Nigerian banks and smallholder farmers’ lack of access to credit




Nigerian smallholder farmers have been the backbone of food production, yet this set of farmers despite all government efforts have not been able to access credit from the commercial banks, JOHN OBA, writes.

Lack of capital

Nigeria has over 40 million smallholder farmers and also that over 90% of these farmers can’t access loan facilities from the commercial banks, yet agricultural credit is imperative in small scale farming as it enables them to secure viable inputs such as seeds, equipment and chemicals needed to run a successful farm which in turns yields an increase in agricultural production and poverty reduction.

Experts in the agriculture sector over the years have stated that one of the major limiting factors hindering the growth of agriculture from the traditional peasant farming to commercial or business farming in Nigeria has been lack of capital by the smallholder farmers to purchase the required inputs. Though government has been working to introduced several programmes to overcome the problem but the lack of willingness by the commercial banks to give credits to these sets of farmers have consistently kept the sector down. Though rightly because of the rate of default among the small farmers, these attitude among the banks still persists despite several programmes introduced by Central Bank of Nigeria to guarantees bank loans against defaults.

Ridiculous loan percentage

According to National Bureau of Statistics (NBS) a  report on its website titled ‘selected banking sector’ data for Q2 2019, only 4.2% of the total loan was given to agriculture in the first and second quarters of 2019. The report revealed that in the first quarter, a total of N15.2 trillion was given as loans with agriculture getting only N638 billion while a total of N15.1 trillion was given as loans in the second quarter of 2019, out of which only N636 billion was given to agriculture in a nation that primes it diversification plan on Agriculture and solid minerals.

The Central Bank of Nigeria (CBN) recently revealed that a total of N387.2 billion has been repaid as part of the total N622 billion disbursed to commercial banks under the Commercial Agriculture Credit Scheme (CACS). The N622 billion fund was disbursed to participating banks to enable them finance commercial agricultural enterprises by giving farmers loans at a maximum interest rate of 9%. But it is certain that further probe into those that got that loan will show that smallholders didn’t access up to 0.1% of this amount.

Policy summersault

Speaking with the president of Abuja Farmers Association, Mr Obaje Omobolaji David said some of the policy formulators don’t understanding the Nigeria agriculture terrain properly, as most policies of the government are not based on realities on ground.

“Majority of those working in the agricultural institutions are only knowledgeable on papers, not on realities. For instance, an average smallholders starts farming preparations around March, that is land preparation starts, immediately rains start falling, they can start planting by April, but as we are talking now in May ending, some banks are still doing data collection. Then you are kept wondering if the data is for dry season or wet season farming. Our farming still largely depends on rain fall farming.

“Also, when a bank insist on small holders farmers bringing collateral, where did they expect them to get collaterals. These are the same people that were told to group themselves into cooperatives so that they can cross guarantee each others, yet they brought another policy that farmers should bring an off-takers, how do you expect a local farmer selling his/her produce in the open markets to get off-takers from?     

“When you call an off-taker, he tells you that the farmers are not his farmers, and he can’t stand for them because he can always go to the open markets to get these produce for his factories, some even have aggregators that goes to buy for him without any risk, so when you tells him to take some percentage risk on behalf of the farmers without incentives, he simply declined.

“If the government through the banks is willing to help farmers, the facilities should be given to the farmers directly, let there be cross guarantee, and any farmer that default should be blacklisted. There is a National Collateral Registry, and every farmer has a BVN, such farmer can be blacklisted if he defaults. And if two, three, four, five people are blacklisted, others that have the privilege will not misuse it, because they wouldn’t want to deprive themselves from getting funds.

On NIRSAL standing as collateral for farmers, Obaje said there are lots of politics and game going on there. NIRSAL has its programme different from the Anchor Borrowers Programme. When NIRSAL came on board across the states, there were power play between the head of Development Finance Office of CBN (DFO) and the head of project monitoring and re-evaluation office of NIRSAL. It was so serious such that made many farmers to loss out.

“At the end of the day, when they said NIRSAL was left to handle the whole process, you will be hearing them saying there are doing geo-mapping, geo-physical, geo this, geo that, they will map till when the season is off. Also, NIRSAL is promoting Farm Smart, and this is not for small holder farmers. But those Anchors they give money to are most times using the money for something else.

“So the small holder farmers are not part of the whole plans, the only way, to carry the small holders farmers along is to give him direct access to the fund and hold him responsible. These same farmers are doing community financing and they refund because they know they would be blacklisted.

Bank bureaucratic process

Finding revealed that some commercial banks working on given farmers loan are not able because of the bureaucratic processes that take such time that before the fund is released, the farming season has elapse.

According to Mr Obaje, CBN action to sanction some banks last year for not borrowing to farmers is like a pat in the back, as most commercial banks don’t borrow to small holder farmers. “Last year, Bank of Agriculture collected farmers data for loan, but at the point of disbursement, CBN stopped them from disbursement. The farmers were told to go to commercial banks, Abuja rice and maize farmers went to Unity bank before they could finish with the whole bureaucratic processes, time has gone for farming.”

Also chairman, Integrated Rice Farmers Cooperative Union, Alhaji Muhammed Umar Babayo, said the lack of loan is serious, as it affects the farmers ability to produce and that some have even lost a lot because they spent money to prepare for the farming season with the hope that they get loans from the banks only to be disappointed, and they are not able to farm the hecterages they have cleared.

He said rice farmers in Abuja have been striving for over four years to get loan from both conventional and bank of Agriculture, but has been denied several time because of lack of off-takers, that is a processing company that will come and buy our rice over.

Bank of Agriculture

He said: “This has adversely affected the farmers because we have been seeking this loan from the Bank of Agriculture for almost four years now under the Anchor Borrowers Programme, but nothing has been given. The first they said they did not give us because of lack of off-takers. We had every ready for farming and the bank went for inspection, under my union alone I have over 1500 farmers in the FCT alone and have opened our account with the bank.

“The second year, we got an off-taker from Kaduna with a rice processing company, who came and wrote an undertaking. But they insisted that he should bring a post-dated check of about N740 million, but CBN said with the agricultural calendar, we can not meet up. Las year we were not given any reasons for not crediting us. As it is today, most of my members have become discourage and disappointed in the government,” he said.

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