Enhancing Food Security, Financial Inclusion with Anchor Borrower Programme

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Emefiele

James Emejo writes that the Anchor Borrower Programme (ABP) of the Central Bank of Nigeria (CBN) has proven to be a rallying point for economic diversification and integration of farmers into the financial system

If anything, government’s efforts at integrating the informal sector of the economy into the formal system seemed to have yielded positive outcomes especially with the launch of the ABP by the CBN.

Launched by President Muhammadu Buhari on November 17, 2015, the ABP is a brainchild of the apex bank, which seeks to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities.

One the objectives was to provide seed and cash to farmers to grow the crops and to boost production of the select commodities as well as ensure there is constant supply of the commodities to the agro processors.

Participating farmers under the scheme ensure that their produce at harvest is supplied to the agro-processor (Anchor), who pays the cash equivalent to farmers’ bank account.

This initiative ensures a readily available market for farmers and helps them to reduce harvest losses through guarantees.

Essentially, the scheme targets farmers, who produce cereals including rice, maize, wheat among others; roots and tubers including cassava, potatoes, yam, ginger; tree crops (oil palm, cocoa, rubber; legumes (soybean, sesame seed, cowpea); livestock (fish, poultry, ruminants as well as cotton, sugarcane and tomato among others.

In supporting the farmers, the ABP ensures participating banks, which work with the CBN lend to anchors at 9 per cent per annum for onward disbursement to the farmers.

The loan is repaid by the farmers after the crops have been harvested with the harvested crops, which must cover the loan principal and interest.

The programme has been adjudged as one of the most successful interventions in agriculture in recent times as government pursues economic diversification to reduce vulnerabilities associated with oil dependence.

Minister of Agriculture and Rural Development, Chief Audu Ogbeh, described the ABP as being a rescue mission to drive the country’s food sufficiency aspiration.

And there had been several success stories since the programme was launched.

Only recently, CBN Governor, Mr. Godwin Emefiele, in one of the most updated statement on the ABP said over 850,000 small holder farmers had been integrated into the mainstream financial system through the ABP in line with its financial inclusion strategy.

According to Ogbeh, the federal government had disbursed over N150 billion to local farmers under the ABP in two years to assist farmers of key agricultural commodities.

He said the CBN intervention had boosted local production of rice and saved the country about $800 million in foreign exchange.

According to him, Nigeria would cease to import rice by the end of 2019 because it would be able to meet local demand of rice before the end of the next year.

But, the road to the successful implementation of the ABP had not been as rosy and has only been sustained by the conditions set out by the CBN for all stakeholders in the scheme to abide by.

The apex bank had in its earlier guidelines for the implementation of the ABP, listed far-reaching sanctions for any violations by all stakeholders.

The implementation guidelines detailed sanctions for any attempt by stakeholders including Participating Financial Institutions (PFIs); Anchor; Small Holder Farmers (SHF) and Project Monitoring Team (PMT) to undermine the objective of the programme.

Specifically, any PFI involved in the diversion of funds to unauthorised activities would cause the amount diverted to be recovered by the CBN while a penalty charge at the maximum lending rate of the PFI on the amount diverted would apply. Such PFI also faces outright ban from participating under other CBN interventions following another infraction.

In addition, any PFI found to be charging unauthorised fees/interest run the risk of reversal of the charged fees/interest and issuance of warning letter to the PFI including outright ban from participating under other CBN Interventions after two infractions.

Moreover, the minister had further assured that his ministry will join hands to ensure that farmers repay loans granted them through the CBN’s Real Sector Support Facility (RSSF), warning that there will be no excuses for default.

He said given that refinancing of existing loans were forbidden under the programme, borrowers, particularly farmers and industrialists were advised to strictly adhere to the terms and conditions of the loans and utilise funds for the purpose for which it was granted.

Ogbeh said borrowers would have “to swear to God and yourself that you will repay. We don’t want the banks losing all their money on grounds of charity”.

He noted that the terms of the loans were healthy at seven-year tenure, two-year moratorium and a maximum of N10 billion per borrower.

He, however, expressed concern about the common farmers who form the bulk of the population as they may be unable to meet conditions for accessing the CBN intervention.

According to him, “We are going to work out a system where cooperatives become the borrowers on behalf of their members since they don’t have relevant collateral to provide the banks.

“We want to sit with the CBN and tell the banks that a certain portion of your loans must be reserved for people who are borrowing N300,000 to N2 million, especially young people who want to add value.”

He added: “We will work out a formula where no one is left out because if the big guys take it and banks will rather deal with the big guys to save them the problem of pursuing borrowers all over the villages- the cooperative will do the job.

“We will also talk with microfinance banks to see if they can charge nine per cent.”

Meanwhile, to ensure transparency, probity and accountability of the funding intervention, borrowers are mandated to make the project and records available for inspection and verification by the apex bank.

However, the scheme is not without challenges.

There’s no doubt that the recent flooding in several parts of the country had reversed some of the gains so far recorded in the ABP as farmlands had been ravaged, causing wanton losses.

Also, the security situation in the country, occasioned by constant confrontation between herdsmen and farmers as well as Boko Haram insurgency particularly in the northern part of the country have cast a spell on agricultural intervention and limited full success.

Following the torrential rains and severe flooding in parts of the Nigeria, the National Emergency Management Agency (NEMA) recently declared a national disaster as flood ravaged many states including Kebbi, Niger, Kwara, Edo, Kogi, Anambra, Rivers, Bayelsa and Delta, Taraba, Benue and Adamawa.

About 103 local government areas (LGAs) across 10 states were reportedly affected by the devastating flooding, which also affected about 1.9 million people.

In the process, several farmlands were washed away, raising concerns over the possibility a food crisis in the near future.

Notably, most of the states devastated by floods are central to agricultural production.

The situation tends to reverse the gains so far recorded in agriculture interventions especially in rice production in several states that have keyed into the ABP.

But Ogbeh had insisted government will not allow a food crisis next year as it will provide farmers with improved seedlings to plant after the floods might have receded.

Minister of State for Agriculture and Rural Development, Senator Heineken Lokpobiri, had expressed worry that the determination of the present administration to attain food self-sufficiency by 2030 may be hampered by the lingering herdsmen/farmers crises in some northern parts of the country.

Nonetheless, going by the level of commitment and enthusiasm by all stakeholders in the agriculture value chain, as well as the political will, the ABP can become a model for other economic interventions towards diversification.

At least, the revolution in rice production through the use of good agricultural practices and improved seedling has been unprecedented in the history of the country with food import bill crashing drastically.