By Omodele Adigun
In order to increase funding for the agricultural sector, the Central Bank of Nigeria (CBN), in line with its developmental function, established the Anchor Borrowers’ Programme (ABP), which was launched by President Muhammadu Buhari in 2015.
The broad objective of the ABP is to create economic linkage between smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilisation of processors.
Other objectives of the programme include increased banks’ financing to the agricultural sector; reduction in agricultural commodity importation in order to conserve external reserves; increase in capacity utilisation of agricultural firms and creation of new generation of farmers/entrepreneurs and employment. The rest are to deepen the cashless policy and financial inclusion; reduction in the level of poverty among smallholder farmers (SHFs) and to assist rural smallholder farmers to grow from subsistence to commercial production levels.
The fund
The apex bank states that the fund would be provided from the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF). “The loan amount for each SHF shall be arrived upon from the economics of production agreed with stakeholders,” it adds.
Participating Financial Institutions (PFIs)
The loan is expected to be disbursed through any of these PFIs: Deposit Money Banks (DMBs), Development Finance Institutions (DFIs) and Microfinance Banks (MFBs).
Interest rate
“The interest rate under the ABP shall be guided by the rate on the N220 billion MSMEDF, which is currently at 9 per cent per annum (all inclusive, pre and post disbursement). The PFIs shall access at 2 per cent from the CBN and lend at a maximum of 9 per cent per annum.”
Tenor
The tenor of loans under the ABP shall be the gestation period of the identified commodities.
Repayment
Loans granted to the SHFs shall be repaid with the harvested produce that shall be mandatorily delivered to the Anchor at designated collection centre in line with the provisions of the agreement signed. The produce to be delivered must cover the loan principal and interest.
Targeted beneficiaries
The targeted beneficiaries of the loan, according to the apex bank, shall be smallholder farmers engaged in the production of identified commodities across the country. The farmers should be in groups/cooperative(s) of between five and 20 for ease of administration.
The Anchor
In the ABP guidelines just released by CBN, the Anchor “shall be private large-scale integrated processors who have entered into an agreement with the SHFs to off-take the harvested produce at the agreed prices or as may be reviewed by the Project Management Team (PMT). State governments may act as Anchor upon meeting the prescribed conditions.”
Identified commodities
The targeted commodities of comparative advantage to the state shall include, but not limited, to cereals (rice, maize, wheat, etc.), cotton, roots and tubers (cassava, potatoes, yam, ginger, etc.), sugarcane, tree crops (oil palm, cocoa, rubber, etc.), legumes (soybean, sesame seed, cowpea, etc.), tomato, livestock (fish, poultry, ruminants, etc.) and any other commodity that will be introduced by the CBN from time to time.
Loan processing
“Input suppliers shall submit expression of interest letter to the office of the PMT for consideration and issuance of local purchase orders.”
Expression of Interest Letter to the CBN by the Anchor/state government indicating the targeted agricultural commodities, proposed number of farmers, the hectares to be covered and the PFI(s), among others.
•Formation of the PMT
•Verification of the farmers and farm sizes by the PMT
•Confirmation of participation by the head offices of the PFI(s)
•Identification of reputable agricultural inputs suppliers by the PMT
•Organisation of town hall meeting to agree on the economics of production per hectare, off-take price, signing of agreement, and any other relevant issues. The meeting shall have in attendance all the stakeholders including the inputs suppliers.
•Signing of tripartite agreement by the PFIs, Anchor and the farmers
•Submission of loan applications from head offices of PFIs with the list of farmers in the prescribed format with account numbers, gender, farm size, BVN, telephone numbers, cooperative name and LGA
•Registration of farmers on the National Collateral Registry (NCR).
2.6 Collateral
The collateral to be pledged by SHFs under the programme shall include cross and several guarantees by farmers in cooperatives/groups; tripartite agreement signed by the parties; cross and several guarantees by farmers to be registered on the NCR and equity contribution by the farmers (minimum of 5 per cent).
Risk sharing
In order to engender participation of PFIs in the programme, CBN is expected to absorb 50 per cent of the amount in default “after satisfactory evidence that every means of loan recovery has been exhausted by the PFI. The PFI shall bear the credit risk of the balance,” CBN said.
Naira rebounds as investment managers call for devaluation
The Naira on Monday appreciated at the parallel market after about two weeks of posting losses, the News Agency of Nigeria (NAN) reports.
The currency gained 3 points to exchange at N490, from N493 it posted last Friday, while the Pound Sterling and the Euro traded at N600 and N506, respectively.
At the Bureau De Change (BDC) window, the Naira closed at N399, CBN rate, while the Pound Sterling and the Euro traded at N599 and N510, respectively.
Trading on the floor of the inter-bank market saw the Naira stable at N305.00.
Traders at the market linked the appreciation of the Naira to slow activities at the market.
The Naira had exchanged around N490 in spite of speculations that it would hit the N500 to a dollar mark this week.
Meanwhile, despite a record rise in Nigeria’s foreign reserves, which should ordinarily strengthen the naira, some investment managers are urging the Central Bank of Nigeria (CBN) to further devalue the local currency.
The investors are insisting that the naira, which is trading at 305/$ at the official market and 490/$ at the parallel market, is not adequately priced.
The local currency saw a decline in six-month contracts to its lowest level since September, as crude oil prices rose by over 20 percent after the Organisation of Petroleum Exporting Countries (OPEC) agreed to an output cut.
The nation also saw its foreign reserve rise to its highest point since June 2016, at $26.29 billion.
Despite the positive trends, the Standard Chartered Plc and London-based Duet Asset Management say Nigeria needs to devalue the naira and loosen capital controls.
Ayodele Salami, who oversees around $450 million of African stocks as chief investment officer at Duet, told Bloomberg that “oil’s rise isn’t enough to eliminate the need for a change”.
Nigeria won’t attract inflows until it weakens its currency, he added.
Samir Gadio, the London-based head of Africa strategy at Standard Chartered, which forecasts the official exchange rate will be steady for at least the first half of 2017, also said Nigeria will eventually take the step.
“Eventually, they’ll have to revert to a more flexible currency regime. But for the time being, there’s no indication from policy makers that this will happen,” he said.
Tunde Bakare, serving overseer of the Latter Rain Assembly, called on the CBN on Sunday to discard the current exchange rate regime, which he regarded as confusing.
Financial Inclusion: Ingenico partners Interswitch on payment solution
Ingenico Group said it is partnering Interswitch to deliver best-in-class multichannel payment solutions to the Nigerian market.
Ingenico, the global leader in seamless payment, announced that a strategic partnership has been signed with Interswitch Nigeria Limited, the leading transaction switching and electronic payment processing company in the country.
Since 2002, Interswitch has been promoting the seamless circulation of electronic money by building the payments infrastructure and bringing new products and services to millions of customers, both in corporate and consumer segments, across the country. The integration of Ingenico Group technology with Interswitch’s switching and processing system will allow end-users to benefit from the next generation of payment technology and the smoothest and most secure user experience when initiating electronic transactions.
“As Nigeria enters a new era of payment, Ingenico Group and Interswitch are joining forces to better address the market challenges and eliminate the need for cash,” commented Mitchell Elegbe, Group Managing Director and CEO at Interswitch.
“We formed this partnership with Ingenico Group as they are a global leader in payments with great track record and a strong knowledge of our market characteristics and constraints. This agreement is a key milestone in our common strategy to better serve the Nigerian people.
For his part, Rachid Oulad Akdim, Ingenico’s Managing Director for Africa, said, “we are pleased to form this strategic partnership with Interswitch Group.
By combining Ingenico Group’s expertise in payment solutions with Interswitch Group’s vision of the local customers’ needs, we are defining exciting new opportunities for electronic transactions in Nigeria.”