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CBN and the Agricultural Credit Guarantee Scheme Fund

In a bold bid to sustain the federal government’s focus on agricultural development, in order to diversify the economic base from the non-performing oil industry, the Central Bank of Nigeria (CBN) has offered 31,666 loans worth N5.92 billion guaranteed under the Agricultural Credit Guarantee Scheme Fund (ACGSF).

That was both the number of beneficiaries and the total amount in 2021. But the beneficiaries of the scheme recently called for an increase in the maximum amount of loans guaranteed per farmer under the scheme. What could be the reasons for this call?

The beneficiaries cited the rising prices of goods and services. The pertinent question needing urgent answers has to do with the root causes of the ever-escalating food inflation rate?

Transportation cost has been cited by the CBN as the major cause of food inflation in Nigeria. On its part, the USDA states that rising energy and transportation costs could be responsible for it.

Trucking is the primary mode of transportation for food products, and the industry was already dealing with a shortage of drivers before the pandemic in 2020.In fact, the USDA expects all food prices to rise between 4.5% and 5.5% this year.

Backing this position, the World Bank explained that the food supply chain disruptions as caused by the pandemic translated to an increase in price across food items in Nigeria. That was its position as at December, 2021.

Some observers of the goings on in Nigeriastate that there are multiple causes leading to food inflation in Nigeria. These have been identified as including rising demand in large developing countries that have experienced sustained growth in household incomes.

Other factors include the long neglect of agriculture in many developing countries over recent decades, leading to reduced supply; increased costs to farmers due to high fuel and fertilizer prices as well as competition from biofuels for supply of energy.

It would be recalled that the ACGSF was established by Decree No. 20 of 1977, and started full operations in April, 1978. Its original share capital and paid-up capital were N100 million and N85.6 million, respectively. The Federal Government holds 60% and the Central Bank of Nigeria, 40% of the shares.

The capital base of the Scheme was increased to N3 billion in March, 2001. The Fund guarantees credit facilities extended to farmers by banks up to 75% of the amount in default net of any security realized.

The Fund is managed by the Central Bank of Nigeria, which handles the day-to-day operations of the Scheme. The Guidelines stipulate the eligible enterprises for which guarantees could be issued under the Scheme.

According to the CBBN portal, the Fund provides guarantee in respect of loans granted by any bank for agricultural purposes. Speaking not too long ago at the ACGSF Farmers Awards ceremony held at the CBN office in Lagos, the Acting Branch Controller of the apex bank, Nnaemeka Ukanyirioha noted that the CBN has continued to ensure facilitating access to finance for operators in the agricultural sector despite the challenging economic situation in the country.

He disclosed that under the ACGSF, the CBN guaranteed “a total of 31,666 loans valued at N5.92 billion” in 2021. He explained that the award was to reward participants under the scheme “who have shown exceptional promise and dedication to growing our agricultural sector despite the numerous challenges faced.

“The previous year was particularly difficult with businesses trying to recover from the after effects of a global pandemic. This further underscored the importance of a nation’s ability to feed itself. “It is evidence that our commitment in rebuilding our agricultural might as a nation is crucial not only for our subsistence but also our economic relevance on a global scale.”

In addition to the ACGSF, there is the Agricultural Credit Support Scheme (ACSS). It is an initiative of the Federal Government and the Central Bank of Nigeria with the active support and participation of the Banker’s Committee. The Scheme has a prescribed fund of N50.0billion.

ACSS was introduced to enable farmers exploit the untapped potentials of Nigeria’s agricultural sector, reduce inflation, lower the cost of agricultural production (i. e. food items), generate surplus for export, increase Nigeria’s foreign earnings as well as diversify its revenue base.

At national level, the scheme operates through a Central Implementation Committee (CIC) while at the Federal Capital Territory (FCT) and State levels, the Scheme operates through State Implementation Committees (SICs) instituted to ensure that the objectives of the scheme is realized without hindrance.

To access loans under ACSS, applicants (practicing farmers and agro-allied entrepreneurs with means) are encouraged to approach their banks for loan through the respective state chapters of farmers associations and State Implementation Committees. However, large scale farmers are allowed under the scheme to apply directly to the banks in accordance with the guidelines.

ACSS funds are disbursed to farmers and agro-allied entrepreneurs at a single-digit interest rate of 8.0 percent. At the commencement of the project support, banks will grant loans to qualified applicants at 14.0 per cent interest rate.

Applicants who pay back their facilities on schedule are to enjoy a rebate of 6.0 per cent, thus reducing the effective rate of interest to be paid by farmers to 8.0 per cent.

Between 1978 and 1989 when the government stipulated lending quotas for banks under the Scheme, there was consistent increase in the lending portfolios of banks to agriculture.

But after the deregulation of the financial system, banks started shying away by reducing their loans to the sector due to the perceived risk.

In order to reverse the declining trend several innovations and products were introduced under the Scheme such as: The Self-Help Group Linkage Banking, Trust Fund Model and Interest Draw Back.

Application forms under the Scheme are obtainable from various branches of participating banks throughout the country.

While one commends the federal government for these laudable initiatives, the bitter truth however, is the factor of horrifying insecurity in the country which some of our political leaders do shy away from mentioning.

Read also: CBN keeps printing cash to finance deficit, says EIU

Over the past eight years fully armed herders, some of who the powers-that-be claim are from outside Nigeria have been having a field day terrorizing many farmers across several geo-political zones in the country.

It therefore, amounts to sheer self-deceit for our policy makers to bury their heads in the sand, more like ostriches and believe that only hike in transportation is responsible for food inflation.

No! Much as one would commend the CBN for its intervention role to boost food production through the giving of loans, the right steps should be taken according to priority. We cannot put the cart before the horse.

In addition, efforts should be made to ensure that the rural farmers are included in the schemes, educated by farm extension workers on modern, organic farming techniques, supplied with high-yielding, disease-resistant and fast-growing seedlings

For its monetary policies to enhance the different aspects of the food chain; from production, through processing, preservation to marketing and for them to make the desired impact on the people and the national economy, the federal government should tackle insecurity in whatever guise or form.

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