Commercial Agricultural Credit Scheme: Evaluation and Impact Assessment Report


Thursday, November 15, 2018 / 06:22 PM / by CBN



The Commercial Agriculture Credit Scheme (CACS) is a sub-component of the Federal Government of Nigeria’s Commercial Agriculture Development Programme (CADP) financed from the proceeds of the N200 Billion seven (7) year bond raised by the Debt Management Office. The fund is made available to participating banks to finance commercial agricultural enterprises at a maximum interest rate of 9 per cent. In addition, each State Government could borrow up to N1.0 Billion for on-lending to farmers’ cooperative societies and other areas of agricultural development provided such initiatives/interventions are in line with the objectives of CACS. 

The Central Bank of Nigeria established the CACS in collaboration with the Federal Ministry of Agriculture and Water Resources in 2009 to: fast-track the development of the agricultural sector; enhance national food security; reduce the cost of credit in agricultural production; increase national output; generate employment; and raise the level of foreign exchange earnings of the country. 

The evaluation is intended to formalize the evidence of the impact of the CACS program and track the progress made in the implementation in line with the program objectives. A mixture of qualitative and quantitative methods were employed. 

Quantitative information were collected from CACS beneficiaries using structured questionnaires, while qualitative information were collected from beneficiaries through focus group discussions (FGDs). The structured interviews were designed to collect data from beneficiary firms, while the FGDs from farming groups and individual farmers who benefitted through state governments. All beneficiaries (firms) were approached to provide data on the structure questionnaires (Appendix II), while FGDs were conducted in three (Cross River, Kano, and Oyo) selected states.


Beneficiaries and CACS Funds Utilization

The evaluation report is based on information retrieved from 191 benefiting businesses comprised of; cooperative groups, partnerships, private and public limited liability companies and sole proprietorships. A total of N147.87 billion was disbursed to the 191 businesses between 2009 and 2016. State governments also served as channels to certain groups of beneficiaries. Over the years, 2011 and 2015 recorded highest uptakes of CACS loans. Most (79.1%), of the 191 businesses are private liability companies, 7.3% were government owned, 6.8% sole proprietorships and 4.2% public liability companies.

 In terms of number of benefiting firms, Oyo, Kano, Kaduna, Lagos, Edo and Kwara states lead, while seven (7) of the 36 states each received above 5% of the total funds disbursed. 

Majority (44.5%), of the 191 beneficiaries are engaged in crop production, this is followed by livestock production (23.0%) and agriculture produce processing (14.7%). Most(80.2%) of the disbursed funds were channeled to these activity areas and applied to agriculture and agriculture related activities, while 19.8% (N29.2 billion) of the funds may have been applied in the areas not intended under the Scheme by 33 or 17.3% of the beneficiaries.


Impact of CACS on Economic Growth

One of the key objectives of the CACS is to “increase national output”. National outputs are measured through aggregating the values of production, income or expenditure of economies. The assessment heuristically compared growth in aggregate income from sales of produce/products of beneficiaries with growth in nominal GDP of corresponding subsectors, and the volume of production of firms as a measure of contribution to growth is compared with real GDP since the real GDP is a value measure adjusted for price increases. 

Impact assessment compared growth differential of beneficiaries with growth in agriculture. Results show that, prior to access to CACS facilities, aggregate growth in sales of beneficiaries was far lower than the overall nominal growth of the agriculture sector. After access to CACS loans, aggregate growth of sales of the beneficiaries averaged 28.44% between 2009 and 2016 as compared with average growth of 9.96% in agriculture or the 13.93% average growth of manufacturing in the same period. Beneficiaries recorded a growth differential of 18.48% and 14.51% when compared with growth in agriculture and manufacturing respectively. 

The positive impact of CACS funding on growth in sales were recorded across most activity areas as: crop production beneficiaries recorded an average growth of 26.69% as against national crop production growth of 9.69%; beneficiaries in livestock production averaged growth of 65.33% as against 12.0% of national livestock income; beneficiaries in fish production averaged growth of 42.63% as against 13.37% of national fish income; beneficiaries in food and beverages manufacturing recorded average growth of 84.26% as against national growth of 10.91%; and the textile industry beneficiaries averaged growth of 35.33% as against national textile growth of 28.46% between 2009 and 2016. 

Non-metallic and plastic manufacturers did not however record positive impact when compared with national figures as; beneficiaries in non-metallic manufacturing recorded an average growth of 9.93% as against national growth of 27.56%, and manufacturers of plastic products recorded average growth of 26.70% as against the average growth of 37.20 % recorded in the national output of plastic manufacturing.

 Nominal output and income from sales are recorded at current prices. Growth in value measures may be due to growth in volume, unit prices or both. Real income measures growth in volume of production. We further compared real GDP growth with growth in volume of production of CACS beneficiaries. 

CACS beneficiaries involved in livestock and crop production recorded an average growth in quantities of produce of 21.09% between 2009 and 2016 as against national average real growth of 4.55% recorded in agriculture production, thereby creating a growth differential of 16.54%. The contribution of CACS benefiting firms towards national output is also pronounced in the manufacturing sector. The firms recorded an average growth in volume of production of 69.0% between 2009 and 2016 as against the average of 8.52% recorded in real GDP growth by the manufacturing sector, leading to a substantial growth differential of 60.54 percentage points. 

Between 2009 and 2016, volume of crop production by beneficiaries grew at an average of 15.18%, while growth in national crop production recorded 4.56%. Similarly, CACS beneficiaries involved in livestock production recorded an average growth of 23.62% as against the national average of 4.07%. Between 2011 and 2016, fish farmers output grew on the average by 6.15% while production of CACS beneficiaries grew by 37.74% on the average in the same period. All of the agriculture production activities recorded substantial differential growth in volume of produce, indicating substential impact of the Scheme on real GDP growth. 

Growth in national output from manufacturing of food and beverages has been subdued between 2009 and 2016, and in particular turned negative in 2015 and 2016. The average growth recorded by firms under the Scheme between 2009 and 2016 was 97.80% as against 3.22% recorded by the entire sector. Real growth in the Textile and textile products manufacturing deteriorated between 2011 and 2016. Growth in the volume of production by beneficiaries of the CACS funding had been very unstable but averaged 21.61%. National output of non-metallic products had had robust growth with average real growth of 21.28% as against -3.57% recorded by firms on the Scheme between 2009 and 2016. These results confirm similar observations made in respect of the sales.


Impact on Operational Capacity and Employment of Firms

One of the objectives of the CACS is to deepen the credit market. Evaluation results indicate that about 37 per cent of firms who benefited from the CACS loans leveraged on other resources totaling N22.28 billion from other sources to argument the CACS facility and upgrade financial capacity. Most (64.5%) of the firms obtained the funds from commercial banks, while the equity market (11.1%), family and friends (3.8%) and micro-finance banks (0.4%) were other important sources of leveraged funds. 

As hoped, 85.4 per cent of the firms undertook one form or the other of expansion in their operations on receipt of the CACS loan. Most (67.6 %) of the firms acquired new plants or additional equipment/machinery, while other forms of expansion included; recruitment of additional employees (50.3% of firms), improving utilization of installed capacity (41.9%), replacement of old equipment (35.8%), expansion of land under cultivation (30.7%) and establishment of new outlets (22.9%). However, aggregate installed capacity utilization remained low around 50%. Evidences also exist that small holder farmers, who in groups, accessed the facility through state governments expanded operational activities. 

Another key objective of the CACS is to “generate employment”. As a group, the firms employment records showed continuous increases in the number of employees between 2008 and 2017, growing from 10,443 employees in 2008 to 70,070 in 2017, consisting of 32% female and 68% male employees. Nominal increases in staffing positions of the beneficiaries that accessed N119.58 billion generated a net job increases of 24,457 since inception of the CACS in 2009. Beneficiaries engaged in crop production, and manufacture of food and beverages recorded the most net job gains with a total of 11,317 (or 46.3% of total) and 10,604 (or 43.4% of total) respectively. Evidence exist that small scale enterprises that accessed funds through state governments also generated new jobs that were not included in the 24,457 new jobs.


Impact on Assets of Benefiting Firms

The foundation assumption on which the Scheme was established is that “provision of funds to small and medium agricultural enterprises with plans to grow their assets base” would stimulate growth in production/output. Specifically, the Scheme targeted commercial agricultural enterprises with agricultural assets of not less than N100 million with plans to increase the assets to N250 million within a period of three years, and non-integrated farms/agriculture enterprises with assets of N50 million with plans to grow their assets to N150 millions within three years. 

Results of evaluation indicate that all classes of aggregate assets of benefiting firms recorded growth between 2008 and 2017. After 2015, there is evidence to suggest that firms may have disposed their landed properties and equipment/plants to remain liquid or service their financial liabilities. Since inception of the Scheme in 2009, only 6.8% of the firms had their aggregate assets expanded by 150% and above, 12.3% by the end of the second year, and this dropped to 11.6% in the third year indicating reversal in earlier assets growth. 

Aggregate value of foreign exchanges earnings of the benefiting firms increased over the years from $20 million in 2008 to $65.3 million in 2016 mainly from exports of; cotton, cowpea, fruits, maize, rubber and lately processed soya bean. Other


Observations and Recommendations

As part of the structured questionnaire and focused group discussions, challenges and lessons learned were solicited from beneficiaries. Amongst the issues highlighted were: business failures due to poor business plans, late disbursement of funds, shortfall in planned budget, tedious bureaucracy and bottlenecks of participating banks. We also observed that timely collection of data from beneficiaries may improve the efficacy of the Scheme. 

Following from the results, which obviously demonstrated substantial impact on; economic growth, employment generation and foreign exchange earnings, we make the following recommendations to CACS fund managers:


1. There are indications from all categories of beneficiaries that the Scheme provided funding for start-ups and sustenance of operations by existing businesses indicating that cost of funds inhibits economic growth. We therefore recommend that all necessary steps be taken to reduce the cost of funds to businesses. 

2. A number of beneficiaries attempted to actively explore the agriculture value chain, in particular start-ups. These efforts were not mostly anticipated by their business case plans, and DFO contacts with them were unable to identify such opportunities. We recommend that interaction with start-ups be more frequent and the objectives of such contacts should include identification of expansion opportunities so as to transit identified beneficiaries to other facilities for maximum funding impact. 

3. The absence of data from most states that participated in the Scheme may indicate that such funds may have been misapplied. However, there are indications that some states with special purpose vehicles (SPV) and active extension services made the funds available to end users which produced some success stories, but most beneficiaries did not have good business plans to be financed. Concerted efforts be made to ensure that states with plans to key into the Scheme are scrutinized and disbursement monitored. 

4. Agriculture is rainfed in Nigeria and production activities are seasonal. For a one year tenured facility, correct timing of disbursement is key. All efforts be made to ensure that crop producers receive funding at appropriate cropping periods. 

5. A number of benefiting firms were not involved in any active economic activity, and such firms refused provision of information. This calls for the need to monitor closely all beneficiaries through periodic collection of data. We are therefore recommending that the structure questionnaire used for this impact assessment be adopted for annual reporting by all firms under the Scheme. 

6. Funding mismatch is a common issues raised by beneficiaries that received funding far less than their planned budget. This resulted in their inability to fully fund planned expansions activities. We recommend that funds approved for disbursement match business plans in terms of timing and amount.


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