CBN to bear 50% of farmers’ credit risk under private-led agric scheme

The Central Bank of Nigeria (CBN) would bear up to 50 per cent of the risk on loans availed to farmers under its Private Sector-led Accelerated Agriculture Development Scheme (P-AADS) should borrowers default, the regulator said in a circular obtained from its website on Thursday, issued by its Director of Development Finance Yusuf Yila.

P-AADS plans to complement the watchdog’s Accelerated Agriculture Development Scheme, an initiative seeking to tackle food insecurity and youth employment challenges in Nigeria by engaging 370,000 youths in agricultural production via synergy with state governments.

P-AADS, which is to be facilitated by the private sector, will make the CBN guarantee loans granted individual farmers, exposing the watchdog to fresh risks in case of obligor default.

“The collateral to be pledged by participants under the Scheme shall be the title of the cleared land and other acceptable collateral prescribed under the Anchor Borrowers Programme (ABP),” the document said.

The CBN said the maximum amount accessible per borrower was N2 billion.

Read also: Nigerian govt to support farmers with interest-free loans —Agric minister

Its development economics approach could be teetering on the brink given records of loan delinquency in its previous ABP interventions, calling its capacity for risk management to question.

Muhammed Sahabi Augie, chairman of Kebbi State chapter of Rice Farmer Association of Nigeria (RIFAN), said in February 70,000 beneficiary farmers of a N17 billion ABP loan scheme in the state had defaulted.

Jigawa State RIFAN also disclosed last November that over a year after N1.8 billion was disbursed to 18,000 rice farmers, only 200,000 had been recovered.

“Repayment of the facility shall be made on instalment basis through the participating banks and spread over the EOP of the cultivated commodities,” the regulator said in the circular.

“The participating banks shall remit repayments received to the CBN on quarterly or annual basis depending on the commodity financed.”

Rice, maize, poultry, fish, wheat, tomato, cassava, cotton, sorghum, oil palm, cocoa and livestock/dairy are among the agricultural commodities for consideration by P-AADS.

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