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The continuation of the laudable Anchor Borrowers’ Programme (ABP) of the Central Bank of Nigeria (CBN) may be hampered by the low rate of loan repayment. According to the CBN, only N503billion or 52.39 per cent of loans disbursed to beneficiaries under the scheme had been recovered as at the end of February 2023. The CBN has disbursed N1.07trillion to about 4.57 million smallholder farmers, out of which N960 million is due for repayment.
The CBN and the Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) are in charge of disbursing the funds. Only N119billion is not yet due for repayment. The smallholder farmers have cultivated over 6 million hectares of 21 commodities across the country. These commodities include rice, wheat, cowpea, millet, maize, cotton, fish, soya bean, poultry, cassava, groundnut, ginger, sorghum, oil palm, cocoa, sesame seeds, tomato, castor seed, yellow pepper, onions and livestock.
Despite improving the national average yield per hectare of these commodities, with productivity per hectare almost in double digit figures since the implementation of the programme, it has been impeded by poor rate of loan repayment. Repayments under the ABP are made through cash or produce by the beneficiaries within an agreed term as stipulated in the collateral.
Each smallholder farmer is entitled to a maximum limit of 50 per cent of the value of his collateral. Tenor of loans under the credit scheme is also based on the commodity gestation period. About 12 million smallholder rice farmers represent the largest beneficiary of the total loans disbursed under the scheme. Beneficiaries of the loans were granted a forbearance, an extension of the repayment to February 28, 2022, as a result of the outbreak of COVID-19 pandemic in 2020. The disclosure by the CBN has come against the backdrop of a report by the International Monetary Fund (IMF) that only 24 per cent of the loans disbursed has been repaid, while about 75 per cent is yet to be repaid. The IMF says that the ABP is yet to significantly boost production in the country, noting that “the template for repayment could be more encouraging if the recipient loans had been well targeted and worked out properly.”
We advise the smallholder farmers to endeavour to repay their loans. Defaulting will not help the success of the scheme. Since 2021, the CBN had temporarily halted further disbursement of funds under the scheme, citing the high rate of repayment default. The establishment of the ABP is in line with the CBN developmental functions as enshrined in Section 31 of the CBN Act 2007, with the aim to create economic linkage between the smallholder farmers and reputable anchor companies involved in the production and processing of key agricultural commodities.
Apart from providing loans to smallholder farmers, the scheme has created jobs, reduce food import bill towards conserving our foreign reserve. Statistics from the CBN show that out of the N1.07trillion loan already disbursed, N73.99 billion was to support the cultivation of over 383,000 hectares of maize, rice and wheat during the 2022 dry season. CBN has also released the sum of N1.76billion to finance two large-scale agricultural projects under the Commercial Agricultural Credit Scheme (CACS).
All excess output from the farmers will be released to the Nigeria Commodity Exchange (NCX) to help moderate the prices of food in the market. Yet, food prices continue to soar, posing a great challenge to the nation’s food security. Currently, the federal government is spending $2billion annually to support rice import when the ABP ought to be ensuring food security.
There is need to review the objectives of the ABP and prioritise them in such a way that repayment of the loans will be seamless. The scheme is reported to have been abused, as some of the beneficiaries are alleged not to be farmers. Recently, the Chairman, Forum of Agricultural Commodity Association of Nigeria, Mr. Sadiq Dawara, said last year’s floods in some parts of the country affected the repayment of the loans by the smallholder farmers.
Also, the Rice Farmers Association of Nigeria at a recent press briefing said the association built a rice pyramid to show the gains of the credit intervention scheme. Apart from insecurity and flooding, the two associations stated that lack of constant access to affordable finance, unavailability of quality inputs and high cost of equipment, high post-harvest losses, fragmented and unstructured market and the challenges associated with climate change hampered timely repayment process. Nevertheless, the sustenance of the programme is anchored on borrowers’ repayment of the loans when due.
If the CBN wants to remain committed to its developmental mandate of stimulating access to finance the real sector, as well as investment in capital assets in sectors with high-growth and employment elastic potential, beneficiaries of the Anchor Borrowers’ Programme must promptly repay the loans. They should not see the intervention programme as a bazaar.
