Wednesday, August 25,
2021 / 10:24 AM / by United Capital Research / Header Image
In Nov-2015, the Central Bank of Nigeria (CBN) created
the Anchor Borrowers' Programme (ABP) with goal of improving supply of key
agricultural products to Agro-processors from Small Holder Farmers. It intended
to achieve this by supplying farmers with adequate credit at single-digit
interest rates to enable them acquire lands, farming inputs and machinery
necessary to cultivate and produce agricultural outputs. The scheme was also
expected to contribute to helping Nigeria achieve self-sufficiency in food
production as well as address the country's negative balance of payments on
Evaluating recently available data from the CBN's Q4-2020 economic report, over
a six-year period (Nov-2015 to Nov-2020), the ABP program has financed over
2.5m projects, disbursing loans worth N497.2bn to 3.1m farmers in the country.
However, the same report stated that only N118.7bn of the disbursed loans have
been repaid, although some of them are yet to fall due. In addition, recent
media reports have stated the CBN, via different mechanisms have been clamouring
for beneficiaries to repay their loans to ensure sustainability of the scheme.
However, many of the farmers have indicated inability to repay, as the rising
insecurity has forced them to abandon their farms. In addition, we recall in
2019, many of the farmers under the scheme refused to settle their obligations
under the claim that they considered it "their share of the national
cake" after their associations sued some of them.
In our opinion, this further affirms our position that fiat-led interventions are
inadequate to tackle structural deficiencies in the Nigerian economy. Reviewing
empirical evidence, the agriculture sector grew at a six-year average of 4.8%
prior to the introduction of ABP but slowed to 3.0% per annum during the
existence of ABP, a program designed to improve the prior growth rate. Thus, we
believe resolving the structural issues (such as infrastructure &
insecurity) will be key to restoring the sector back to the path of accelerated
growth. We believe resolving these issues should take front burner rather than
sustaining cash interventions.
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