Tuesday, February 04, 2020 /11:20
AM / By CSL Research / Header Image Credit: The Guardian Nigeria
Recent media reports suggest the Central Bank is struggling to recoup the loans disbursed in 2015 from the concerned farmers under the CBN's Anchors Borrower's Program (ABP). For instance, the Chairman of Rice Farmer Asociation of Nigeria (RIFAN), Kebbi State chapter told reporters how it has sued 70,000 rice farmers to court over failure to repay the N17bn loan given to them in 2015. Similarly, the Chairman of RIFAN in Jigawa state told reporters that he had only managed to recoup just N200,000 out of the N1.8bn loan given to 18,000 rice farmers in the state. According to him, the association has hired a legal counsel to help prosecute the loan defaulters.
We recall in November 2015, the CBN in partnership with the Presidency launched the Anchors Borrowers Program with the intention of creating a linkage between anchor companies who specialize in processing agricultural commodities and small holder farmers in the country. This led to the disbursement of loans for farm inputs to many small holder farmers through financial institutions within the country (DMBs, DFIs & MFBs). The loans were disbursed from the N220bn Micro, Small & Medium Enterprises Development Fund. While financial institutions got the loans from the CBN at 2.0%, Farmers got the loans at interest rate of 9.0% leaving a spread for the financial institutions concerned with disbursement.
While the objective of the ABP can be considered valid given the country's largely untapped agricultural potentials, the framework around the program appears faulty. The small holder farmers who were given these loans were identified by cooperatives and farmers associations (e.g. RIPAN) who receive these loans on their behalf before distributing to their member farmers. Many of the associations have been accused of corrupt practices in disbursing the loans with several of their leaders allegedly siphoning some of the funds for personal use. Furthermore, we think the farmers (many of whom are illiterates) considered the loans "free money" and possibly their "share of the national cake". This was alluded to by the Chairman of RIFAN in Kebbi state when he spoke to the press.
Nevertheless, the ABP seems to have influenced agricultural development positively in some regions with the RIFAN chairman in Kebbi stating how the state's rice production capacity of 70,000 mtpa in 2015 grew to 1.2m mtpa in 2016. However, we believe the CBN should employ alternative methods to carry out the program with examples drawn from similar private projects executed by agropartnership firms in the country. Furthermore, we are of the opinion that the program should come under the supervision of the Ministry of Agriculture as we struggle to see how the program can be efficiently run by the CBN.