Only 24% of CBN’s anchor borrowers loan repaid – IMF

The International Monetary Fund (IMF) said only 24 percent of loans disbursed in Central Bank of Nigeria (CBN) Anchor Borrowers Program (ABP) has been repaid.

The Washington-based lender in a new report titled ‘Nigeria’s chosen problem’ said agricultural credit in Nigeria has not boosted production despite challenges in targeting the right recipients for the credit.

In November 2015, President Muhammadu Buhari launched the ABP to boost agricultural production and reverse Nigeria’s negative balance of payments on food.

Small farmers who cultivate cereals (rice, corn, wheat etc.), cotton, roots and tubers, sugarcane, crops, pulses, tomatoes and livestock are those who are captured in this initiative.

Loans are channeled to beneficiary farmers through Deposit Money Banks (DMBs), Development Finance Institutions (DFIs) and Micro Finance Banks (MFBs), which the program recognizes as Participatory Finance Institutions (PFIs).

According to the guidelines of the program, at harvest time, the farmer pays off his loan by bringing the crop to the ‘anchor’ who pays the same amount to the farmer’s account.

The IMF, however, said the weak effect of agricultural credit on production growth can be attributed to the difficulty in targeting the right recipients.

It is explained that the data (November 2020) from the central bank shows that the repayment rate for the Commercial Agricultural Credit Scheme (CAC) is almost 66 percent, but since the loan started in 2009, this is not the highest result.

“For the Anchor Loan Program, repayments are also as low as 24 percent, mainly because payments can be made in a way, thus limiting the tenor of the loan to one year.

“Part of the problem is the structure of the incentive to repay the land, the recipient loans are not always well targeted and sometimes the financing is used for other purchases (for example, companies trading new agricultural inputs to obtain commercial leases),” said the IMF.

Food Insecurity

The report notes that food insecurity is a growing policy problem in Nigeria.

He said the country is endowed with abundant agricultural resources and more than 81 million acres of fertile and mostly fertile land, with maize, cassava, guinea corn, yams, millet, and rice as the main crops.

The IMF said domestic production of staples and rising global food prices are among the factors affecting the food security situation.

“Rural areas are somewhat insulated from the recent price surge as housing production is higher even though the country’s peripheral areas have suffered the worst effects in recent years,” he said.

The Washington-based lender said the key factors in food security are demand and supply factors as well as food price inflation.

He added that the cross-country analysis identified four levers to increase the level of food security: increase per capita consumption, increase production yield, limit food price inflation, and reduce dependence on food imports.

“Per capita consumption is far from the comparator countries in Nigeria, and can be stimulated through increased diversification. Yields are also lower in Nigeria than in other countries due to lack of inputs (fertilizers, modern irrigation methods, and mechanization),” he said.

Addressing other challenges, the IMF said that timely, high-quality, and price-competitive inputs will not only achieve optimal agricultural yield productivity, but also food inflation.

It noted that Nigeria has achieved an increase in agricultural production associated with the policy, but some have been less successful.

“Import dependence for key staples has not decreased and the cost of these agricultural products remains driven by international prices.

“Furthermore, central bank credit for the agricultural sector has not succeeded in increasing production beyond the stimulus of high rainfall and high food prices,” he said.

Unlike the IMF, the government’s e-voucher scheme for farmers to get subsidized inputs has proven to improve yields.

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“This latter policy is currently being introduced along with the creation of a new special processing zone and offers good prospects if handled efficiently,” he said.