Anchor Borrowers Scheme: Agriculture-based Incentives Creating More Jobs

Rice Farm In Kebbi State

With the zero oil agenda of the federal government, agriculture has become the focal point not only for the government and entrepreneurs, but also for investors and financial institutions.

In recent times, the banking sector credit to the agriculture sector has continued to rise year-on-year, presently standing above 4 per cent of the total credit given out by banks. The sector with its own peculiar nature has not found funding by bank as easy as the regulators continue to use moral persuasion to drive bank lending to it.

This had been one of the reasons the Central Bank of Nigeria (CBN) had set up several intervention funds, such as the Agricultural Credit Guarantee Scheme Fund (ACGSF), Commercial Agriculture Credit Scheme (CACS), Agricultural Credit Support Scheme (ACSS) and the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), specifically for the sector.
The NIRSAL was designed by the CBN as a de-risking mechanism to unlock financial resources from the banks for the development of the agricultural value chain. The initiative is hinged on the five pillars, namely: risk sharing, technical assistance, bank incentive mechanism, bank rating system, and insurance facility. The credit risk guarantee (CRG), IDP (components of the risk sharing facility), and capacity building under the technical assistance facility have commenced and is expected to be sustained in 2014/2015.

The CBN had also launched the N200 billion CACS focused on the financing of large ticket projects along the agriculture value chain. It is administered at a 9 per cent rate of interest to beneficiaries for a seven year period, beginning from 2009. Eligible large scale farmers and state governments, including the FCT, have continued to access the scheme. The apex bank has reiterated its commitment to continue an intensified monitoring of projects to enhance the funding of the agriculture value chain.

The ACGSF, which has a seed capital of N3 billion, guarantees credit facilities extended to farmers by banks at the rate 75 per cent of the amount in default net of any security realised. It has encouraged lending to the agriculture sector by providing guarantee to banks. In 2014/2015, the CBN said it will sustain the scheme to further boost small-farmer activities. Complementary to the scheme, the CBN said that it will continue the operation of the Interest Drawback Programme (IDP) in the payment of interest rebate of 40 per cent to farmers that make timely repayment.

Over the years since its inception in 1978, the fund has impacted the lives of over five million Nigerians. Data from the CBN shows that as at February this year, the ACGSF has directly created 5,045,900 jobs. From the seed capital of N3 billion, it has so far given out 1,009,180 loans with a value of N97.014 billion. Of this, N67.014 billion has been repaid by those who took the loan, allowing the seed capital to continue to flow and spread.

Also the CACS which was launched in 2009 with a seed capital of N200 billion has so far funded 423 projects and created 1,132,232 jobs within its eight years of existence. Of the N200 billion seed fund, the CBN under the scheme has disbursed N337.635 billion with N137.804 having been repaid for onward lending to others.

The most recent of its agriculture-based incentives is the Anchor Borrowers Scheme which was launched by President Muhamadu Buhari in Kebbi last year. The scheme, just months after it was launched, recorded its first set of beneficiaries, 78,000 farmers.The CBN said that it established the Anchor Borrowers’ Programme (ABP) with a view to collaborate with anchor companies involved in the production and processing of key agricultural commodities.

Specifically, the APB have been pushed for rice and wheat farmers in 14 states, Kebbi, Sokoto, Niger, Kaduna, Katsina, Jigawa, Kano, Zamfara, Admawa, Plateau, Lagos, Ogun, Cross-Rivers and Ebonyi, to advance their status from smallholder farmers to commercial or large growers. This has become essential as the federal government has set a target of 2018 and 2019 for self sustenance in rice and wheat.

With a seed capital of N40 billion, the CBN director, Banking and Supervision, Tokunbo Martins, said that a total of N16.4 billion was given to 78, 000 farmers under the first tranch of the Anchor Borrowers’ Scheme in Kebbi State. According to her, N210, 000 was given to each farmers as part of funds to acquire a hectare of land, adding that such feat would be replicated in Ebony and Anambra in the next pilot scheme.

Under the programme, the CBN is setting aside N40 billion out of the N220 billion Micro, Small and Medium Enterprise Development Fund to be given to farmers at a maximum single-digit interest rate of 9 per cent per annum. This, no doubt, shows that the agriculture sector has the capacity to curb Nigeria’s rising unemployment rate which has risen to 10.4 per cent in the last quarter of 2015, according to the data provided by the National Bureau of Statistics.

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