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Economy | Agriculture

Issues Associated With Anchors Borrowers' Programme Loan Repayment Are Talking, Are We Listening?

Nov 08, 2021   •   by   •   Source: Proshare   •   eye-icon 2150 views

Monday, November 08, 2021 / 12:22 PM / by CSL Research / Header Image Credit: Central Bank of Nigeria

 

Recently, the Central Bank of Nigeria (CBN) released the revised AnchorsBorrowers' Programme (ABP) guidelines, addressing current realities anddevelopments while including protective measures to ensure the programme'ssmooth implementation process and mitigate the risk of loan default. Based onthe document, the apex bank has taken the bull by its horns, introducingadditional clauses to reduce loan losses arising from the failure of farmers torepay to a minimal level. 


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First, the participating financial institutions(PFIs) shall foreclose on all pledged collateral one year after the expirationof the tenor for the initial facility. In addition, where the facility wasaccessed through a Commodity Association, the leadership of the associationwill be held liable for any default on the facility granted to its members.More importantly, the CBN has increased the equity contribution to the loanamount by the smallholder farmers from 5% to 10%, and failure to repay suchloans will cause the loss of the equity contribution.

 

Therevised guidelines are essential, as the apex bank has been trying to recoupthe loans disbursed to concerned farmers with very minimal success. Availabledata from the CBN's Q4 2020 economic report revealed that out of the cumulativeN497.2bn disbursed to over 2.5m farmers from inception to November 2020, onlyN118.7bn had been repaid, which corresponds to a 23.9% loan performing rate.Although some of these loans are yet to be due, we can assume that a largeportion is in default. One, many of the farmers based on previous reports,viewed the loans as their share of the national cake. Also, many leaders of severalfarmers' associations who handled the distribution of the loans diverted thefunds for their personal use.

 

Currently,the cumulative sum of N798.1bn has been disbursed to 3.9m farmers based on theinformation obtained at the last MPC meeting held in September 2021. While nodata is available to ascertain the level of non-performing loans during theperiod, we believe that the narrative seems not to have changed. We recall thatin August 2021, many farmers called on the Federal Government to appeal to theapex bank on their behalf to extend the loan repayment period. In defence oftheir plea, the farmers noted that the unabated insecurity limits cropproduction, resulting in low output. Rightly so, the rising insecurity has madeit impossible for many farmers to go to their farms for fear of being killed orkidnapped.

 

Whilewe cannot overemphasize the importance of revising the ABP guidelines based onthe current realities associated with the programme, we believe complementaryefforts, particularly from the authorities, are needed to address the risingspate of insecurity amidst smuggling activities, which significantly weigh onlocal production. Also, we believe the government, like in developed climes,should focus more on encouraging mechanized farming. Sadly, without intensifiedinvestments in the entire agricultural sector value chain to improve storagefacilities, infrastructure, seedling quality, etc., we may struggle to see aremarkable improvement in the fortunes of the sector.


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