Recovery of Loan Sum Under the Anchor Borrowers’ Programme

The Central Bank of Nigeria (CBN), in line with its functions as enshrined in Section 31 of the CBN
Act, established the Anchor Borrowers’ Programme (ABP) under the President Muhammadu Buhari
administration, to create economic linkages between smallholder farmers (SHFs) and reputable
companies (anchors) involved in the production and processing of key agricultural commodities.

The core of the Programme is to provide loans to SHFs to boost agricultural production, create jobs,
and reduce food import bill towards conservation of foreign reserve. The International Monetary
Fund (IMF) in its Selected Issues Paper on Nigeria completed on January12, 2023 revealed that the
repayment of loans under the ABP is low. According to IMF, over N1 trillion has been disbursed
since 2016 when the programme started and only 24% of the loans have been repaid. The CBN on 6
March 2023 said 52.39% has been repaid as of 28 February 2023. None of these figures is
impressive. The IMF said part of the problem is the weak incentive structure for repayment, the
recipient loans are not always well targeted and occasionally the funding is used for other  purchases.

To tackle the issue of the recipient loans not being well targeted and the occasional use of funds for
other purchases, it is recommended that a due diligence is conducted on the associations, SHFs and farmlands and a periodic monitoring of these farmlands. Also, a productive ecosystem of value
chain financing can help the government tackle non-repayment. 

The value chain will link the input suppliers, SHFs, service providers, financial institution, insurance
company and anchor/off-takers. Both the off-taker and the CBN shall pay to the Participating
Financial Institution (PFI) who then disburses to the stakeholders and repays the CBN from the sum
paid by the off-takers. The roles and responsibilities of the value chain stakeholders should be
stipulated in a clear and unambiguous manner. 

Chapter 6 of the Anchor Borrowers’ Programme (ABP) Guidelines (Guidelines) revised September
2021 provides for infractions and sanctions. Under the Guidelines, the SHFs and the commodity
association/cooperative has the responsibility to ensure full repayment of the facility granted. Both
parties can be sanctioned for failure to repay facility as and when due and for diversion of funds.
The sanctions include blacklisting of the SHF or association and its leadership from all CBN
interventions, prosecution of the association leadership by the PFI or prosecution of the SHF by the
commodity association, repayment of the loan by the guarantors/cooperatives/commodity
associations and foreclosure on all pledged collateral.

The PFI may prosecute by instituting a civil action in court. A practical approach is by filing a
motion for summary judgment as provided under Order 13 Rule 1 High Court of Lagos State (Civil
Procedure) Rules 2019 and Order 11 and Order 43 Rule 1 of the High Court of the Federal Capital
Territory (Civil Procedure) Rules 2018. For summary judgment to be granted, the suit must be for a
liquidated money demand and the defendant has no defence to the sum being claimed. Also, Chapter 6.4 (2) (iii) of the Guidelines provides for foreclosure. A foreclosure process derives its legal bases from a mortgage, and the right to foreclosure is restricted. An action for foreclosure can only be instituted by a legal mortgagee, equitable mortgagee, or an assignee. The action for foreclosure may not stand if there is no legal or equitable mortgage created between parties. It is pertinent to state that the Limitation Act imposes a six-year limitation on debt collection in Nigeria.

Capital investment is important to boost agricultural production in Nigeria, however, high repayment
performance is also essential. If loans availed to farmers are not properly used and repaid, the CBN
liquidity position will be affected and the government’s effort to ramp up agricultural production,
boost non-oil exports and diversify the revenue base of Nigeria remains in futility. To effectively
maximize the ABP, we are of the opinion that the responsibilities and liabilities of the value chain
stakeholders should be critically examined, stipulated, and implemented. It is also highly advised
that professionals are consulted in every stage of loan schemes for proper legal documentation.