Anchor Borrowers’ Programme — A Life Line for Nigerian Farmers
Diversification of the Nigerian economy is a major focus of the Buhari Administration. Overcoming economic recession and trying to stay afloat, the government decided to look into the agricultural sector; developing and improving it to encourage business-driven agricultural practice. The advantage of this would see an independent country in term of agricultural produce and also increase the country’s GDP as agricultural importation would reduce and exportation encouraged. In the consultations carried out with farmers and major stakeholders by Federal Ministry of Agriculture and Rural Development, State Governments, millers of agricultural produce and Small Holder Farmers (SHFs), it was realized that a major bottleneck they faced was access to funds from financial institutions. Most times, farmers are overlooked when loans are given out due to factors like collateral provision, payment time frame and the amount loaned over a period of time. The Federal Government through the Central Bank of Nigeria has stepped in with the Anchor Borrowers’ Program (ABP) to mitigate these challenges faced by farmers.
In November 2015, the CBN in line with its developmental functions, launched the Anchor Borrowers’ Programme to create a linkage between anchor companies (Agro processing companies) involved in agricultural processing and Small Holder Farmers. The programme’s primary aim is the provision of farm inputs in kind and cash (for farm labor) to Small Holder Farmers to boost production of agricultural commodities, stabilize inputs supply to agro processors and address the country’s negative balance of payments on food. At harvest, the SHFs supplies their produce to the Agro-processor (Anchor) who pays the cash equivalent to the farmer’s account.
The focus is to provide seed to these farmers and cash to grow the crops. This would increase production of the selected produce and make sure there is constant supply of these goods to agro processors. ABP is aimed at farmers who produce cereals, root and tubers, legumes, tree crops, livestock, cotton, sugarcane and tomatoes; basically crops that are consumed locally and can be exported to generate revenue. It aims to increase banks’ financing to the agricultural sector, reduce agricultural commodity importation and conserve external reserves in a bid to increase capacity utilization of agricultural firms. Additionally, its establishment has continued to deepen the cashless policy and financial inclusion while reducing the level of poverty among SHFs as they would evolve from subsistence farming to commercial production levels.
The Anchors are 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 Project Management Team (PMT). State Governments may act as Anchor upon meeting the prescribed conditions. As a farmer benefitting from ABP, the produce at harvest is supplied to the Agro-processor (Anchor) who pays cash equivalent to the farmer. This is to ensure there is constant supply of the commodities to the agro processors to boost the agricultural sector.
To be a beneficiary of the loan, the recipient has to be a member of any agricultural association of the produce aforementioned. This would then qualify the recipient for the loan. The following financial institutions are responsible for disbursing the loans to beneficiaries; Deposit Money Banks (DMBs), Development Finance Institutions (DFIs) and Microfinance Banks nationwide. For the input suppliers, an expression of interest letter shall be submitted to the office of the PMT for consideration and issuance of local purchase orders before a supply can be made.
The loan paid is 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 is guided by the rate on the N220 billion MSMEDF, which is at 9% p.a (all inclusive, pre and post disbursement). The Financial Institutions access at 2% from the CBN and lend at a maximum of 9% p.a. The gestation period of the identified commodities would determine the duration of the loan. Loans granted to SHFs are to be repaid with the harvested produce mandatorily delivered to the Anchor at designated collection centers in line with the provisions of the Agreement signed. The produce to be delivered must cover the loan principal and interest.
To further encourage a business-driven agricultural practice, CBN has formed strategic partnerships with agricultural commodity associations in the country to expand the implementation of the ABP by leveraging on existing organized structures of agricultural associations nationwide. This in turn provides huge economies of scale in its implementation.
In a bid to ensure many farmers are reached by the ABP, the Nigeria Incentive-based Risk Sharing System for Agriculture (NIRSA) deployed an innovative nation-wide field structure to support farmers under the CBN Anchor Borrowers Scheme with units in each State and the FCT. This structure is known as Project Monitoring Reporting and Remediation Office (PMRO) and its role is to make agriculture more attractive for private sector investment by de-risking the agricultural value chain. They are to monitor and supervise NIRSA related projects to bring about successful outcomes.
These PMROs were deployed to support an initial number of 225,000 farmers (divided into about 5,000 farmers in 36 states of the Federation and the FCT) who are partakers of the loan under the program. This is to generate new projects, supervise existing projects and mobilize the community to support, own and enjoy the impacts of these projects.
The PMROs are in proximity to these farms and the farmers in order to monitor the funds and the farmers; to ensure that these funds are not diverted to another cause. This is also essential in order to support them with the best farming techniques. This will increase productivity, success rate and profitability of these agricultural projects thus reducing the perception of the sector as high risk by financial institutions. These PMROs are led by highly experienced private sector professionals. They would also declare private sector orientation and strategies to drive the projects. They would also assist the banks to properly package those projects so they become bankable.
In February 2018, the CBN Governor, Godwin Emefiele put the amount disbursed to Farmers under the scheme at N55.526 billion for over 250,000 farmers. These set of farmers, according to the CBN Governor, have cultivated almost 300,000 hectares of farmland for rice, wheat, maize, cotton, soybeans, cassava, etc. Two years into the implementation of ABP, the programme has contributed to the creation of an estimated 890,000 direct and 2.6 million indirect jobs in Nigeria.
This programme has put Nigeria on a strong path to reducing the importation of agricultural commodities that can easily be produced locally. It is an intensified effort to grow what we eat and produce what we consume. Above a million farmers under the ABP are benefiting from low interest loans which help to promote expansion and commercial farming. The effect of the programme is palpable as it has helped to boost local production of rice to the extent that it has saved Nigeria about $800 million in foreign exchange. The Anchor Borrowers’ Programme is a life line for Nigerian farmers.
