Survival Threatens as Bank of Agriculture’s Negative Equity Capital Widens
In recent years, the Bank of Agriculture (BOA) has been unable to live up to expectations due to a lack of capacity to deliver on its objective successfully as a result of widening negative capital. This has continued to threaten its survival.
Incapacitated by a lack of funding, BOA has lost its allure in the Agricultural segment of the economy, and the supply chain. Market analysts expect the Federal government to wind down the bank or recapitalise it.
In 2022, the Bank’s negative equity capital widened to N70.598 billion, from N48.398 billion in the corresponding year. Fully owned by the Federal Government of Nigeria through the Ministry of Finance Incorporated and the Central Bank of Nigeria, BoA’s operation has come under intense pressure from low capital to deliver its mandate.
The Bank’s mandate is to provide agricultural credit facilities to support all agricultural value chain activities, provide non-agricultural micro-credit, Savings mobilization, and Capacity development. It achieves this through the cooperative development of agricultural information systems and the provision of technical support and financial advisory services.
Development in the economy indicates that major agriculture intervention has been shifted to the CBN, while BoA operations suffer large setbacks. In recent years, local deposit banks have become channels for implementing agricultural-related interventions.
“One would have thought that the Nigerian government understands the gravity of major border closure against an influx of cheaper goods and service in August 2019”, Research analysts at LSintelligence Associates said in an email comment.
The current inflation pressure facing the economy was triggered by a lack of plans to boost local production of goods and services without creating a gap between demand and supply in a consumer economy, the firm said.
In 2022, Bank of Agriculture’s total equity was red in 2022, according to the Central Bank of Nigeria’s audited financial report published last week. Detail from the report showed that the Bank of Agriculture’s balance sheet was broken.
In 2022, BoA’s negative equity balance widened to more than N70 billion from N48.398 billion. The Bank’s gross income settled at N1.741 billion, which was a significant improvement from a gross loss of N7.681 billion reported in 2021.
In the period, total expenses settled at N3.565 billion. Surprisingly, BoA’s total expense in 2021 was positive, thus reducing a massive loss it sustained in the year by N3.604 billion, the CBN report showed.
MarketForces Africa review showed that there is no additional explanation on why a company would have positive total expenses, and an additional note from the CBN report omitted the same.
In the period, CBN said its exposure to BoA was 14% shareholding, which caused the apex lender to book more than N4 billion impairment loss in its book.
The Bank grants Micro and Macro loans for Agricultural production, processing and marketing, and other financial services, but as of 1 April 2006, marketing ceased to be one of the Bank’s principal activities.
It also engages in the business of stimulating rural savings as well as provision of loans to small-scale enterprises in order to develop the economic base of the low-income populace, according to a CBN report.
The Bank was incorporated on 24 November 1972 as Nigerian Agricultural Bank Limited, changed its name to the Nigerian Agricultural and Co-operative Bank Limited (NACB) in 1978, and later changed to Nigerian Agricultural Cooperative and Rural Development Bank Limited (NARCDB) on 29 December 2000.
BOA enlarged its object clause to include the total development activities of the Peoples Bank of Nigeria and also acquired the risk assets of the Family Economic Advancement Program (FEAP). #Survival Threatens as Bank of Agriculture’s Negative Equity Capital Widens