By Yinka Kolawole
Agriculture constitutes one of the most important sectors of the Nigerian economy. In terms of employment, agriculture is by far the most important sector, engaging about 70 percent of the nation’s labour force. The importance of the sector necessitated the government over the years to establish many intervention funds in the agricultural sector that would be entrepreneurs can take advantage of.
Agricultural Credit Guarantee Scheme Fund (ACGSF)
The ACGSF was established by Decree No. 20 of 1977, and started operations in April 1978. Its original share capital and paid-up capital were N100 million and N85.6 million, respectively, with the Federal Government holding 60 percent and the Central Bank of Nigeria (CBN), 40 percent of the shares. The capital base of the scheme was increased to N3 billion in March 2001. The Fund, which is managed by CBN, guarantees credit facilities extended to farmers by banks up to 75 percent of the amount in default net of any security realized.
Purpose – The purpose of the Fund is to provide guarantee in respect of loans granted by any bank for agricultural purposes with the aim of increasing the level of bank credit to the agricultural sector.
Security – The security which may be offered to a bank for the purpose of any loan under the scheme include the following: charge on land in which the borrower holds a legal interest or a right to farm, or a charge on assets on the land including fixed assets, crops or livestock;
charge on the movable property of the borrower; life assurance policy, promissory note or other negotiable security; stocks and shares; personal guarantee; and any other security acceptable to the bank. For loans of N20,000.00 and below, banks are not expected to demand tangible securities and feasibility reports.
Agricultural Credit Support Scheme (ACSS)
The ACSS is an initiative of the Federal Government and the Central Bank of Nigeria with the active support and participation of the Bankers’ Committee, with a prescribed fund of N50 billion.
Purpose – The purpose of ACSS is to develop the agricultural sector of the Nigerian economy by providing credit facilities to farmers at single digit interest rate. This is to enable farmers exploit the untapped potentials of the sector with a view to reducing the cost of agricultural production, and increase output on a sustainable basis.
These efforts are expected to lead to fall in prices of agricultural produce, especially food items, thereby leading to reduction in inflation rate, generate surplus for export, diversify the revenue base and increase foreign exchange earnings for the country.
Loan access – To access loans under ACSS, applicants (practicing farmers and agro-allied entrepreneurs with means) are encouraged to approach their banks for loan through the respective state chapters of farmers associations and State Implementation Committees. However, large scale farmers are allowed under the scheme to apply directly to the banks. ACSS funds are disbursed to farmers and agro-allied entrepreneurs at a single-digit interest rate of 8.0 percent. At the commencement of the project, support banks will grant loans to qualified applicants at 14.0 per cent interest rate. Applicants who pay back their facilities on schedule are to enjoy a rebate of 6.0 per cent, thus reducing the effective rate of interest to be paid by farmers to 8.0 per cent. This rate is inclusive of other charges by banks.
Commercial Agriculture Credit Scheme (CACS)
The CBN in collaboration with the Federal Ministry of Agriculture and Water Resources established the Commercial Agriculture Credit Scheme (CACS) in 2009 to provide finance for the country’s agricultural value chain (production, processing, storage and marketing). The scheme is a sub-component of the Federal Government of Nigeria’s Commercial Agriculture Development Programme (CADP) and is financed through a N200 billion Bond raised by the Debt Management Office (DMO).
The aim of the scheme is that increased production arising from the intervention would moderate inflationary pressures and assist the bank to achieve its goal of price stability in the country.
Purpose: The objectives of the scheme are to: fast-track the development of the agricultural sector by providing credit facilities to large-scale commercial farmers at a single digit interest rate; enhance national food security by increasing food supply thereby promoting low food inflation; reduce the cost of credit in agricultural production to enable farmers exploit the untapped potentials of the sector; and increase output, generate employment, diversify Nigeria’s revenue base, raise the level of foreign exchange earnings and provide input for manufacturing and processing on a sustainable basis.
Loans to eligible entities under the scheme are disbursed at a maximum interest of 9 percent. The subsidy arising from this stipulated rate and the market rate on all loans granted, and the administrative expenses of the scheme are borne by the CBN. The fund is made available to the participating bank(s) to finance commercial agricultural enterprises.
In addition, each State government could borrow up to N1 billion for on-lending to farmers cooperative societies and other areas of agricultural development provided such initiatives/interventions are line with the objectives of the scheme. CACS is operated in two tranches of N100 billion each. The 1st phase of the tranche ran from May to December, 2009, while the 2nd tranche commenced in February, 2010.
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