Current Issues Associated With Anchors Borrowers’ Programme Loan Repayment
Recently, the Central Bank of Nigeria (CBN) released the revised Anchors Borrowers’ Programme (ABP) guidelines, addressing current realities and developments while including protective measures to ensure the programme’s smooth implementation process and mitigate the risk of loan default. Based on the document, the apex bank has taken the bull by its horns, introducing additional clauses to reduce loan losses arising from the failure of farmers to repay to a minimal level.
First, the participating financial institutions (PFIs) shall foreclose on all pledged collateral one year after the expiration of the tenor for the initial facility. In addition, where the facility was accessed through a Commodity Association, the leadership of the association will be held liable for any default on the facility granted to its members. More importantly, the CBN has increased the equity contribution to the loan amount by the smallholder farmers from 5% to 10%, and failure to repay such loans will cause the loss of the equity contribution.
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The revised guidelines are essential, as the apex bank has been trying to recoup the loans disbursed to concerned farmers with very minimal success. Available data from the CBN’s Q4 2020 economic report revealed that out of the cumulative N497.2bn disbursed to over 2.5m farmers from inception to November 2020, only N118.7bn had been repaid, which corresponds to a 23.9% loan performing rate. Although some of these loans are yet to be due, we can assume that a large portion is in default. One, many of the farmers based on previous reports, viewed the loans as their share of the national cake. Also, many leaders of several farmers’ associations who handled the distribution of the loans diverted the funds for their personal use.
Currently, the cumulative sum of N798.1bn has been disbursed to 3.9m farmers based on the information obtained at the last MPC meeting held in September 2021. While no data is available to ascertain the level of non-performing loans during the period, we believe that the narrative seems not to have changed. We recall that in August 2021, many farmers called on the Federal Government to appeal to the apex bank on their behalf to extend the loan repayment period. In defence of their plea, the farmers noted that the unabated insecurity limits crop production, resulting in low output. Rightly so, the rising insecurity has made it impossible for many farmers to go to their farms for fear of being killed or kidnapped.
While we cannot overemphasize the importance of revising the ABP guidelines based on the current realities associated with the programme, we believe
complementary efforts, particularly from the authorities, are needed to address the rising spate of insecurity amidst smuggling activities, which significantly weigh on local production. Also, we believe the government, like in developed climes, should focus more on encouraging mechanized farming. Sadly, without intensified investments in the entire agricultural sector value chain to improve storage facilities, infrastructure, seedling quality, etc., we may struggle to see a remarkable improvement in the fortunes of the sector.