How CBN’s Anchor Borrowers’ Programme is Boosting Nigeria’s Agriculture

The Central Bank of Nigeria (CBN) in its quest to diversify the economy through agriculture and also achieve self-sufficiency in food production recently released guidelines for the Anchor Borrowers’ Programme (ABP) through its Finance Development Department. The programme which was launched by President Muhammadu Buhari on November 17, 2015, is to create a linkage between anchor companies involved in processing and small holder farmers (SHFs) of the required key agricultural commodities. 

This programme, if properly harnessed, will boost agricultural production and output in Nigeria. The thrust of the ABP is the provision of farm inputs in kind and cash (for farm labour) to smallholder farmers to boost production of these commodities, stabilize inputs supply to agro-processors and address the country’s negative balance of payments on food. At harvest, the SHF supplies his/her produce to the Agro-processor, the Anchor who pays the cash equivalent to the farmer’s account. The Programme evolved from consultations with stakeholders comprising Federal Ministry of Agriculture & Rural Development, State Governors, millers of agricultural produce, and smallholder farmers to boost agricultural production and non-oil exports in the face of unpredictable crude oil prices and its resultant effect on the revenue profile of Nigeria.

 “The broad objective of the ABP is to create an economic linkage between smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilization of processors. Other objectives include: Increased banks’ financing to the agricultural sector, reducing agricultural commodity importation and conserving external reserves,” said the CBN “Others are increasing capacity utilization of agricultural firms, creating a new generation of farmers/entrepreneurs and employment, deepening the cashless policy and financial inclusion, reducing the level of poverty among smallholder farmers and assisting rural smallholder farmers to grow from subsistence to commercial production levels.” The apex bank noted that the targeted beneficiaries are smallholder farmers engaged in the production of identified commodities across the country. “The Farmers are required to be in groups/cooperative(s) of between 5 and 20 for ease of administration”. 

The regulatory authority stated that the targeted agricultural commodities of comparative advantage to the state shall include but not limited to: Cereals – Rice, Maize, wheat; Cotton, Roots and Tubers – Cassava, Potatoes, Yam, Ginger, and Sugarcane. Tree crops: Oil palm, Cocoa, Rubber, Legumes: Soybean, Sesame seed, Cowpea, Tomato, Livestock (Fish, Poultry, Ruminants and any other commodity that will be introduced by the CBN from time to time. “The loans shall be disbursed through the eligible Participating Financial Institutions (PFIs) such as the Deposit Money Banks (DMBs), Development Finance Institutions (DFIs) and Microfinance Banks (MFBs). The Anchor shall be private large-scale integrated processors who have entered into an agreement with the SHFs to off-take the harvested produce at the agreed prices or as may be reviewed by the PMT. State Governments may act as Anchor upon meeting the prescribed conditions. The input suppliers shall submit an expression of interest letter to the office of the PMT for consideration and issuance of local purchase orders,” CBN explained further. The Fund shall be provided from the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF). Loan amount for each SHF shall be arrived upon from the economics of production agreed with stakeholders. Interest Rate under the ABP shall be guided by the rate on the N220 billion MSMEDF, which is currently at 9 percent (all inclusive, pre and post disbursement). 

The PFIs shall access at 2 percent from the CBN and lend at a maximum of 9 percent. The tenor of loans under the ABP shall be the gestation period of the identified commodities. And the repayment of Loans granted to the SHFs shall be repaid with the harvested produce that shall be mandatorily delivered to the Anchor at designated collection center in line with the provisions of the Agreement signed. The produce to be delivered must cover the loan principal and interest. There shall be two models of administration of ABP based on the anchor arrangement namely: Private Sector-led and State windows. Under each model, a PMT shall be established to coordinate the implementation of the programme. 

Private Sector-led Window: The PMT under the Private Sector-led Window shall be constituted as follows: Head of DFO, CBN as Chairman, Representatives of Anchor Firms as Co-Chairman and Programme Manager, State Agricultural Development Programme (ADP) Representatives of participating Banks, representatives of farmers associations and Nigerian Agricultural Insurance Corporation (NAIC). 

The State Window shall be constituted with representatives of stakeholders as follows: Head DFO, CBN as Chairman to be co-chaired by the person appointed by the State Government. A representative of State Governments/Ministry of Agriculture and Rural Development/ADP, Participating Banks, Anchor Firms, NAIC, and Representatives of farmers associations.

Process Flow of the ABP:

The activities shall include Expression of Interest Letter to the CBN by the Anchor/State Government indicating the targeted agricultural commodities, proposed number of farmers, the hectares to be covered and the PFI(s). Formation of the PMT: Verification of the farmers and farm sizes by the PMT: Confirmation of participation by the Head Offices of the PFI(s) Identification of reputable agricultural inputs suppliers by the PMT Organization of Town Hall Meeting to agree on the economics of production per hectare, off-take price, signing of agreement, and any other relevant issues. 

The meeting shall have in attendance all the stakeholders including the inputs suppliers. Signing of tripartite agreement by the PFI, Anchor and the farmers submission of loan applications from Head Offices of PFIs with the list of farmers in the prescribed format with 7 accounts numbers, gender, farm size, Bank Verification Number, Telephone numbers, cooperative name and LGA Registration of farmers on the National Collateral Registry NCR. In the area of capacity building for the Farmers according to the apex bank, a mandatory training programme shall apply for farmers that will participate under the ABP covering; Farming as a business, improved agricultural practices and group management dynamics. Furthermore, the regulatory authority specified that the cost of such training shall be borne by the participating anchor. However, partnerships with Development Partners are encouraged on the training of the farmers. Certificates issued at the end of the training shall constitute a requirement for farmers to access credit facility in kind and cash under the programme. Infraction such as diversion of funds to unauthorized activities shall attract sanction.

 The amount diverted shall be recovered by the CBN. The penalty includes interest charged at the maximum lending rate of the PFI on the amount diverted, outright ban from participating in other CBN Interventions following. Another infraction such as charging of unauthorized fees/interest attracts reversal of the charged fees/interest, issuance of a warning letter to the PFI and outright ban from participating in other CBN Interventions after two infractions. So also a failure to disburse funds within specified period to the borrowers shall attract penalty charged at the maximum lending rate of the PFI, recovery of the disbursed amount plus interest. Infractions on the side of the Anchor such as failure to collect certified quality output from farmers after going into an agreement as the Anchor to the farmers, the Anchor will be sanctioned such that he/she ceases to participate in the programme, ban from accessing agricultural and other CBN interventions. So also a failure to pay for collected commodities within the specified period, the Anchor will bear the cost of accrued interest on the farmers’ account from the due date and call in the performance bond to settle for the produce delivered. 

Any infraction on the part of Small Holder Farmers (SHF) shall attract sanction such as total prohibition from all CBN Side-selling interventions, blacklisting of the SHF on any intervention by the CBN, prosecution of the SHF, payment of the loan by the guarantors and cooperatives, blacklisting of the SHF on any intervention by the CBN. So, infractions committed by the Project Monitoring Team such as insider-related contracts and inflation of contract figures shall attract penalty, including suspension/prosecution of the culpable member(s) and report the culpable member(s) to the relevant institution(s) 

Conclusion: if all the stakeholders and participants involved in this programme play their roles effectively, transparently and wholeheartedly, the farmers will be empowered, the economy will become buoyant and Nigeria will record great output in food production. Subsequently, the nation will achieve self-sufficiency in food production in no distant time and also have a diversified economy through agriculture with substantial foreign reserves.