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Anchor Borrowers Programme: Time To Curb Missing Links In Agric Financing



Sam Diala examines the gains recorded in Nigeria’s several Agric financing initiatives and underscores the need to address the key challenges plaguing the system to ensure that the desired objectives are achieved.

Agricultural financing has been a focal point in the development agenda of the Nigerian government. The measure took accelerated dimension in the 70’s in response to demand for home-grown solutions to Nigeria’s economic challenges.

A practical demonstration of this move was the Central Bank of Nigeria (CBN) Agricultural Credit Guarantee Scheme Fund (ACGSF) created in 1977 (but took off in 1978). The Fund guarantees credit facilities extended to farmers by banks up to 75 per cent of the amount in default, net of any security realised. It is managed by the CBN which handles the day-to-day operations of the Scheme.

The CBN has, since then, created various micro-schemes under its intervention policy — targeting critical sectors, especially agriculture; to create jobs, expand the real sector and boost the nation’s gross domestic product (GDP). This aims to compliment the Fund for Agricultural Finance in Nigeria (FAFIN) introduced by the government to serve small-holder farmers and agribusinesses.

In addition to the ACGSF, the CBN created the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL);  the Commercial Agriculture Credit Scheme (CACS); the N220 billion Micro, Small and Medium Enterprises (MSME) Fund;  and the Anchor Borrowers’ Programme (ABP) among others. The ABP is a landmark in development of agriculture value chain because of its timing, thrust and characteristics.

Launched by President Muhammadu Buhari in November 2015, the ABP which targets identified key agricultural commodities is intended to create a linkage between anchor (Linkage) companies involved in the processing and small-holder farmers (SHFs) of identified key agricultural commodities.  The programme thrust of ABP is provision of farm inputs in kind and cash to small-holder farmers to boost production of the identified commodities, stabilise inputs supply to agro-processors with the overall effect of addressing the country’s negative balance of payments on food.

At harvest, the SHF supplies his produce to the agro-processor – the Anchor/Linkage in the activity chain, who pays the cash equivalent to the farmer’s account.  Loans granted to the SHFs are repaid with the harvested produce. And the harvested produce shall be mandatorily delivered to the Anchor/Linkage at designated collection center in line with provisions of an Agreement signed prior. The guideline stipulates that produce to be delivered by the SHFs to the Anchor/Linkage must cover the loan principal and interest.

A unique selling point of the ABP is the relief it offers the SHF over funding, seed supplies (both in cost and quality) and evacuation of his produce. On the part of the Anchor, it removes uncertainties over recovery of credit extended to the SHF by way of funding or seed supply. On both sides, unintended consequences such as “act of God” (in form of flood, fire or other natural disaster) are offset by the CBN-sponsored insurance cover (such as the NIRSAL) which  absorbs the risks. There is also the Programme Monitoring Team (PMT).

Risk is further mitigated by the fact that targeted beneficiary farmers should be in groups/cooperative(s) of between 5 and 20 for ease of administration and to minimise ‘loss burden’. Furthermore, loan amount for each SHF shall be arrived upon from the economics of production agreed with stakeholders.  This imposes a measure of discipline on the beneficiary while instituting a control system in the process.

Recently, the CBN adjusted the process by retouching the Anchor/Linkage aspect of the ABP.  The Acting Director, Corporate Communications Department of CBN, Isaac Okoroafor, announced early November, that the apex bank had expanded the implementation of the ABP by forming strategic partnership with agricultural commodity associations in the country.

According to him, “the CBN is forming these partnerships to further ramp up domestic production of identified commodities by leveraging the existing organized structures of the agricultural associations nationwide, thereby providing huge economics of scale in the implementation of the programme.”

Under the expanded scheme, the apex bank will go beyond the designated private integrated processors and the state governments to partner with the Rice Farmers Association of Nigeria (RIFAN). The process involves mobilising 300,000 rice farmers who are expected to add at least two million metric tonnes of rice to the national output of the country.

The Numbers

Remarkable results have been achieved through government continued efforts at developing the agricultural sector; as the CBN counts the gains of its various intervention programmes.  According to Okorofor, the CBN has created over seven million jobs directly through its several interventions in the real sector, including agric-related programmes as at August this year. It plans to increase its reach to farmers through the ABP from 200,000 to 500,000; that is tremendous growth.

Data mined from the CBN base showed that cumulative value of loans guaranteed by the apex bank since inception of the ACGSF rose from N44.33 million in 1978/79, to N107.6 billion in August 2017. While the total number of loans guaranteed rose from 397.42 million between 1978 and 2004, to hit 1.08 billion as at August 2017.

As at May 2017, a total amount of N467.7 billion has been disbursed to 20 participating banks in respect of 509 projects spread across the states, under the Commercial Agricultural Credit Scheme (CACS) introduced in 2009. Three banks have played in the league of top financiers under the scheme by value and number of projects sponsored: Zenith Bank N98.86 billion, United Bank for Africa (UBA) N65.56 billion, First Bank of Nigeria (FBN) N42.89 billion regarding 64, 44 and 98 sponsored projects respectively.

It is reported that the CBN  is working with the Federal Ministry of Agriculture and Rural Development to establish the Accelerated Agricultural Development which aims at the pilot stage to create at least 10,000 jobs in each state of the federation. Government decision to inject fresh capital of N1trn into the state-owned Bank of Agriculture is to complement the CBN lending capacity within its CACS and the N220bn MSMEF. Government also provided for the recapitalisation of the Bank of Industry (BoI) and the Bank of Agriculture (BoA) with N15 billion in the 2017 budget.

Commenting on the rapid development achieved in the agricultural sector, FBNQuest Research in its December 2016 report, entitled ‘The Agricultural Sector (slowly) on the Move’ said, “The FGN has indulged in rebranding and so come up with a roadmap entitled the Agriculture Promotion Policy. The e-wallet initiative is however inherited from the previous administration. A total of 14 million farmers were registered on the federal ministry’s database for access to inputs in February, and a target of 30 million has been set.”

Opportunities, Threats

Nigeria is naturally endowed with all it takes to join the league of topmost agriculturally-enriched nations. The landmass, climate, vegetation, labour and absence of natural disaster (such as earthquake or wild fire) favour her agricultural development pursuit. With a total land area of 92.4 million hectares of which 84 million, representing 91 per cent, is arable; the country has great potentials to hit sky-top in food sufficiency, raw material inputs and export. At present, only 32 million of the 84 million hectares of arable land, representing 38 per cent, is cultivated.

Great potentials for irrigation to ensure all-season farming is guaranteed by Nature as the country is known to possess about 279 billion cubic metres of surface water, added to the opportunity offered by two of Africa’s major rivers – the Niger and Benue Rivers. Little has been done to exploit the opportunities in the two major rivers for irrigation, fishing, evacuation of agric produce, and other uses. Compared to peer nations like Malaysia, Indonesia, Thailand and Brazil, Nigeria lags in the area of agricultural yields per hectare, which is mere 20-50 per cent. Reports showed that Nigeria also has one of the lowest usage rates with mechanisation intensity standing as low as 10 tractors per 1,000 hectares as against 241 tractors per 100 hectares recorded by Indonesia.

“The primary challenge at hand is how to increase agricultural productivity and all-year round production instead of the perennial two seasons of Dry and Wet season farming”,  Ade Adefeko  wrote in Proshare (online market and research publication) News of September 6, 2016.

“Nigeria’s food import is growing by about 11 percent per annum, with top imports and the sum of 11 billion dollars spent on wheat, rice, sugar and fish according to Central Bank of Nigeria. As a nation our Agricultural output is meanwhile growing at about 6 to 7 per cent annually. Dismal you might say.

“Alarmingly, only around 0.8 percent of the arable land is even irrigated, compared to the 28 percent in say Thailand. Although there are approximately 110 million young people in the work force, due to low wages for laborers in the agricultural sector and lack of mechanization which the young are keen to adopt, food production has largely been left to the elderly who are in the age bracket of 60 to 75 years”, Adefeko said, quoting a 129-page Agricultural Promotion Policy document unveiled by Nigeria’s Agriculture & Rural Development Minister, Audu Ogbe.

According to FBNQuest,“We have identified enough encouraging pointers to be confident about the years ahead for agric. Outside rice, we note the large-scale planting of cashew seedlings across three states, and a US$150m investment in wheat milling and poultry by Olam, which was comfortably Nigeria’s leading non-oil exporter in 2014.

“In October the FGN gave some hope for employment by launching its smart farmer scheme, which is designed to create 490,000 posts … we have to comment on agricultural and related imports, having seen official figures ranging as high as US$20bn annually.”

Two key factors increased the urgency and importance of paying closer attention to the move  by the government, its agencies and other stakeholders to grow agriculture. First is the decline in oil revenue arising from the slide in oil prices in the international market which saw the commodity price nosedive from US$100 to less than $40 per barrel mid-2014. This created acute foreign exchange (forex) challenges culminating in the Naira depreciating to an all-time high of N500/US$1 early February. Secondly is the removal of 41 items from being imported with forex sourced from official forex window.

Some of the agric-related products affected by the 41-item forex restriction policy include poultry, tomato/tomato paste, fish, palm oil products and rice. Quoting a survey carried out by a financial services institution, FBNQuest Research  reported that the 41-item forex-restriction policy resulted in dramatic jump in prices of some imported goods early in 2016. It said “The prices of sardines and a 50kg bag of rice increased by 10% to N165/tin and 12.5% to N13, 500/bag respectively over the period”.

Some manufacturing companies have resorted to aggressive backward integration agenda in sourcing local materials for their inputs. For instance, Nigerian Breweries has over 60 per cent, Nestle Nigeria records 82 per cent and Coca Cola has about 80 per cent of their product inputs sourced locally. “We are determined to boost local production; to that effect, we have created thousands of  indirect jobs by supporting local farmers and suppliers in our value chain,” Mauricio Alarcon, Chief Executive Officer, Nestle Nigeria, told LEADERSHIP exclusively at their Sagamu (Ogun State) factory recently.

Missing Link, Paradox

Despite the huge investment in agriculture, several paradoxes persist. Food inflation has been on an upward trajectory since January 2016 and has reached a record high of 32.32 per cent last September, according to data by the National Bureau of Statistics (NBS). Virtually all the food items in the country have increased in prices in recent times, due to increasing demand amid supply plagued by poor logistics, lack of preservation facilities, pest, diseases and, more recently, attack by nomadic herdsmen.

There is huge waste in various crops. Cost of transportation continues to rise with attendant loss to farmers, traders and higher prices to be paid by the consumer. Our budget for agriculture, has remained in the realm of less than 20 per cent of the overall budget volume over the years, while unemployment of youths and entire labour force continues to mount.

Many seasonal products such as tomato, yam, onions, pears, maize and potatoe, among others are wasted while awaiting off-taking or in transit. There is no effective storage system to guarantee all-year supply of these items and some perishables like vegitables and fruits.

Quoting former chairman, export group, Lagos Chamber of Commerce and Industry (LCCI), Obiora Madu, BusinessDay recently reported that Nigeria does not have effective agricultural infrastructures. It emphasised on the need for effective agricultural infrastructure such as storage facilities and good road network for the country to succeed in its export drive of agric produce.

The paper observed that post-harvest losses in Nigeria are huge due to inadequate storage facilities in the country, noting that the post-harvest losses experienced by Nigeria are enough to feed the West African region. It could be recalled that Ogbe recently lamented the rejection of huge Nigeria’s agric export rejected by their destination countries – America and United Kingdom, for being of poor quality. Experts point to the miserably poor state of roads to Nigeria’s Apapa and Tin-Can Island ports in Lagos which hampers logistics challenges and ultimately affect cleared or export-intended cargos.

“It is time to believe that our problem is beyond financing. We lack the necessary infrastructure, no matter how primary and crude. We must address the challenges of poor electricity and bad road networks. We must address unnecessary extortion, multiple levies and taxes imposed by states and local governments, and ensure we have silos to preserve our produce. When you achieve increased agric produce and farmers celebrate fat bank accounts, yet the nation is not reaping the benefit of the agric-financing thrust, it amounts to little, and the citizens remain poor. That is the missing link in the celebrated enhanced agric value chain,” Romanus Akanno, an Owerri-based farmer said by phone last week.



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