Nigeria’s farmers’ loan programme faces repayment crisis

In 2015, the Nigerian government of Muhammadu Buhari launched a major programme to support farmers across the country with loans in a bid to boost productivity as one of its flagship agricultural policies. 

But now, the Central Bank of Nigeria (CBN) has accused some farmers who collected loans through the Anchor Borrowers’ Programme (ABP) of refusing to repay, with local agents of the bank going as far as threatening to arrest and jail defaulters.

In December, the bank’s comptroller in Bauchi state, Saladu Idris, said that farmers had agreed to pay back the loans as soon as the harvest was completed, but many had defaulted.

While the defaulters could be “arrested and locked up” until they repay the loans, those who paid back fully on time would be “rewarded with a higher amount of money and more inputs,” he said during a press briefing.

Though the authorities later denied that farmers have been arrested or jailed, the threat is symptomatic of a dysfunctional loans system that is failing to deliver value for either the government or farmers.

Noble goals

The project began with ambitious aims. It was launched in a bid to fulfil Buhari’s promise to help local farmers gain access to credit facilities while improving foreign exchange and reversing the negative balance of trade in food. Agriculture has long received a small percentage of support from the country’s financial sector – as recently as 2019, the sector accounted for less than 5% of loans from Nigeria’s banks. 

“The programme has been designed as a one-stop solution for the agricultural value chain by creating economic linkages between farmers and processors to not only ensure a clear agricultural output but to also reduce dependence on imported food,” Buhari said at the programme’s launch in 2015.

Farmers, including smallholders in far-flung communities who had no access to credit facilities, were the main targets. Producers eligible for loans are active across Nigeria’s agricultural value chains including cotton, roots and tubers, sugarcane, tree crops, legumes, tomato, and cereals. In January, the government estimated that 4.8m farmers had benefited from the programme. 

The loans were disbursed through recognised partners known as participating financial institutions, including development finance institutions (DFIs), microfinance banks, and deposit banks. The programme established conditions, including that farmers would repay loans in cash or with produce when the harvest is complete. 

A gift or a loan?

But shortly after the launch, challenges surfaced, with evidence emerging that many of the farmers did not properly understand the loans they took out, with some mistaking them for a gift from the federal government not requiring repayment.

In the far north of Nigeria, the source of much of President Buhari’s political support, some believed that grants were being disbursed as a reward for backing the president. A 2018 investigation revealed that politicians hijacked the scheme to compensate their followers and shut out other local farmers.

“When the loan came, people thought it was not a repayable loan and so they collected for their wives and children and now, it is difficult for them to repay the loan,” says Fidelis Akosu, chairman of the Rice Farmers Association of Nigeria (RIFAN) in the country’s north-central state of Benue.

Akosu says the association helped to secured loans for 2,264 farmers, less than 1% of whom have repaid. N301.8m ($725,665) was disbursed by the CBN to rice farmers in the state through RIFAN but only N5.1m has so far been repaid, leaving a balance of N296.6m, as of January this year. The Nigeria Security and Civil Defence Corps has been tasked with recovering some of the loans. 

That reflects a wider failure of the scheme at a national level: N615.4bn ($1.5bn) had been loaned but just N152.3bn had been repaid as of the end of March 2021, according to the CBN’s monthly economic report for April 2021. The amount loaned out rose to N927.94bn by the end of December 2021, according to a statement by CBN governor Godwin Emefiele in early February.

Why aren’t the loans being repaid?

As well as confusion around the nature of the financial support, challenges like climate-change-induced irregular rainfall, drought, flooding and low crop yields all limit farmers’ abilities to repay loans in a timely fashion. 

Nigeria’s farming community is rocked by periodic insecurity – in December 2020, Islamist terrorist group Boko Haram hacked 76 farmers to death on their rice farms in a village in Borno state. In January gunmen attacked and killed 13 farmers in their farms in Nakudna and Wurukuchi villages in the Shiroro local council area of Niger state. 

Such attacks have devastating impacts on farming, disrupting productivity, harvests and the security of land tenure. Conflicts between pastoralists and farmers have also undermined the sector. 

Meanwhile, education around the scheme is limited, meaning that the purpose and nature of the loans continues to be obscured, and critics say that it is too easy for the scheme to act as a conduit for fraudulent applications. 

To achieve the programme’s aims, challenges like insecurity must be fixed and measures to mitigate the impacts of climate change must be implemented, says Bamgboye Emmanuel, managing partner of Empyrean Professional Services, an accountancy and tax firm in Lagos. 

“Beyond security, there should be policy consistency that gives the farmer some form of guarantee while making projections for the future.”

Others say a shift in the attitudes of farmers is long overdue. Paul Alaje, senior economist and partner at SPM Professionals, says that many citizens long neglected by the state believe support from the federal government should not be returned but kept as a rare benefit of citizenship.

The programme has shown that what some of the farmers really need is not access to credit facilities but a change of mindset and readiness to be credit-worthy, he says. 

Future of the programme

Still, Emmanuel says that despite the programme’s mixed success and the improbability of large amounts ever being recovered, the government is continuing to take a long view. 

Improving the scheme rather than abolishing it appears the more likely of the options, he says. The government is concentrating on the apparent achievements of the programme – in January, Buhari said that rice production in Nigeria has increased to over 7.5m tonnes annually from less than 4m when the programme began. 

“It will not discourage the CBN or any government agency from providing credit facilities and interventions to farmers because that is one of their core responsibilities,” says Emmanuel. “If the facilities are properly channelled, they can lift the economy and create more employment.”

On the other hand, Alaje says the CBN should be more serious about whom it disburses funds to in order to ensure that only genuine farmers who need the funds have access.

“The CBN should not think that suddenly people will become more responsible,” says Alaje, adding that it should hire consultants to  monitor the progress of the farms and ensure prompt repayment. 

Prosecuting those who are not genuine farmers would deepen credit access to more farmers, Emmanuel added.

“When the CBN shows more seriousness with recovering the loans, it will become clear to everyone that the intervention is not a national cake and only genuine farmers who need the loans and commit to paying back will go forward to access it.”