SPECIAL REPORT: How default on loans is killing Nigeria’s Anchor Borrowers Programme

On a Monday morning in July, Usman Muhammad, one of the 70,000 beneficiaries of Nigeria’s Anchor Borrowers Programme (ABP), was in a magistrate courtroom adjusting and readjusting his belt as he waited for a judge to deliver his prison sentence in Birnin-Kebbi, the capital of Kebbi State.

According to prosecutors, Mr Muhammad failed to repay the loan he collected six years ago. The  Anchor Borrowers’ Programme   guidelines stipulate that upon harvest, benefiting farmers are to repay their loans with produce (which must cover the loan principal and interest) to an anchor, who pays the cash equivalent to the farmer’s account.

Mr Muhammad said his failure to repay the loan was not deliberate. “I didn’t make any profit. Everything went away as a result of the devastating flood,” he told PREMIUM TIMES. Mr Muhammad was not sent to jail that day as he had expected, thanks to his uncle who paid a part of the loan and promised to make full repayments afterwards.

Thousands of farmers like Mr Muhammad have defaulted in paying back the Anchor Borrowers Programme loans which, among other things, we’re expected to increase the banks’ financing to the agriculture sector, help smallholder farmers scale up, achieve food security, and ensure self-reliance in rice production.

The ABP was also designed by the government to create a new generation of farmers as well as boost employment.

At inception in late 2015, the Central Bank of Nigeria said: “The programme 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, stabilise inputs supply to agro-processors and address the country’s negative balance of payments on food.”

By 2022, at least 4.8 million people had benefitted from the Anchor Borrowers Programme, authorities said at the unveiling of stacked paddy rice pyramids produced by rice farmers under the ABP initiative.

But the programme has been marred by loan default, even as food prices rose significantly within the years it took effect.

Beneficiaries who spoke to this newspaper cited insecurity, flooding, climate change and crop failure as reasons for their inability to repay the loans.

However, experts and government officials said that while the farmers’ reasons are somewhat valid, many of the farmers saw the loans as ‘their share of the national cake’ which do not need to be repaid.

There are also reports that several farmers collected the loan to travel to Hajj or married additional wives from the proceeds of the Anchor Borrowers Programme. This, among other reasons, is why authorities resolved to take legal action.

“We find it very difficult to recover this loan,” Sahabi Augie, the immediate past Chairman of the Kebbi State chapter of the Rice Farmer Association of Nigeria (RIFAN), told PREMIUM TIMES.

“We had to resort to taking the farmers to court to pay back these loans.

“Now in every magistrate (court) you go, we have given the list of farmers to recover the loan. The drive for loan recovery is now in the court.”

In Gwandu, an agriculture commodity market town in Kebbi State, Ibrahim, who asked to use a pseudonym because he did not want his name in the media, said the ABP intervention was a “liability because bad seeds and lack of water” resulted in losses. He received almost N200,000 together with six bags of fertilisers and irrigation pumps in 2017.

“But it was almost at the end of planting when I got this support,” he said.

Mr Ibrahim has yet to make full repayment in 2023. The Kebbi State chapter of RIFAN has petitioned the police about Mr Ibrahim and he was asked to start making deposits in tranches until he fully repays the loan.

With frustration written all over his face, Mr Ibrahim told PREMIUM TIMES that he did not get “anything to take home.”

“I didn’t get anything in the end. But I had incurred the loss because the agreement is agreement. Therefore, I will still pay back the loan once I have the money,” he said.

Several farmers like Messrs Ibrahim and Muhammad are either facing charges in court or answering petitions in police stations and civil defence offices.

The Anchor Borrowers Programme and Loan defaulters

In a recent report on Nigeria, the International Monetary Fund (IMF) said only 24 per cent of loans under the ABP had been repaid.

The CBN, however, disagreed with the IMF saying N503 billion of loans under the ABP had been repaid. This figure represents 52.39 per cent of the total loans collected by farmers under the programme, according to the bank.

A recent statement from CBN’s corporate communications department restated that only 48 per cent of the loan has not been repaid. The CBN said it released N1.079 trillion under the programme, out of which over N500 billion is due for repayment.

Interestingly, the All Farmers’ Association of Nigeria (AFAN) seemed to tilt towards the IMF when, in December 2022, it said the CBN was having difficulties recovering the loans because most beneficiaries of the ABP were not Nigerian farmers.

Experts believe the failure of farmers who benefitted from the ABP to repay more than N500 billion extended to them by the CBN underscores a weakness in the initiative.

Recalcitrant farmers

In Kebbi, a large chunk of the arable land in the state is wetland. The state has over 5,000 hectares of farmland with a lot of water bodies (underground and open water bodies) and therefore was selected as the experiment ground for ABP.

Abubakar Aminu, a public commentator in Kebbi, said: “The anchor borrower was a successful programme by every consideration. Thousands of farmers benefitted from it and they made a profit.

“They are just trying to find excuses because there is no reason why they shouldn’t repay the loan by this time. People have a way of assuming whatever comes from the government is for free.”

Joe Aiki, the permanent secretary of the Kebbi State Ministry of Agriculture, said that “farmers just simply refused to pay and we don’t know the reason.

“They have all made good productions. The average production was five tonnes per hectare and five tonnes means about 70 bags of rice in one field. The total loan package to the farmers in Kebbi was N220,000; therefore if you sell 20 bags of rice at N13,000, you should be able to pay back N220,000 and have a plan. But many have refused to pay up till this moment.”

Political influence and the Anchor Borrowers Programme

PREMIUM TIMES understands that many people who collected the loan invested in other projects outside farming which is why it is difficult to ensure repayment. Some farmers told PREMIUM TIMES that some of the beneficiaries of the loan are not ‘real farmers’ and they did not understand the farming business.

Abdullahi Argungu, a farmer and retired civil servant in the state, said the programme was politicised.

“You are well aware that most of the beneficiaries who got the loans were not farmers. The programme was politicised. You can ask people in communities where they disbursed the loans for confirmation,” he said.

“I have more than 300 hectares of farmland but I didn’t get any support from the government. They don’t like us to say it but that programme was abused seriously,” he added.

This point was corroborated by Yunusa Yabwa, the national secretary of the All Farmers Association of Nigeria (AFAN), when he told Businessday that the loans under ABP were not disbursed adequately, hence the difficulty in ensuring repayment.

“The Anchor Borrowers Programme was abused and it did not meet expectations to boost food production. Many people collected the loan to invest in other projects, not farming,” he said.

Chaotic Implementation

While the federal government claims that the ABP was “revolutionary”, PREMIUM TIMES found that its implementation could have been better. The programme kicked off on a wrong footing, experts said. At least six months after its launch, and well after the planting season, many farmers were still wondering if it would ever take off. The promised inputs and funds did not arrive on time.

When the programme eventually kicked off, many of the guidelines in the programme were thrown overboard.

Mr Aiki said that even though the programme was well planned, the execution was done in a hurry.

“When the programme was launched, we needed time to mobilise all the inputs that we needed ranging from irrigation pumps, fertiliser, agrochemicals, and improved seeds. The time was rather short to implement the programme,” he said.

“We had to rush within that time to do what was possible. Even to get some of the irrigation pumps in the country was not possible. What was available in-country was what we distributed to farmers.

“Instead of farmers getting two irrigation pumps as we proposed in the plan, they got one and we have a huge number of farmers. And then even fertiliser, mobilising that quantity was not easy,” he said.

Gains of the Anchor Borrowers Programme

Despite the challenges, Mr Aiki said the ABP “was a very successful programme,” adding that in the “first year of the intervention, we made about 1.2 million metric tonnes of rice production in 2015/2016. By 2017, it had grown to 3.65 million metric tonnes.”

Rice – like wheat-based foods such as bread and noodles – is one of the most popular staple foods in Nigeria, Africa’s most populous country. The country’s national rice consumption is 6.7 million metric tonnes per annum, according to the Food and Agriculture Organisation. However, by 2015 when the ABP launched, only about 3.7 million metric tonnes were locally produced with the remaining imported or smuggled into the country through porous land borders.

The ABP intervention was, therefore, also to scale down food import bills and conserve foreign exchange as the country’s economy was then sliding into recession amid falling oil prices. In addition, rice mills could raise their capacity utilisation with more farmers assisted to produce more rice paddies.

In the two years that followed the launch of the ABP, Nigeria’s local rice production jumped to about 4.5 million metric tonnes and five million metric tonnes by 2021, meaning, nevertheless, local production is still unable to satisfy demand, according to data from FAO.

The organisation said Nigeria now has at least 68 rice mills from 10 in 2015, an over 500 per cent jump, following the ABP.

According to the CBN, more than “four million farmers that the Anchor Borrowers Programme supported had cultivated over 6.02 million hectares of 21 commodities across the country.”

Some of the commodities, the bank said, include rice, wheat, cowpea, millet, maize, cotton, fish, soya bean, poultry, cassava, groundnut, ginger, sorghum, oil palm, cocoa, sesame, tomato, castor seed, yellow pepper, onions, and cattle/dairy.

“Therefore, the ABP had contributed significantly to the increased national output of focal commodities, with maize and rice peaking at 12.2 and 9.0 million metric tonnes in 2021 and 2022 respectively,” the CBN said.

“The programme had also helped to improve the national average yield per hectare of the commodities, with productivity per hectare almost doubling within the eight years of the programme’s implementation.”

Other positive impacts credited to the programme include saving the country about $800 million in foreign exchange; the unveiling of 13 rice pyramids which housed 200 thousand bags of rice (50 kg each) in Kebbi and Gombe states, and a rice pyramid in Ekiti State.

Security Implication

On a sunny day in July, the landscape of the Goronyo rice field looked like a giant checkerboard of green, yellowish-green and brown patches. While some patches of the plain looked well-taken care of with thriving plants, the majority of the farmlands were uncultivated and abandoned.

“Many of us have deserted the farms for our personal safety,” said Alhaji Lawal, a rice and wheat farmer in Goronyo, Sokoto State. “The farms have been left uncultivated and until this moment people are not able to resume farming because of the insecurity.”

While Boko Haram terrorism remains a threat in the North-east region, in the North-west, terrorists, locally called bandits, are ravaging rural communities, precipitating a humongous humanitarian disaster.

Muhammad Sa’ad, Chairman of RIFAN in Sokoto State, told PREMIUM TIMES that “the bandits are conducting mass abductions for ransom and mass killings.” He said these threats seriously affected the activities of farmers like Mr Lawal in Goronyo.

Mr Sa’ad said over 9,000 people have not been able to repay the ABP loans. When the government started the programme, farmers came from all over the state to apply for the loan because they were really interested.

“But, these bandits have chased them away. The little money they will get from farming, the bandits will ask them to use as a ransom payment. In some instances, farmers were forced to sell off their lands to pay ransom,” the RIFAN chair said.

While banditry and farmer-herders clashes displace farmers, climate change distorts seasonal patterns which affect Nigeria’s largely rain-fed agricultural sector. Environmental degradation, such as desertification, is equally playing a role in poor agricultural production, according to PREMIUM TIMES findings.

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ALSO READ: CBN disbursed N629 billion to farmers under Anchor Borrowers Programme in 2022

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Apart from Kebbi State, 10 other far northern states (Adamawa, Bauchi, Borno, Gombe, Jigawa, Kano, Katsina, Sokoto, Yobe, and Zamfara) are regarded as “desertification frontline” states.

Nigeria is estimated to be losing 351,000 hectares of its 70.8 million hectares of arable land to desert conditions annually with the Sahara Desert expanding southward at the rate of 0.6 km each year, according to official records.

The 11 frontline states are normally dryland. However, exacerbated by climate change, rapid desertification is increasingly converting croplands to nonproductive arid land, useless for agriculture.

Solutions/Way forward?

According to experts, the poor outcome of the Anchoor Borrowers Programme is an indication that the continued focus on supporting farmers with finance without addressing lingering issues will only drive inflation and not boost productivity.

“Full-rime farmers must be targeted to get the loans and it must be explained to them that it’s a loan, not a national cake,” said Muhammad Sani, a manager at Albishir Farm in Kano.

“The government should also focus on providing the right infrastructure to reduce production cost, spur investments and address the ease of doing business rather than cash handout for farmers,” Mr Sani said.

He added that politicians and government officials are not directly supposed to be involved in the disbursement of loans to farmers but through other channels with clear guidelines. According to him, this would ensure constant monitoring and evaluation as well as ensure the funds get to the real farmers.

“Agriculture is associated with several risks. Hence proper pre and post-assessment procedures are critical to reducing the level of risk for that farmer even before getting those funds. When a beneficiary gets funds to cultivate rice, and the land to be cultivated has an associated risk of flood yearly, you outrightly know the land cannot be cultivated or you risk the high possibility of losing all to the flood,” he argued.

Following the COVID-19 pandemic, the central bank approved a one-year extension of the moratorium on repayment, raised the Loan Deposit Ratio (LDR) from 60 per cent to 65 per cent, and reduced the interest rate of the intervention loans from nine per cent to five per cent. Still, the problem of repayment hovers.

Farmers often repay loans from sales made from harvested produce. But when productivity is affected, payment becomes an issue. And this will consequently hamper the sustainability of the programme, Mr Sani said.

Last year, devastating floods displaced 1.3 million persons and affected more than 2.5 million people. The floods also injured almost 3,000 people, damaged 150,000 hectares of farmland, and “completely damaged” 85,000 homes, according to Nigeria’s disaster management agency, NEMA.

Mr Sani further identified the need for extension workers to work closely with farmers who are beneficiaries so that they can understand modern farm practices and management services. “As they are cultivating within the time frame the money is given to them, they must have access to information on the market and data that would help them reduce the level of risk they are vulnerable to,” he said.