September 4, 2023/CSL Research
The ambitious Anchor Borrowers’ Loan Scheme floated by the Central Bank of Nigeria to make cash available for increased agricultural production in Nigeria has run into a halt due to the inability of beneficiaries to repay the loan upon maturity thereby holding up government funds and denying others from tapping into the scheme. Based on a Central Bank report, of the N1.12trn that has been disbursed to the beneficiaries under the Anchor Borrower Programme (ABP) since its inception in 2015, only a little above N546 billion has been repaid while a whopping balance of N577 billion (51.4% of the total amount disbursed) remains unaccounted for.
In November 2015, the CBN, in partnership with the Presidency, launched the Anchors Borrowers Programme (ABP) to create a linkage between anchor companies who specialize in processing agricultural commodities and smallholder farmers in the country. This led to the disbursement of loans for farm inputs to many smallholder farmers through financial institutions within the country (DMBs, DFIs & MFBs). While financial institutions got loans from the CBN at 2.0%, Farmers got the loans at an interest rate of 9.0%. Despite this initiative and many others by the CBN, however, the agriculture sector has seen no real significant growth.
Mr. Yunusa Yabwa, the national secretary of All Farmers Association of Nigeria (AFAN), in trying to explain the reason behind the default in repayment, alleged that most beneficiaries of the programme were not farmers, noting that many people collected the loan to invest in other projects and not farming, making it difficult to track repayment. The farmers, on their part, argue that the spate of insecurity in the country has continued to undermine output, as many farmers cannot go to their farms for fear of being attacked or kidnapped. In addition, the lack of storage & agro-processing facilities and decrepit road infrastructure hamper the route-to-market strategy, which also contributes to post-harvest losses.
President Bola Ahmed in his speech marking first 100-day in office has tasked top security agencies in the country to recover all outstanding loans from the defaulters on or before 18 September 2023 so as to make the cash available to genuine farmers who want safe loans for more food production. In our view, it may be near impossible to recover these bad loans by the deadline. Rather, the CBN should draw lessons from the turn out of the anchor borrower program. For example, we believe subsequent interventions targeted at the agricultural sector should come under the supervision of the Ministry of Agriculture.
