Anchor borrowers and unnecessary CBN interventions

Alarmingly, some farmers benefiting from the Central Bank of Nigeria’s anchor borrower program owed the bank 463 billion naira in March 2021, according to data from the CBN’s economic report for April. The ABP was officially expanded on November 17, 2015 by the President, Major General Muhammadu Buhari (retired), to boost agriculture, ensure food security, stabilize the economy, create jobs and reduce dependency. crude oil.

The program, which started with a pilot project in Kebbi State, based on its advantage of dry season rice production, has been strongly linked to increased rice production in some states, although rice productivity in the country is still weak. Some of the loan beneficiaries include farmers growing cereals (rice, maize, wheat, etc.), cotton, roots and tubers, sugar cane, tree crops, legumes, tomatoes and livestock. Agricultural extension workers are not excluded from the system.

But six years later, some farmers and extension workers in some states seem to see the program as a cash cow. There are too many defaulters whose actions threaten the sustainability of the program. Many recipients seem to interpret money as their share of the national pie.

The national vice-president of the Maize Producers Association of Nigeria, Muazu Iliyasu, emphasized this point when he addressed the 12,562 members of the association in Adamawa State at the launch of the 2021 rainy season harvest. He said, “Most farmers think this (the Anchor Borrower Program) is a bonus part of the national pie. But we dispute this fact, pointing out that it is a loan that must be repaid. We are doing our best and now they are well aware. They now know that it is a loan and not a grant per se. We toured and received support from traditional chiefs and grassroots village chiefs to encourage repayment and recovery.

Currently, loans are disbursed to beneficiaries through deposit banks, development finance institutions and microfinance banks recognized by the program as participating financial institutions. The CBN report showed that from November 2015 to March 2021, 615.4 billion naira was paid to 3.04 million farmers, of which 152.3 billion naira was repaid.

It has been alleged that some non-farmers infiltrated the program and obtained loans. This is an area the umbrella bank should take a critical look at, notwithstanding the program’s tripartite arrangement whereby the CBN, alongside farmer associations and state governments, disburses loans to farmers.

As debts accumulate, it behooves the CBN to activate a foolproof debt collection process to collect the loans. Its monitoring team should stop the trend of protecting genuine beneficiary farmers and strengthen the program to achieve its goal. The CBN must do everything to make the program sustainable, including rigorous awareness campaigns among beneficiaries.

It should fully involve the private sector in the review of the program and its solid foundation. This is the case of India and Malaysia where “contract farming”, close to ABP, is revolutionizing the agriculture of these countries. The concept of contract farming is effectively coordinated and identified loopholes are blocked from the start.

Misinformation, cumbersome loan processes for some smallholder farmers, among other issues, have been identified as some of the problems facing the program. The CBN should rethink strategies in this direction. It is not enough to launch a laudable initiative and fall asleep. It is evident that entrenched political factors synonymous with the country’s national life have crept into the program and efforts must be made to separate it from these off-putting parameters.

At one point, Senate Agriculture Committee chairman Abdullahi Adamu urged the CBN to examine oversight strategies amid mounting debts threatening the stability of the program.

CBN Governor Godwin Emefiele also made it clear that the sustainability of ABP depends on loan repayment. During the unveiling of the aggregation of the 2020 rainy season crops and the inauguration of the 2021 rainy season input distribution in southwest Ekiti state, Emefiele said: “The Loan repayment is the hallmark of every credit cycle, and the sustainability of the program depends on the ability and willingness of farmers to repay their loans, and we engage with them constantly to build their confidence in the system. But beyond the rhetoric, the CBN should take preventive measures; prioritize debt collection and monitoring defaulters.

In June of this year, the CBN said it had deployed a total of 37 intervention programs aimed at saving different sectors. But corruption in all its forms always cancels out government assistance. For example, CBN’s over 1.5 trillion naira intervention fund to power businesses ended up in dark tunnels, while the 2011 naira 120 billion aviation fund disappeared in the dark. tunes. The textile intervention funds of 220 billion naira have not resuscitated the textile companies from their comatose state.

The Carnegie Endowment for International Peace claims that the big budget CBN programs have been largely unnecessary, prone to corruption and, more importantly, have failed to tangibly develop the struggling MSME sector in Nigeria. He adds that, unwilling to internalize the lessons learned from previous interventions, the CBN often repeats past mistakes and recreates the obstacles to success already identified. The bank also does not attempt to assess the impact of its programs against their high cost and low utilization rate.

Ultimately, there is a huge disparity between the actual costs of CBN interventions and their economic benefits. For example, most interventions come with other costs, in particular on the administrative overheads of each program and the interest that the CBN charges to financial institutions that participate as intermediary lenders in its programs. Experts say that CBN’s programmatic guidelines tend to become “more complicated, less applicable, less clear, published less timely with each iteration.”

A new pragmatic approach is needed to make CBN intervention programs work. In states with a history of non-payment of ABP loans, affected farmer associations should strive to collect debts, with concerted efforts by the state and the CBN. They should take inspiration from the Niger State branch of the Rice Farmers Association of Nigeria, which has taken some of its members to court for failing to submit paddy rice from their last season’s harvest in payment for the ABP loan they contracted with the CBN.

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