Suing Anchors Borrower's Program Beneficiaries; A Wild Goose Chase?

Tuesday, February 04, 2020 /11:20AM / By CSL Research / Header Image Credit: The Guardian Nigeria

Recent media reports suggest the Central Bank isstruggling to recoup the loans disbursed in 2015 from the concerned farmersunder the CBN's Anchors Borrower's Program (ABP). For instance, the Chairman ofRice Farmer Asociation of Nigeria (RIFAN), Kebbi State chapter told reportershow it has sued 70,000 rice farmers to court over failure to repay the N17bnloan given to them in 2015. Similarly, the Chairman of RIFAN in Jigawa statetold reporters that he had only managed to recoup just N200,000 out of the N1.8bnloan given to 18,000 rice farmers in the state. According to him, theassociation has hired a legal counsel to help prosecute the loan defaulters.

We recall in November 2015, the CBN in partnership withthe Presidency launched the Anchors Borrowers Program with the intention ofcreating a linkage between anchor companies who specialize in processingagricultural commodities and small holder farmers in the country. This led tothe disbursement of loans for farm inputs to many small holder farmers throughfinancial institutions within the country (DMBs, DFIs & MFBs). The loanswere disbursed from the N220bn Micro, Small & Medium EnterprisesDevelopment Fund. While financial institutions got the loans from the CBN at2.0%, Farmers got the loans at interest rate of 9.0% leaving a spread for thefinancial institutions concerned with disbursement.

While the objective of the ABP can be considered validgiven the country's largely untapped agricultural potentials, the frameworkaround the program appears faulty. The small holder farmers who were giventhese loans were identified by cooperatives and farmers associations (e.g.RIPAN) who receive these loans on their behalf before distributing to theirmember farmers. Many of the associations have been accused of corrupt practicesin disbursing the loans with several of their leaders allegedly siphoning someof the funds for personal use. Furthermore, we think the farmers (many of whomare illiterates) considered the loans "free money" and possibly their"share of the national cake". This was alluded to by the Chairman ofRIFAN in Kebbi state when he spoke to the press.

Nevertheless, the ABP seems to have influencedagricultural development positively in some regions with the RIFAN chairman inKebbi stating how the state's rice production capacity of 70,000 mtpa in 2015grew to 1.2m mtpa in 2016. However, we believe the CBN should employalternative methods to carry out the program with examples drawn from similarprivate projects executed by agropartnership firms in the country. Furthermore,we are of the opinion that the program should come under the supervision of theMinistry of Agriculture as we struggle to see how the program can beefficiently run by the CBN.