CBN Anchor Borrower Program Risks Derailment Over Non-Performing Loans – Businessamlive

The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, also known as NIRSAL Microfinance Bank Limited, has recently issued a Final Demand Notice to agricultural industries that have benefited from the Anchor Borrower Scheme (ABP) to repay their debts totaling N5 0.67 billion.

The action followed the CBN’s directive to the microfinance bank to recover all non-performing intervention loans made to beneficiaries under the CBN-facilitated anchor borrower program.

The published list of borrowers with the largest non-performing loans who allegedly defaulted on their loans as agreed includes Sadolen Interworld Ltd, with Saidu Audu Adaji and Nura Musa Hassan as promoters, with current exposure of N2.05 billion; Arabic Farms and Commodities Ltd, with Alhaji Yusuf Ibrahim Babangida as promoters and current exposure of N1.22 billion; Prime Synergy Global Solutions Ltd., with Mercy Ikeji and Jennifer Nyesom-Effiong as promoters and an exposure of N1.45 billion.

The others are Asuj Food Production and Processing Ltd, with Abubakar Umaru Jibrilla as promoter and an exposure of N581.41 million; Souvenire Seeds Nigeria Ltd with Roseline Omokora as promoter and N158.18 million exposure; and Con Investment Ltd with Josephine Nwaeze as promoter with current exposure of N211.6 million.

NIRSAL, in the notice of formal notice issued in Abuja, said that earlier notices of formal notice were issued by the bank to the last known addresses of the aforementioned customers who had not complied, adding that the notice public served as the final notice of demand.

“Following the directive of the Central Bank of Nigeria (CBN) to NIRSAL Microfinance Bank Limited (NMFB) to recover all non-performing intervention loans made by NMFB under the Anchor Borrowers Scheme (a CBN Intervention Program), NOTICE is hereby given to the under-listed customers, to set off their debt to NMFB under the said CBN Intervention Program,” NIRSAL said in the notice. remains.

“Prior notices of demand were issued by NMFB to the last known addresses of the aforementioned customers, therefore, this public notice serves as the final notice of demand,” it said.

The ABP was inaugurated by President Muhammadu Buhari on November 17, 2015, just six months into his first term. The program, according to Buhari, was established to create an economic link between flagship companies involved in the processing of agricultural products and smallholder farmers of needed agricultural products.

The program, facilitated and coordinated by the CBN, aims to increase bank financing to the agricultural sector and improve the capacity utilization of agricultural lands involved in the production of notable commodities. Program policy documents also indicated that PBA will boost agricultural lending to farmers and entrepreneurs, strengthen the value chain, reduce the importation of commodities, reduce poverty among smallholder farmers, increase the rate of employment and will also develop smallholder farmers from subsistence production levels to commercial productivity.

Upon inception, the program secured its Micro, Small and Medium Enterprises Development Fund (MSMEDF) grant of N220 billion under the auspices of the CBN. Beneficiaries received loans at an interest rate of 9%, which should be repaid according to the gestation period of their products which will be compulsorily delivered to designated collection centres.

According to program guidelines, at harvest, beneficiary farmers are supposed to repay their loans with the harvested produce (which must cover the principal and interest of the loan) to an “anchor” who disburses the cash equivalent. on the farmer’s account.

Despite the remarkable goal of the ABP, and despite being hailed in several quarters as one of the CBN’s most successful development finance interventions, the non-collection of loans worth billions of naira has been described as a blockage in the wheel of program development.

This has led analysts to question the sustainability of the PBA framework, as program objectives appear threatened by the inability of beneficiaries to repay loans amid allegations of corrupt practices in loan disbursement with several agricultural association leaders, civil servants and politicians who allegedly siphoned off some of the funds for personal use.

Speaking on why many farmers did not repay the loans as scheduled, Isa Wanzam, a rice farmer and loan recipient in Kebbi State, said that when funds were disbursed to many of them them (the farmers), it was not clearly indicated that it was a loan. He added that they did not apply for the loan in the first place and it would be difficult for many farmers to repay the loan as not everything was in monetary form as some farmers were offered farming tools that they they considered in the form of donations or agricultural support aid from the government.

“We wouldn’t have collected anything if they had educated us thoroughly about the program,” he said.

Umar Al-Hassan, another rice farmer, revealed that the loan was disbursed indiscriminately as the money was given to those who were neither farmers nor understood what farming entails while farmers had to bear the brunt of it. weight.

Solomon Kyagya, a farmer from Adamawa State, explained that he and some farmers in his community were offered an input loan, after which they received documents from the CBN. Kyagya, however, lamented that the input price tags have a discrepancy with those in the market.

“A bag of fertilizer on the market at that time was between N8,000 and 10,000, but the one supplied by ABP was marked N14,000. Most of the inputs we were given were double the price of the market and you can’t do anything because they gave us the form to sign it, collected our photos and details,” he said.

Bata Peter-Bwala, a farmer from Maiduguri, Borno State, noted that most farmers in the state were unaware of the procedure to access the loan and get the inputs at the right time.

According to her, many farmers who applied for loans got them at a time when the farming system was finished, which made inputs inefficient.

The All Farmers Association of Nigeria (AFAN), in a related statement, noted that CBN credit, disbursed through commercial banks and other outlets, was not readily available to genuine farmers in many case, but has been hijacked by some officials who claim to be representatives of farmers. He added that banks do not take into account production inhibitors such as storage, post-harvest losses, transport risks and others in the agricultural credit system.

Towards a more stabilized support scheme for farmers

While the anchor borrower program remains disrupted by loan defaults that have hampered the smooth operation and expansion of the program, agricultural experts have called for a more structured implementation of the policy that would ensure that the program achieves the desired results.

The All Farmers Association of Nigeria suggested that practicing farmers should be properly sensitized to the programs and directly involved in loan disbursement processes. The association also noted that before initiating the program to a group of farmers, the CBN should be aware of the value of production and the risks associated with a particular agricultural product.

Abiodun Olaniyi, executive director of Agriquest Africa, an agribusiness management organization, said many of the agricultural inputs provided to farmers by the program are rudimentary tools that may prove ineffective in the long run.

He explained that many farmers lack mechanized tools to boost production, which has resulted in low yields, making it harder for farmers to meet loan demands.

Agriquest’s Olaniyi suggested that the money used for the purchase of some “outdated” agricultural inputs can be better used for the purchase of improved seedlings, mechanized tools and technological tools which will be presented to associations and communities. agriculture to promote improved productivity. .

He added that in addition to providing these tools, their use should also be properly monitored to ensure they are used for the right purposes.

Agricultural experts also felt that the program should come under the direct supervision of the Federal Ministry of Agriculture and Rural Development (FMARD). This, they said, will help ease the “burden of responsibility” placed on CBN which is struggling to run the program effectively.

The Nigeria Agribusiness Group (NABG), in its evaluation of the Anchor Borrower Scheme, urged the Federal Government to reassess the scheme and make it more sustainable by transferring its control of CBN to the Federal Ministry of Agriculture and Development. Rural Development (FMARD) .

Kabir Ibrahim, chairman of the group’s board of directors, who questioned the credibility of the program, noted that the initiative has failed to fill many gaps while a large percentage of farmers do not haven’t yet taken advantage of its benefits.

Ibrahim also argued that the farmers CBN works with under the Anchor Borrowers scheme are largely unknown, while the apex bank’s target of 2 million farmers was unrealistic given that Nigerian farmers are more than 14.5 million.

Further justifying the offer to move the program away from CBN control, Ibrahim asked what would happen to the program if the next CBN governor did not believe in it.

“We have to remember that former CBN governors such as Soludo and Sanusi Lamido Sanusi focused on banking and other reforms,” Ibrahim said.

“We need to learn how to institutionalize interventions and transferring the program to the ministry will ensure that happens. Relevant individuals and ministries that have specific mandates must be authorized to perform the tasks assigned to them,” he said.