Friday, March 11, 2022 / 1:24PM / by CSL Research / Header Image Credit:  ChannelsTV

Based on news reports earlier this week, the Nigeria Agribusiness Group (NABG) appealed to the Federal Government to relocate the Anchor Borrowers' programmes from the Central Bank of Nigeria (CBN) to the Federal Ministry of Agriculture. Chairman, Administrative Board of the group, Kabir Ibrahim, explained that while the initiative has been helpful, there are gaps that have been left unfilled. Ibrahim, who faulted the credibility of the beneficiaries of the programme, alleged that a large percentage of farmers are not benefitting from the programme. There have been concerted efforts by the CBN to boost agricultural output, and there have been a number of schemes created to achieve this aim. 

In November 2015, the CBN, in partnership with the Presidency, launched the Anchors Borrowers Programme (ABP) to create a linkage between anchor companies that specializes in processing agricultural commodities and smallholder farmers in the country. This led to the disbursement of loans for farm inputs to many smallholder farmers through financial institutions within the country (DMBs, DFIs & MFBs). While financial institutions got loans from the CBN at 2.0%, farmers got the loans at an interest rate of 9.0%. At the last MPC meeting held in January 2022, the CBN noted that ₦927.94 billion had been disbursed to over 4.5 million smallholder farmers under the scheme. 

Prior to the launch of the ABP, the CBN in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) in 2009, established the Commercial Agriculture Credit Scheme (CACS) to provide finance for the country's agricultural value chain namely production, processing, storage and marketing. Under the CACS, loans are provided to commercial farmers at a maximum interest of 9%. The scheme also allows for a moratorium in the loan repayment schedule, taking into consideration the gestation period of the enterprise. Data for the CBN showed that banks under the CACS had disbursed N672.9bn loans to fund 636 commercial farming projects as of January 2020. 

Despite these initiatives and many others by the CBN, the agriculture sector appears to have seen no real significant growth. Since the inception of the ABP in 2015, the agriculture sector has grown by an average of 2.9% between 2015 and 2021 which is lower compared to the prior 5 years (2010 -2014) and 10 years (2005 - 2014), when the sector grew by an average of 4.5% and 5.7% respectively. In our view, apart from some gaps in the administration and disbursement of funds under these schemes, the insecurity in the food-producing regions amidst two recessions in the past five years continues to cap output growth. Also, the many structural problems affecting the sector continue to limit growth.