are returned to the museum. He then asked us to come with a programme that will deliver mechanization without the farmer actually saying he owned the tractor.
To own a tractor, you need between 75-100 hectares of land but almost 90 per cent of Nigerian farmers own between 1-2 hectares of land, therefore it is difficult technically and financially so we set up a Ministerial Mechanization Committee called MMC and I was asked to chair it. The committee comprised of the private sector, the financial institutions, the then NIRSAL when it was newly incorporated, cooperative structures with people from CBN and Ministry of Agriculture,
I was from the private sector then running this programme. So they bought into it and made me chairman. So the programme actually ran for about two-and-a-half to three years with a view to metamorphosing into a private sector arrangement and living the government. We were given some amount of money and we launched about 700 minutes of tractors. Fortunately, again the government changed into the hands of the APC. Although we were not moved out of the ministry but when the government came and Mr Ogbeh became the minister, he saw what we were doing and was impressed.
He said we are not going to stop anything good that is ongoing but to widen and deepen the existing project. So far so good, the mechanisation programme that introduced private sector inclusion and the agricultural equipment living enterprise that delivers services to farmers at a minimal amount of money will continue but it took almost 2 years for us to get approval from Mr president. As we speak now, we have the president’s approval as well as that of the minister. The Infrastructural Concession Commission to deliver mechanisation with NAMEL.
NAMEL is actually out to drive a mechanization system that functions and bridge financing from the public sector and the private sector. We created a mechanisation eco-system where we have the government bridging mechanisation funding by 35 per cent and also the private sector bringing in 65 per cent. What the government was doing before was to use the whole money for example if you need a 100 unit of tractors, you need a couple of millions which can only buy you about 50 units but with the same amount of money.
We are putting 400 units of tractors in place. We are able to do this by wooing investors from the private sector to put in 65 per cent so we converted the Federal Government pool forward
that normally give them about 50 unit of tractors to represent 35% of 400 units of tractors and then we now partner with the MSPs such as TOOAN and TOHFAN. You can also consider us as financiers, managers, drivers and negotiators. We are working to sustaining the mechanisation eco-system for the next 17-20 years.
WHAT IS THE CURRENT LEVEL OF MECHANISATION AS COMPARED TO THE LAST 10 YEARS?
Well… to be very honest with you, that will be a very difficult data to give right now because mechanisation should be measured scientifically in terms of intensity and density. You can do that by calculating the number of tractors that come into the country, where they are and what they are doing. We don’t have that record right now.
But I can tell you categorically that the federal government has in the last 6 years injected 900 units of tractors into the system and most of these tractors are no longer functional. The state governments too are buying tractors in hundreds but most of the them are not sustained. After 6 months, 1 year, the no longer function properly so it’s very difficult if I tell you this is the productivity increase in ratio because the injection of tractors is not correct. In NAMEL right now, we have introduced what we call, Agricultural data Tracking System. We are partnering with some foreign companies to track the movement of the tractors as well as their working condition and what they produce.
NAMEL in the next 2to 3 years will be able to give you precise number of tractors in the system and what they are doing. We intend to change the narrative that Nigeria is operating below 0.10 hectare.
YOUR ORGANISATION RECENTLY SIGNED AN MOU WITH SOME MSPs. WHAT DO YOU INTEND TO ACHIEVE BY THIS?
The NAMEL mechanisation eco-system involves a lot of syndication of funds by bringing in players that is the federal government, equipment manufacturers like John Deere, banks as well as the mechanisation service providers. The MSPs are a group of successful managers with financial credibility in single obligation of between 1 to 5 billion naira with almost zero default. They have borrowed money from banks to do what was thought to be impossible. We cannot generate money when we send tractors out, we generate money and pay our indebtedness even at high interest rate. Signing and MoU with them means they are part of the eco-system. The president and the minister of Agriculture said the government is tired of buying tractors and they are disappearing but at the same time, we must mechanise. That was why NAMEL was asked to identify successful bodies who can manage tractors very well and return guarantee on investment both on the side of the government and the private sector. The approval we got from Mr President is to work with these MSPs to deploy 10,000 units of tractors to the farmers nationwide through NAMEL.
WHAT ARE YOUR MAJOR CHALLENGES AS AN ORGANISATION?
Our major challenge frankly speaking is taking off. Challenges can come in various forms. I would not want to dwell on the financial aspect because that is what everybody deals with by giving excuses that the economy is not moving. Whether you like it or not financial challenge will always be there. The sustainability of the flow of revenue when the tractors are in the fields. Sorry to say that right now it looks like there is a veil covering the eyes of many. A tractor 4 years ago was about 4.5 million, today a 75 horse power tractor is about 15 to 16 million Naira. Yet, what we are producing is the same thing per hectare. Our major challenge right now is the high cost of agricultural machinery. We are doing our best and the government is also doing its best to increase production. John Deere on its part is helping to increase our productivity to 300 metric tonnes per hectare in addition to training on how to use the equipment.
APART FROM THE APPROVAL GIVEN BY MR PRESIDENT FOR THE TAKE-OFF OF NAMEL, WHAT OTHER STEPS HAS THE GOVERNMENT TAKEN TO IMPROVE AGRICULTURE IN THE COUNTRY?
There are a lot of things the government has done to improve agricultural productivity, but I would like to remain on the issues that concern NAMEL and that is strictly mechanisation. I will tell you that Mr President has approved 35% bridging finance. For clarity take for instance if a tractor is 1 million, since the government is bridging 35%, the tractor is now coming at 650,000 naira so your cost of fund alone is on the 650 rather than 100%. To make it more beautiful, Mr President has also approved through the Minister of Agriculture that, 25% of that 35% bridged is a grant so which means the amount of money going back to the federal government is 10% that is about 2 million naira off. Putting the arithmetic together, and reversing your calculation, your interest is almost a simple digit because if you remove the 35% you will be left with the actual amount we are buying from the private sector with high cost of fund that is the interest and the minster negotiated with John Deere and Stanbic IBTC and they are giving us 19%. So if you merge the two and reverse your calculation you are getting a single digit. Another thing the government has done is to extend the payment to six years. We were doing 4 years before. It is the successful implementation and payment of the 45% that will apply the 25% grant.
WHAT SHOULD NIGERIANS EXPECT FROM NAMEL IN THE COMING YEARS?
They should expect more tractors, more Agro-machinery, more beautiful and low cost funding structure. NAMEL is currently negotiating with manufacturers of Agro-machinery, donor agencies and development partners to see how we can lease out equipment which costs less than 2 million naira. When tractors come into the system, productivity increases. NAMEL is the first private sector entity to give out equipment on a lease finance where you pay some amount of money and the equipment becomes yours after some time.