Akinyinka Akintunde is the president and chief executive officer of AFEX Nigeria. In this interview with Josephine Okojie, he spoke about the recently suspended Anchor Borrowers Programme and why most of the beneficiaries are yet to repay loans extended to them.
AFEX was one of the principal anchors of the Central Bank’s Anchor Borrowers Programme – a scheme that has been suspended by the recent administration over farmers’ failure to repay loans. Your organisation interfaced with most of these farmers and in your opinion why are the farmers unable to repay loans given to them under the scheme?
Typically, with agriculture financing, repayment risks are always bound to occur, owing largely to disruptive forces that farmers, insurers and financiers cannot control. Usually, these risks cut across environmental factors and, in some cases, business environment forces.
What we’ve managed to do over the years has been to hedge these risks as best as possible through extension services that see extension officers working with farmers to guide them on best farming practices.
We have had a solid repayment record for our input programs, however, in the instance of the 2022/2023 Anchor Borrower’s programme, disruptive macroeconomic forces on the back of record inflation and the naira redesign policy rendered these farmers unable to meet up their payment obligations.
Many of these farmers who rely on profits to feed their families had to sell their harvests way below market price, some even selling at 30 percent of the market value just to get cash.
These are farmers that have participated in previous input programs and completely fulfilled repayment obligations but faced with hardship that affected millions of households, they made an economic choice, which has unfortunately now impacted upon their ability to repay loans.
“Our focus has always been empowering farmers to improve their livelihoods and increase productivity to support food production, and our engagement in the Anchor Borrowers Program reflects that commitment to farmers and food security in the country.”
How is the absence of crop insurance affecting the ability of farmers to repay loans?
Farming is typically risky and crop insurance provides contingencies against disruptive forces beyond the control of farmers. Some of the barriers that limit agriculture financing revolve around risks of droughts, floods, pests, and other unforeseen events that devastate crops, and threaten repayment.
In the case of the ABP, we took insurance against low yield, however this was not the case, as many farmers harvested the expected yield, but as a result of cash scarcity, sold their commodities for quick cash to offset household needs. This is a different situation from, for instance, the ginger blight infestation, where about 1,380 of our farmers who were affected in the 2023 wet season got an insurance payout.
GT Bank is claiming AFEX owes it N17.8 billion, is there a discrepancy in this amount? If yes or no, what timelines were supposed to exist for repayment and by how much have they been exceeded?
The numbers in the case are definitely contested, but because it is a subject of ongoing litigation, we cannot speak to it pending the outcome of the decision of the court. In terms of timelines, the loans reached maturity in October 2023 and we have been working with farmers to enable repayment.
What legal response has been done by AFEX in all of this?
Currently, we have filed our processes in court to vacate the order and we will explore all judicial remedies available to us.
What do we not know, beyond all that is being published and reported, is there a backstory we should know?
We have spoken very widely about the impact of the cash crunch and other macroeconomic factors even prior to this particular situation. It, however, bears repeating that smallholder farmers who have probably the least say in these issues, have been the most impacted by them.
In our recently released impact report we highlight the fact that rural poverty in Nigeria is more widespread in 2023 compared to baseline measurement in 2020 with over 80 percent of Nigerian farmers still existing around and below the poverty line.
These farmers overwhelmingly produce the food that we eat and do stand for now as the key players in our food emergency response. One of the key driving points of the food emergency response is providing inputs for farmers in the form of fertilisers, pesticides and seedlings.
Today, the value of the demand for agricultural financing is estimated at N83 trillion ($200 billion), and this demand falls into three broad categories: input financing, medium to long term finance for assets and overheads, and short-term working capital and long-term investment in productive assets.
For us, input financing is an essential tool for increasing productivity and food production in Nigeria and this has always formed a huge part of our operations with our input financing programs having historically had over 90 percent repayment rates.
Our focus has always been empowering farmers to improve their livelihoods and increase productivity to support food production, and our engagement in the Anchor Borrowers Program reflects that commitment to farmers and food security in the country.
What is the risk sharing system provided for by the CBN and why has it not been activated to resolve this issue?
The risk sharing system was a collateral guarantee announced by the Central Bank of Nigeria as an additional incentive under the Anchor Borrowers Program to essentially share risk with farmers on the program.
We did make a formal request to the CBN through GTBank, which acted as a Participating Financial Institution in the transaction, to activate this risk sharing structure that was put in place for the program and the apex bank had asked for all parties to come together in a resolution meeting to reach an agreement on outstanding amounts, but this mediation meeting is yet to be held.
What has been done to make farmers pay back and in your opinion what else can be done?
We have primarily strengthened our outreach, targeting and working closely with community leaders and cooperative groups to compel farmers to repay. These are farmers who have historically paid back on time and our goal is to limit unnecessarily punitive measures while still ensuring that the farmers are able to fulfill their obligations.
In a legal notice that was published, the bank intends to take over the commodities/produce stored in your warehouses. Can you explain if this means they intend to administer your warehouses until a particular motion is determined or they would be taking out the goods to some other places?
We do think it is important to clarify that the bank has no authority on warehouses or commodities, solely on the basis that the transaction featured input loans only.
How many products do you have in storage in terms of value? If it exceeds N17.8bn; so, why would the bank be taking what exceeds what it claims to be owed?
As a commodities exchange, the commodities in these warehouses are not owned by us, but rather all inventory or securities are owned by members of the Exchange.
Also, would an inventory be done to record what is taken if it so happens? And In the event they are taking them away, what happens if they are not stored properly, and spoilage occurs?
