CBN launches another programme to provide up to N2 billion loan to farmers

The Central Bank of Nigeria (CBN) has launched guidelines for the regulation of the Private Sector-Led Accelerated Agriculture Development Scheme (P-AADS), in order to boost private sector staple food production, industrial raw materials and support food security, job creation and economic diversification.

The apex bank in a circular endorsed by Yusuf Philip, director, development finance department, dated November 2020 and published on its webpage, said in the bid to address food security and youth unemployment challenges across the country, the CBN introduced the Accelerated Agriculture Development Scheme (AADS) to engage 370,000 youth in agricultural production, in collaboration with state governments.

However, it noted that P-AADS was developed to complement AADS by exploring private sector partnership to facilitate more rapid land clearing for production of key agricultural commodities.

“The broad objective of the P-AADS is to facilitate increased private sector agricultural production of staple foods and industrial raw materials, as well as support food security, job creation and economic diversification,” the CBN said.

The guidelines noted that the maximum loan accessible under the Scheme shall be N2 billion per obligor, while the facility shall be repaid from the Economics of Production (EOP) for cultivating on the cleared farmland.

The guidelines stated that interest rate under the intervention shall be 5.0 per cent per annum (all-inclusive) up to 28th February 2021, while the interest on the facility from 1st March 2021 shall be 9 per cent p.a. (all-inclusive).

According to the guidelines, the Private Sector-Led Accelerated Agriculture Development Scheme shall be funded from the Anchor Borrowers’ Programme (ABP).

Anchor Borrowers’ Programme

In November 2015, Mr Buhari launched the ABP to provide farm inputs in kind and cash to small-holder farmers (SHFs) to boost agricultural production and for the country to reverse its negative balance of payments on food.

Farmers captured under this programme include those cultivating cereals (rice, maize, wheat etc.) cotton, roots and tubers, sugarcane, tree crops, legumes, tomato and livestock.

The loans are disbursed through any of the Deposit Money Banks (DMBs), Development Finance Institutions (DFIs) and Microfinance Banks (MFBs), all of which the programme recognises as Participating Financial Institutions (PFIs).

According to the guidelines of the programme, upon harvest, benefiting farmers are expected to repay their loans with harvested produce (which must cover the loan principal and interest) to an ‘anchor’ who pays the cash equivalent to the farmer’s account.

Modalities

The guidelines stated that the collateral to be pledged by participants under the Scheme shall be the title of the cleared land and other acceptable collateral prescribed under the ABP.

The CBN said it would bear 50 per cent of the credit risk in the event of default by the participant, while repayment of the facility is to be made on an instalment basis through the participating banks and spread over the EOP of the cultivated commodities.

It says the participating banks shall remit repayments received to the CBN on quarterly or annual basis depending on the commodity financed.

Also, the guideline noted that periodic monitoring of projects financed under the Scheme shall be conducted jointly by the participating banks and CBN.

According to the guidelines, the CBN shall provide the fund, act as managing agent, issue and review modalities and operating guidelines from time to time,and as well provide regulatory and supervisory oversight among others.

Meanwhile, the CBN highlighted that the participating banks (PB) shall conduct due diligence on prospective participants, access funds from the CBN for on-lending, ensure that payments are made directly to mechanization service providers for the land clearing among others.

Eligible participants and commodities

The eligible participants enshrined in the guidelines include: Agro-processors of agricultural commodities engaged in backward integration; Prime anchors and commodity associations participating under the Anchor Borrowers’ Programme (ABP) with evidence of contiguous land readily available for clearing and cultivation of agricultural commodities.

Others are companies and individuals with evidence of ownership of contiguous land readily available for clearing and cultivation of agricultural commodities.

The central bank said prospective P-AADS participants must be existing or new firms engaged in agricultural production with proven capacity

and bankable proposal, possess an acceptable title for contiguous lands of not less than 20 hectares and must have a good credit record.

Also, the CBN said a participant must be able to provide the required collateral for participation and provide evidence of the capacity to cultivate a focal commodity directly or engagement of farmers, including youths as in-growers or out-growers to cultivate on the land after clearing

Meanwhile, the agricultural commodities eligible for consideration under the scheme include rice, maize, cassava, cotton, wheat, tomato, poultry, fish, sorghum, oil palm, cocoa, livestock/dairy, and any other commodities as may be listed by the CBN from time to time, the guidelines stated.

Diversion of funds by the participating banks shall attract a penalty at its maximum lending rate at the time of infraction. In addition, such PFI shall be barred from further participation under the scheme, the apex ban warned.