The Agricultural Credit Guarantee Scheme (ACGSF) Amendment Act assented to by President Muhammadu Buhari increased the share capital of the fund from N3 billion to N50 billion. The new scheme is in line with the Central Bank of Nigeria’s (CBN’s) move to increase lending to the agricultural sector and support increased food production. The fund provides a guarantee for bank loans for agriculture and boost lending to agriculture. Financing of production farm machinery, production equipment, processing, storage and transportation are now allowed under the amended ACGSF Act, writes COLLINS NWEZE.
Before now, farmers were the least that banks would consider for loans. Such loans, if approved, were deemed lost from the outset, especially when advanced to smallholder farmers.
Today, the story is different. Both the smallholder farmers and established ones can take a shot at bank loans. Also, lenders, which previously saw agricultural loans as high risk, are now seeing the potential of how much a well-priced credit can add to their balance sheets and profitability. The amendment of the Agricultural Credit Guarantee Scheme (ACGSF) Bill raised share capital of the fund from N3 billion to N50 billion, a step that allowed more farmers to access agricultural loans.
A breakdown of the ACGSF Amendment Act 2019 shows that the sharing ratio is the Federal Ministry of Finance (60 percent) and Central Bank of Nigeria (40 percent). The maximum for a non-collateralised loan under the scheme is now N100,000.00, the maximum amount for collateralised loan granted to individuals, cooperative societies and corporate entities is now N50 million, up from N10 million.
Also, complete Agricultural Value Chain financing is now allowed as well as the financing of production farm machinery, production equipment, processing, storage and transportation.
This Act amends the ACGS Fund Act Cpa. A11, Laws of the Federation Nigeria 2004, to enhance capital base, expand coverage of the scheme, increase the size of the loanable fund, increase membership and give more powers to the board.
Further details of the ACGSF showed that the amended section 2 of the Principal Act enacted by the National Assembly of the Federal Republic of Nigeria now requires that the Minister shall appoint a chairman, a representative of the Nigerian farmers, a representative of the Federal Ministry of Finance, and a representative of the Federal Ministry of Agriculture. The fund was increased from N100 million to N50 billion, which may be increased by such amount the Board may determine and that amount shall be contributed in a proportion as the board may prescribe. President Buhari signed and certified the ACGSF Bill into law.
CBN Governor Godwin Emefiele identified agriculture financing as the way forward for the economy. He explained that part of its developmental role, the CBN has in collaboration with the Federal Government established the ACGSF for promoting agricultural enterprises in Nigeria.
The fund, he added, will complement other special initiatives of the apex bank in providing concessionary funding for agriculture.
According to Emefiele, “there was no need to allocate scarce forex to rice importers when vast amounts of paddy rice of comparable quality produced by poor hard-working local farmers across the rice belts of Nigeria are wasted, and farmers are falling deeper into poverty at a time the government exports their jobs and income to rice-producing in overseas countries.
“A few decades ago, Nigeria was one of the world’s largest producers of palm oil but, today, we import nearly 600,000 metric tonnes while Indonesia and Malaysia combine to export over 90 percent of global demand.
“Under these circumstances, I believe it is appropriate, and in fact, expected, that the CBN contributes to protecting the jobs and incomes of local farmers, using some of the same principles Western economies use to justify the protection of their farmers through huge subsidies.”
Noting that agriculture remained the largest employer of labour, the CBN chief said the sector contributes about 24.2 percent of the country’s Gross Domestic Product (GDP).
Emefiele described as unacceptable that the greatest share of the demand for forex goes directly to importing agricultural produce.
He said: “So, the CBN has both a the direct and indirect rationale to ensure that this sector is revived in a significant way. In this regard, we are gratified that the CBN’s Anchor Borrowers’ Programme (ABP), together with other initiatives like the CACS and Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), are proving to be successful in several states.”
He explained that in Kebbi State alone, over 78,000 smallholder farmers cultivate about 100,000 hectares of rice farms. It is expected that over one million metric tonnes of rice will be produced in that state alone this year.