By Babajide Komolafe

The launching of the Central Bank of Nigeria’s Anchor Borrowers Programme in far away Kebbi state last week represents the latest effort to tackle one of the greatest challenges to Nigeria’s foreign reserves and the value of the naira, which is the huge amount of foreign exchange spent on food importation.

For example, in the first half of 2014, the country spent $2.66 billion or N524 billion to import various food products. This represents 8.1 percent of total foreign exchange spent on importation of visible goods during the period. Furthermore, the country spent about $5 billion or N985 billion to import food in 2014. Meanwhile, the huge food import bill is dominated by importation of rice, wheat and other commodities, which the country has the capacity to produce enough quantity to meet local demand.

Emefiele CBN Governor

While several policy measures have been introduced to address this problem, the trend has persisted.  But faced with the challenge of declining external reserves due to sharp drop in foreign exchange earnings from crude oil, leading to devaluation of the naira twice within six months, the CBN decided to confront the problem headlong with radical policy measures.

The most recent and notable of these measures is the restriction of the importation of 41 items from the nation’s foreign exchange market. The list includes food items like rice, palm oil products, vegetable oils, tomatoes, vegetables and processed vegetable products, poultry and tinned fish.

The purpose of the policy, according to the apex bank, is to encourage local production of these products. “The implementation of this policy will help conserve foreign reserves as well as resuscitate domestic industries and improve employment generation”, it stated.

The Anchor Borrowers Programme

Realising that restricting the importation of food products from accessing foreign exchange will not automatically translate to their local production, the CBN decided to complement the policy with a programme  aimed at boosting local production of rice and wheat, two of the four products that dominates the country’s food import bill. This is the rationale behind the introduction of the Anchor Borrowers Programme (ABP).

Speaking at the launching of the Programme, CBN Governor, Mr. Godwin Emefiele said, “Nigeria’s food import bill is both exceptionally and unsustainably high. The top

four import commodities, which include rice and wheat, consume over N1.0 trillion in foreign exchange annually. Furthermore, relying heavily on food importation fuels domestic inflation, depletes our foreign reserves, displaces local production and creates unemployment in the country. Indeed, import dependency especially on commodities of comparative advantage is not acceptable and sustainable fiscally or economically.

“The Anchor Borrowers’ Programme would be a decisive model that will transform Nigeria from one of the world’s highest importers of rice into a net exporter of the commodity in the short- to medium-term. It will undoubtedly complement the Growth Enhancement Scheme (GES) and advance the status of many subsistence GES small-holder farmers to commercial or large contract growers with attendant increase in agricultural productivity and farm income.

The ABP is aimed at addressing the various problems militating against large scale production of food crops in the country.  For example, in the rice industry, despite the huge investment with the setting up of almost 40 integrated rice mills, the industry continues to suffer as a result of low yield rice varieties, poor farm practices and lack of good quality farm inputs.

Other challenges facing the industry include non-utilization of available cultivable lands, manual system of production and inadequate funding for the establishment and development of nucleus farms and small farmers out-grower schemes. The CBN’s Anchor Borrowers Programme is designed to address these challenges.

The Programme is designed to create economic linkages between farmers and processors, not only to ensure increased agricultural output of rice and wheat but also close the gap between production and consumption by ramping up capacity utilization in  the nation’s  integrated mills.

Details of the Programme

Under the  programme, the CBN will set aside the sum of N40.0 billion out of the N220 billion Micro Small and Medium Enterprises Development Fund (MSMEDF) to be availed to farmers at single digit interest rate of 9.0 percent per annum. Smallholder farmers shall under the scheme be entitled to loans ranging from N150, 000 to N250,000 to assist them in procuring necessary agricultural inputs such as seedlings, fertilizers, pesticides and other important inputs to help boost agricultural outputs and productivity.

The Programme is expected to link over 200,000 rice and wheat farmers with reputable millers for off-take of every grain of paddy produced. The milling companies have adequate capacity to meet Nigeria’s rice requirements, backed by installed state of the art processing equipment. Ultimately, the quantum of funds to be channelled and the number of farmers to benefit from this programme will increase as we extend the Programme to other commodities.

The implementation plan of the Programme involves a three-pronged approach including: Anchor Outgrower Support; Value Chain Training for stakeholders; and Risk Mitigation.

This approach was adopted to ensure that major stakeholders in the industry work closely with the Federal Ministry of Agriculture and Rural Development, NIRSAL, insurance companies, CBN and other financial institutions to create the needed linkages and transparent ambience required to sustainably grow the identified commodities.

Objectives of the Programme

The Anchor Borrower’s Programme is expected to deliver some key outcomes in five years. The expected outcomes are: An increase in the ratio of agricultural lending from 3.72 percent of total bank lending in 2014 to 7.0 percent;  An increase in capacity utilization of rice mills from the current level of less than 50 percent to not less than 80 percent;  Empower at least 1 million farmers in each of the selected produce under the programme;  Create at least 2,000,000 direct and indirect jobs in the processing segment of the above value chains; and  Reduce Nigeria’s import bill on the identified commodities by at least 30 percent annually over the specified period.