Nigeria’s Farmer Loan Scheme Faces Repayment Crisis

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In 2015, the Nigerian government of Muhammadu Buhari launched a major program to support farmers across the country with loans with the aim of boosting productivity as one of its flagship agricultural policies.

But now the Central Bank of Nigeria (CBN) has accused some farmers who collected loans through the Anchor Borrowers Program (ABP) of refusing to repay, with local bank officials going so far as to threaten to arrest and imprison defaulters.

In December, the bank’s comptroller in Bauchi state, Saladu Idris, said farmers had agreed to repay the loans as soon as the harvest was over, but many had defaulted.

While defaulters could be “arrested and locked up” until they repay the loans, those who repay in full on time would be “rewarded with a higher sum of money and more inputs”, he said. he said during a press briefing.

Although authorities later denied that the farmers had been arrested or jailed, the threat is symptomatic of a dysfunctional loan system that does not deliver value to either government or farmers.

Noble Goals

The project started with ambitious goals. It was launched with the aim of fulfilling Buhari’s promise to help local farmers access credit facilities while improving foreign exchange and reversing the negative food trade balance. Agriculture has long received a low percentage of support from the country’s financial sector – as recently as 2019 the sector accounted for less than 5% of lending by Nigerian banks.

“The program was designed as a unique solution for the agricultural value chain by creating economic links between farmers and processors to not only ensure clear agricultural production, but also to reduce dependence on imported food” , Buhari said at the launch of the program in 2015.

Farmers, including smallholders in remote communities who did not have access to credit facilities, were the main targets. Farmers eligible for the loans are active in all agricultural value chains in Nigeria, including cotton, roots and tubers, sugar cane, tree crops, pulses, tomato and cereals. In January, the government estimated that 4.8 million farmers had benefited from the scheme.

Loans were disbursed through recognized partners known as Participating Financial Institutions, including Development Finance Institutions (DFIs), Microfinance Banks and Depository Banks. The program has set conditions, including that farmers repay the loans in cash or produce after the harvest is complete.

A gift or a loan?

But soon after launch, challenges emerged, with evidence that many farmers did not properly understand the loans they took out, with some mistaking them for a gift from the federal government that did not require repayment.

In Nigeria’s far north, the source of much of President Buhari’s political support, some believed grants were being paid as a reward for his support of the president. A 2018 investigation found that politicians had hijacked the program to compensate supporters and exclude other local farmers.

“When the loan came, people thought it was not a repayable loan and so they collected for their wives and children and now it is difficult for them to repay the loan,” says Fidelis Akosu , Chairman of the Rice Farmers Association of Nigeria (RIFAN) in Benue State in the north-central part of the country.

Akosu says the association has helped secure loans for 2,264 farmers, of whom less than 1% have repaid. 301.8 million naira ($725,665) has been disbursed by the CBN to rice farmers in the state through RIFAN, but only 5.1 million naira has so far been repaid, leaving a balance of 296.6 million naira in January this year. The Nigeria Security and Civil Defense Corps has been tasked with recovering part of the loans.

This reflects a broader failure of the program nationally: 615.4 billion naira ($1.5 billion) had been lent but only 152.3 billion naira had been repaid by the end of March 2021, according to the economic report. CBN Monthly for April 2021. The amount loaned increased to N927.94 billion at the end of December 2021, according to a statement by CBN Governor Godwin Emefiele in early February.

Why are the loans not repaid?

Besides confusion around the nature of the financial support, challenges such as climate change-induced erratic rainfall, drought, floods and low crop yields all limit farmers’ ability to repay their loans on time.

Nigeria’s farming community is rocked by periodic insecurity – in December 2020, the Islamist terrorist group Boko Haram killed 76 farmers with axes in their paddy fields in a village in Borno State. In January, gunmen attacked and killed 13 farmers on their farms in the villages of Nakudna and Wurukuchi in Shiroro Local Council area, Niger State.

Such attacks have devastating effects on agriculture, disrupting productivity, harvests and land tenure security. Conflicts between herders and farmers have also undermined the sector.

Meanwhile, education around the program is limited, meaning the purpose and nature of the loans continue to be obscured, and critics say it’s too easy for the program to act as a conduit for fraudulent claims.

To achieve the program’s goals, challenges such as insecurity must be addressed and measures to mitigate the impacts of climate change must be implemented, says Bamgboye Emmanuel, managing partner of Empyrean Professional Services, an accounting firm and Lagos Tax.

“Beyond security, there should be policy coherence that gives the farmer some form of guarantee while making projections for the future.”

Others say a change in farmers’ attitudes is long overdue. Paul Alaje, senior economist and partner at SPM Professionals, says many citizens long neglected by the state believe federal government support should not be returned but retained as a rare benefit of citizenship.

The program has shown that what some farmers really need is not access to credit facilities, but a change of mindset and the will to be creditworthy, he says.

The future of the program

Yet Emmanuel says that despite the program’s mixed success and the likelihood that significant sums will ever be recovered, the government continues to take a long-term view.

Improving the regime rather than scrapping it seems like the more likely option, he says. The government is focused on the program’s apparent achievements – in January Buhari said rice production in Nigeria had risen to more than 7.5 million tonnes a year from less than 4 million at the start of the programme.

“It will not discourage the CBN or any other government agency from providing credit facilities and interventions to farmers, as it is one of their main responsibilities,” says Emmanuel. “If the facilities are properly channeled, they can boost the economy and create more jobs.”

On the other hand, Alaje says the CBN should be more serious about who it disburses funds to in order to ensure that only genuine farmers who need the funds have access to them.

“The CBN shouldn’t think that people will suddenly become more accountable,” Alaje says, adding that it should hire consultants to monitor farm progress and ensure prompt payback.

Prosecuting those who are not genuine farmers would increase access to credit for more farmers, Emmanuel added.

“As the CBN shows more seriousness in loan recovery, it will become clear to everyone that the intervention is not a national cake and only genuine farmers who need the loans and are committed to repaying will go. forward to access it.”

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