Loans Default Plague Anchor Borrowers Program as Farmers Struggle to Repay
The Anchor Borrowers Programme (ABP), initiated by the Central Bank of Nigeria (CBN), has been facing significant challenges with loan default, resulting in farmers’ struggles to repay their debts. Despite the program’s aim to boost food production and stabilize inputs supply, the low recovery of loans granted to farmers has become a growing concern.
Since its inception in November 2015, the ABP has provided farm inputs and cash to smallholder farmers, benefiting a total of 4.8 million farmers by 2022. However, according to the International Monetary Fund (IMF), 76 percent of the loans remain unpaid. The IMF attributes this to the difficulty in reaching the targeted farmers and the weak incentive structure for repayment.
Repayments under the ABP can be made in cash or produce of equal value, with the loans limited to a one-year tenor. However, these repayment options have not been effective, partly due to misallocation of the loans and misuse of funds. Many beneficiaries of the program have used the funds for purposes other than farming, making it challenging to ensure repayment.
Yunusa Yabwa, the National Secretary of the All Farmers Association of Nigeria (AFAN), noted that the ABP was abused and did not meet expectations in boosting food production. He highlighted that a significant number of beneficiaries were not even farmers but individuals who diverted the loans to other projects.
Abdulmumin Isa, Director of the CBN’s Corporate Communications Department, provided statistics on the program’s progress. Out of the N1.08 trillion released by the apex bank, N960 billion is due for repayment. The ABP has supported approximately 4.57 million smallholder farmers, who collectively cultivated over 6.02 million hectares of land for 21 different commodities nationwide.
The ABP guidelines require farmers to repay their loans with produce upon harvest, covering the principal and interest. The anchor, who provided the loan, should then deposit the cash equivalent into the farmer’s account. However, numerous default payments have hindered the success of the program, with more than 50 percent of loans remaining unpaid.
Efforts to address the challenges faced by the ABP are crucial to ensure farmers can access the necessary support to enhance food production. Stakeholders, including farmers’ associations and financial institutions, need to collaborate to improve loan disbursement and repayment mechanisms. By strengthening the targeted allocation of loans and fostering accountability, the ABP can achieve its goals of boosting agricultural productivity and reducing food prices for the benefit of all Nigerians.
In conclusion, the ABP has encountered significant obstacles in terms of loan repayment, posing challenges for both farmers and the program itself. Effective measures and improved mechanisms must be implemented to ensure timely repayment and enable the sustainable growth of the agricultural sector in Nigeria.
