Structural reforms will boost Agric sector against cash intervention model by CBN ~Analysts
Analysts at the United Capital Plc review the five years of the CBN Anchor Borrowers’ Programme (ABP) and conclude that resolving the structural issues, which include insecurity will boost the agricultural sector better than the current cash intervention scheme by the CBN.
In November 2015, the Central Bank of Nigeria (CBN) created the Anchor Borrowers’ Programme (ABP) with goal of improving supply of key agricultural products to Agro-processors from Small Holder Farmers.
It intended to achieve this by supplying farmers with adequate credit at single digit interest rates to enable them acquire lands, farming inputs and machinery necessary to cultivate and produce agricultural outputs.
The scheme was also expected to contribute to helping Nigeria achieve self-sufficiency in food production as well as address the country’s negative balance of payments on food items.
Evaluating recently available data from the CBN’s Q4-2020 economic report, over a six-year period (Nov-2015 to Nov-2020), the ABP program has financed over 2.5 million projects, disbursing loans worth N497.2 billion to 3.1 million farmers in the country.
However, the same report stated that only N118.7 billion of the disbursed loans have been repaid, although some of them are yet to fall due.
In addition, recent media reports have stated the CBN, via different mechanisms have been clamouring for beneficiaries to repay their loans to ensure sustainability of the scheme.
However, many of the farmers have indicated inability to repay, as the rising insecurity has forced them to abandon their farms.
In addition, we recall in 2019, many of the farmers under the scheme refused to settle their obligations under the claim that they considered it “their share of the national cake” after their associations sued some of them.
In our opinion, this further affirms our position that fiat-led interventions are inadequate to tackle structural deficiencies in the Nigerian economy.
Reviewing empirical evidence, the agriculture sector grew at a six-year average of 4.8 percent prior to the introduction of ABP but slowed to 3.0 percent per annum during the existence of ABP, a program designed to improve the prior growth rate.
Thus, we believe resolving the structural issues (such as infrastructure & insecurity) will be key to restoring the sector back to the path of accelerated growth.
We believe resolving these issues should take front burner rather than sustaining cash interventions.