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Recovering government-facilitated agric loans

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‘Loans should be disbursed through farmers’ associations’

Stakeholders in the agricultural financial sector and agribusiness have harped on the imperative of repaying various financial facilities put in place by the Federal Government, its agencies such as the Central Bank of Nigeria (CBN), NIRSAL Microfinance Bank, various state governments, and other revolving loans.

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Before insecurity got escalated and displaced thousands of farming households, access to finance was rated by agricultural scientists and farmers as one of the most prominent impediments to small-scale farmers’ operational expansion and productivity. Lack of adequate capital for farm operations implies a lack of quality inputs such as seeds, seedlings, fertiliser, farm equipment, and skilled labour.

Farmers’ inability to access inputs has been a consistent challenge as the government slowed down investments and commitment to agriculture, and financial institutions considered the sector a high-risk zone predominantly operated by unlettered individuals with no financial and business management skills.

However, various interventions by governments in recent times have indicated a ray of hope that the past glories of the country in agriculture could be restored.

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Among such interventions is the Anchor Borrowers’ Programme (ABP), managed by the CBN and partly insured/guaranteed by NIRSAL.

The ABP of the Federal Government was launched in November 2015, and the purpose of the scheme is to create a linkage between companies involved in processing or exporting key agricultural commodities and smallholder farmers.

The focus of ABP is to provide seed to farmers and cash to grow the crops, and it is expected that this would boost production of the selected commodities and make economic industrialisation through substitution a reality.

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However, the scheme is threatened as recouping the so-called revolving loans has been difficult, especially at the smallholder level where such loans are often seen as grants and empowerment schemes.

Apart from ABP, various state governments have initiated soft loan schemes, but loan recovery is really in doubt. For example, Akwa Ibom State Commissioner for Agriculture and Food Security, Dr Glory Edet, said: “The governor gave over 1000 vegetable farmers interest-free loans last year. He also gave over 1,000 maize farmers interest-free loans, as well as cassava farmers. Cassava is one of the major staple crops in Akwa Ibom.”

Why participants in CBN loan scheme, others should payback
Stakeholders itemised benefits of the loan, how it helps participants to get access to quality farm inputs and stable market, and preached efforts to keep the facilities afloat by repaying loans promptly.

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The ABP scheme targets small-scale farmers cultivating fewer than five hectares of land and producing cereals such as rice, maize, and wheat; roots and tubers such as cassava, potatoes, yam, and ginger; tree crops like oil palm, cocoa, and rubber; legumes such as soybean, sesame seed, and cowpea; livestock such as fish, poultry and ruminants. Also included are cotton, sugarcane, and tomato.

The participating banks, which work with the CBN, lend to farmers at nine per cent yearly and the loan is repaid by the farmers with the harvested crops.

A former Regional Coordinator of the Cassava: Adding Value for Africa (CAVA), Professor Kolawole Adebayo, had said through off-taking scheme, small-scale farmers had access to big cassava processors through the CAVA project by linking such farmers to supply chain managers for the purchase of their produce at standardised rates.

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Professor Adebayo had said: “When improved yields are available, some of the farmers had challenges selling their yields because they were not large enough to attract those large buyers. So, we intervened at this stage to help them to access new markets.”

Loan repayment is also made easier at harvest, because a farmer is paid the balance after deducting the borrowed capital and the interest, giving no room for defaults.

Other benefits of such schemes include group participation and access to cheaper farm mechanisation in terms of mechanised land preparation with plowing, harrowing, and ridging implements; planting with planters and weed control, and crop protection with boom spraying of agrochemicals.

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“Doing collective mechanisation in a contagious farmland reduces cost, and prevents delay because large operations motivate tractor hiring firms to mobilise to farm sites on time,” David Ayodele, a farm service provider, told The Guardian.

“It is easier and more economical for tractor operators to work on several hectares of farmland in a location than at different locations. Hence, reduction in cost to operators and farmers is an advantage that farmers should explore.”

Apart from that, through the off-taking processors, it is easier for farmers to get the best available buyer-specific seeds, seedlings, agrochemicals, and other inputs to contribute to successful farming and marketing. These companies could source the input locally or import if not readily available.

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Quality of seeds and seedlings determine harvest, and access to improved seeds would guarantee a bumper harvest. Protecting and boosting the yield of the crop is made easier because standard chemicals and fertiliser are facilitated by the off-takers or input suppliers.

Use of adulterated agrochemicals has been responsible for failed crop protection and eventual meager harvests have jeopardized investments of most farmers, making farming unsustainable for them.

Consequences of not meeting repayment obligation include shrinking opportunities for more farmers, collateral damage to food sufficiency drive, and hunger.

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President of All Farmers Association of Nigeria (AFAN), Ibrahim Kabir, advised farmers to pay any loan they take “so that others would get because no government has enough resources to satisfy the need of all Nigerian farmers.

“The repayments are used to give those who are in line waiting for their turns as the loans are revolving in most cases.”

AFAN chairman in Kano State, Abdulrasheed Magaji, said: “Reasons for loan default emanates from or is technically planned and made possible by those government officials saddled with the responsibilities to manage and execute the processing and disbursement of the loans.”

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He listed factors such as poor disbursements via timing, incomplete packages, inflation of input prices and advancing loans to wrong and undeserving beneficiaries as part of the causes of inability to recoup loans from farmers.

He advised that “I believe if the above could be corrected and taken care of, farmers will definitely repay any loan, especially if procedures of giving out the loans are to be observed.

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“I can’t say that a hundred per cent repayment can be made, but excellent recovery would be made.”

Magaji advised farmers to insist on seeing the original loan documents and reject any incomplete loan package, adding: “And farmers’ leaders should also fear God and stop conniving with government officials to short-change their followers.”

He said if loans were facilitated through farmers’ cooperatives and associations such as AFAN, recovery would be easier.

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