By Babajide Komolafe
Seven months after its commencement no farmer or aggro-allied enterprise is yet to benefit from the N200 billion Commercial Agricultural Credit Scheme (CACS) due to official bureaucracy and unresolved technicalities among the parties involved in the management of the scheme.
Investigations reveal that despite the recent increase in the number of participating banks to five from two, and the recent approvals of some applications for loan by the CBN, agro_alliedÂ enterprises are yet benefit from the scheme.
The scheme was initiated by the Central Bank of Nigeria (CBN) in the first quarter of the year in an effort to enhance flow of credit to the agricultural sector.
The scheme was prompted by the reality that while the Agricultural sector contributesÂ 42.7 per cent to the nation’s gross domestic product (GDP) it enjoys less than one per cent of total bank credit to the economy. Consequently the CBN in collaboration with the Federal Government set up the scheme which was fund with N200 billion raised through bonds issued for this purpose by the Debt Management office (DMO). GuidelinesÂ for the operation of the scheme was released on 15th April while UBA PLC and First Bank were appointed as participating banks.
The scheme is coordinated by the Development Finance Department of the CBN and the Commercial Agriculture Development Programme (CADP) Secretariat of the Federal Ministry of Agriculture. The two reports to the Project implementation Committee which comprise Deputy Governor, CBN [Financial Sector
Surveillance], Chairman National Coordinator, Commercial Agriculture Development Programme, SecretaryÂ Director, Development Finance, CBN, MemberÂ One Representative each of the Participating Banks [PBs]Â Executive Director, National Food Security Agency MemberÂ Representative of the Federal Ministry ofÂ Finance MemberÂ Representative of the Large Scale farmers Association Member Representative of the Debt Management Office Member .
According to the operating guidelines, “All applications for loans under the scheme shall be made to the PBs in duplicates; one copy of which will be stamped by the PB concerned and forwarded to the Development Finance Department of CBN and CADP Secretariat of the FMAWR. Both Departments shall set up a joint task_force that promptly (within 48 hours) issues a “no objection” letter to the PB on the loan application, after confirming that the products/purposes conform to the focus of the scheme.
Thereafter, the PB can quickly process the loan and effect disbursement. Applications received by the PB s all be processed promptly and not exceeding thirty days. The banks are expected to set up Task_Forces and Fast_Track processes to ensure prompt service delivery.
All applications under the scheme shall be treated by PB’s with the same degree of diligence, good faith and competence with which they would normally be expected to treat all applications for loans received in the normal course of their banking business.
Investigation however revealed that as at October, about six months after the commencement of the scheme neither of the banks has started lending to farmers.
This it was gathered was due to unresolved technical issues concerning the scheme. This prompted the CBN to withdraw N86.4 billion unutilized agricultural fund from the banks in the first week of this month. According to a CBN source, the money was withdrawn from the banks because they have not started lending meanwhile they were using the money to trade without paying any interest on it.
Investigation however reveals that the withdrawal was occasioned by the heated debate over the management of the fund among banks at the last Bankers Committee. The other banks queried the selection of UBA and First Bank and the decision to use only two banks for the management of such huge amount of money. They noted that funds given to the bank gave them undue advantage over others in the interbank market. Consequently the apex increased the number ofÂ participating banks to five adding three banks namely Zenith Bank, Unity Bank and Fidelity Bank.
In addition to this, the CBN rather than releasing the fund to the banks in cash provided it in the form of an open line of credit which the banks can draw down whenever they are ready to disburse to farmers.Â Â Industry sources however confirmed to Vanguard that none of the banks have drawn from the fund.
The banks, it was gathered insisted that they will only draw down on the fund if they get borrowers who will not default. This is because under the scheme the banks would bear the lose should any borrower fails to repay the loan.
“The banks are afraid to lend the money because no one wants to carry non_performing loans in its books which could resort to making provision for bad loans”, said a senior bank treasurer. The implication is that the N200 billion might lie dormant with the CBN for a long time or only few farmers would be able to benefit, a situation that would undermine its effectiveness.
Meanwhile Vanguard reliably gathered that a stakeholders meeting was convened by the Ministry of Agriculture and the CBN to address the challenges to the
effective implementation of the scheme. The meeting was still in progress as at the time of going to press hence the details and outcome of the meeting could not be ascertained.According to the operating guidelines, the objectives of the scheme are: To fast track development of the agricultural sector of the Nigerian economy by providing credit facilities to commercial agricultural enterprises at a single digit interest rate;
To enhance national food security by increasing food supply andÂ effecting lower agricultural produce and product prices, thereby promoting low food inflation; To reduce the cost of credit in agricultural production to enable farmers to exploit the potentials of the sector;Â To increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.
The scheme is devoted to commercial agricultural activities and it defines a commercial agricultural enterprise as a commercial enterprise is any farm or agrobased enterprise with agricultural asset (excluding land) of not less than N350Million for an integrated farm with prospects of growing the assets to N500Million within the next three years and N200Million for non_integrated farms/agro_enterprise.
The agricultural products/activitiesÂ covered by the scheme are:Â Cultivation of target crops (rice, cassava, cotton, oil palm, wheat, rubber, sugar cane, Jatropha carcus, fruits and vegetable);Â Livestock (dairy, poultry, piggery); Fisheries; while Credit support to the target commodities shall be administered along the entire value chain of; Production, Storage, Processing, Market and Enterprise development The guidelines recognises two categories of agro_allied enterprises that can borrow from the scheme namely Corporate and Large Scale Commercial Farms/Agro
Enterprises Medium Scale Commercial Farms/Agro EnterprisesTo participate in the scheme as Corporate and Large Scale Commercial Farms/Agro_ EnterprisesÂ the borrower shall;Â Be a limited liability company with asset base of not less than N350M and having the prospect to grow the net asset to N500Million in the next three years and complies with the provision of the Company and Allied Matters act (1990).Â Have a clear business plan;Â Provide up_to_date record on the business operation if any;
Have out growers programme, where appropriate;Â Satisfy all the requirement specified by its lending Bank To participate in the scheme Medium Scale Commercial Farms/Agro_EnterprisesÂ the borrower shall;Â Be a limited liability company with asset base of not less than N200M and having the prospect to grow the net asset to N350 Million in the next three years and complies with the provision of the Company and Allied
Matters act (1990);
Have a clear business plan its lending bank;Â Provide up_to_date record on the business operation if
any;Â Have out growers programme, where appropriate;Â Satisfy all the requirement specified by its lending Bank
State government and the Federal capital TerritoryÂ are also allowed to participate in the scheme. to participate inÂ the scheme a state Government/FCT shall Submit an expression of interest; Put in place appropriate institutional arrangements by setting up a Secretariat (Special Unit or Agency) staffed with experienced agricultural experts and credit officers dedicated for the administration of the fund to be borrowed which shall be approved by the PMC; and
Sign an irrevocable standing payment order (ISPO) in favour of the CBN to deduct at source the total amount in default from the states(s) on monthly basis of
State revenue allocation on behalf of the participating banks.