APB: Assessing the implications of loan repayment failure

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With the recent comment from the Central Bank of Nigeria (CBN) stable that most farmers have refused to repay loans obtained under the Anchor Borrowers Scheme (ABP), believing that it is “ the national cake”, TAIWO HASSAN examines the economic implications of the N1 trillion PBA intervention

Statistics have shown that the Anchor Borrower Program (ABP) launched by the CBN is undoubtedly working and has contributed significantly in helping the nation achieve self-sufficiency in food production and also solved the balance of debt. the country’s negative payments on food products. . In particular, the ABP was established in November 2015 by the Central Bank of Nigeria (CBN) to improve the supply of key agro-industrial agricultural commodities by smallholder farmers. ABP provides farmers with adequate credit at single-digit interest rates to enable them to acquire land, agricultural inputs and machinery needed to grow and produce agricultural products. However, the federal government said more than 4.8 million smallholder farmers across Nigeria had been supported by the program, with increased production of 23 agricultural commodities, including maize, rice, palm oil, cocoa, cotton, cassava, tomato and cattle. He noted that today rice production in Nigeria has increased to over 7.5 million metric tons per year. Before the program was introduced, average production in Nigeria between 1999 and 2015 was less than four metric tons per year.

Consolidation

In order to make the ABP work, CBN under the leadership of Godwin Emefiele restricted the forex for the import of foodstuffs such as rice, corn, tomatoes/tomato paste, palm kernel/based products palm oil / vegetable oils, vegetables and processed vegetable products, among others. This was to encourage local production and ensure that the country eats what it produces and produces what it eats. Borders have been closed to curb the smuggling of prohibited items, paving the way for increased local production by farmers and boosting the Nigerian agricultural sector.

Earnings

Indeed, the gains recorded so far with the ABP include some countries losing market share to Nigeria. For example, in 2014, Thailand alone exported 1,239,810 metric tons of rice to Nigeria. In 2016 it fell to 58,000 metric tons and in 2015 it went down to 5,000 metric tons. It dropped significantly to 2,169 metric tonnes between January and October 2021. ABP financed 21 agricultural commodities and disbursed N884.9 billion to 4.1 farmers cultivating 5.02 million hectares of land nationwide in 2020. The average yield per hectare for paddy rice and maize increased from 1.5 MT to 4.0 MT. Average annual capacity utilization of national integrated rice mills from 30% to 98.2%. The rice import bill has dropped dramatically by 95% from $1.05 billion in the pre-ABP era to $18.50 million per year. In addition, ABP has created around 12.3 million direct and indirect jobs in different value chains. Nigeria recorded a 72.5% decline in the import bill of major commodities from $2.23 billion in 2014 to $0.59 billion in 2018. 95% decline in the import bill for rice, from $1.05 billion in the pre-ABP era to $18.50 million per year.

Non-payment of loans

Despite all the positive achievements PBA has brought to Nigerian farmers and the country as a whole, it is worrying that many farmers, who have been granted the loans, are reluctant to repay. The Central Bank of Nigeria has lamented that farmers are refusing to repay the loans, instead describing it as a “national cake”. According to a CBN spokesperson, Sadeeq Ajayi, “Many farmers have refused to repay their loans due to the misconception that since CBN is the lender, the loan is a ‘national cake’ and they don’t have not to repay what they consider theirs as citizens. Ajayi said their refusal to repay the loans had made it difficult for others to access the loan. In particular, the apex bank noted that most of the farmers in Oyo state, who benefited from the scheme, failed to repay their loans, however he urged stakeholders including traditional leaders to appeal to defaulting farmers to promptly repay the loans. ready for the good of others.

Confirmation of non-payment by the BoA

To back up the apex bank’s position, the Bank of Agriculture (BoA) said less than 10% of recipients had repaid their loans. This was revealed by the bank’s Managing Director, Alwan Ali Hassan, when he recently hosted the Agricultural Commodities Forum delegation led by its chairman, Bashir Ibrahim, in Abuja. He expressed his dissatisfaction with the attitude of the farmers’ associations towards the repayment of the loans granted to them, adding that it was negatively affecting the operations of the bank. Furthermore, Hassan said that only one commodity association has repaid the loans since he took office in May 2020. “The percentage is not encouraging, it is less than 10%, it only came from a single association; the other two haven’t paid anything since I came here as general manager. “We have called them, written to them and spoken to them, unfortunately this has not happened but we hope that the associations will live up to their responsibility and repay the loans they have taken, this will help the bank to give money to the new set of farmers or associations,” he said.

Reasons for non-payment

There is no doubt that the inability of Nigerian farmers to repay can be attributed to recurring instances of insecurity, floods and COVID-19. Furthermore, Hassan explained that a good number of farmers have had to pay extra for security on their farmlands, due to the growing insecurity across the country. In addition, the problem of floods, a natural disaster, as well as the global COVID-19 have affected agricultural yields, farmers’ profit margins and their ability to repay loans. That’s why from 2019 until 2018 there were a lot of challenges in agriculture. “There is a lot of insecurity in some places. Farmers can’t even go and harvest their produce, other places they have to pay before they can even harvest on their farms. “We had a situation of massive flooding in about 19 states in 2018, the farmers got money and when they went to plant, a natural disaster happened, the Nigerian Agricultural Insurance Corporation (NAIC) didn’t was not willing to help farmers and in 2019 and 2020 we had the problem of COVID-19, about six months there was no farming, some people planted, but did not been able to harvest,” the BoA chief executive said.

last line

However, it is undeniable that the inability of farmers to repay their loans will block the apex bank’s plans to reissue loans to other smallholder farmers in the country.

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