The agricultural sector received a further boost recently as President Muhammadu Buhari assented to the bill on the amendment of the Agricultural Credit Guarantee Scheme Fund (ACGSF). To be known as the Agricultural Credit Guarantee Scheme Fund (ACGSF) Amendment Act 2019, the law is meant to enhance the capital base of the fund expand, its coverage as well as increase the size of the loanable fund. The capital base of the fund in the new law has been raised from N100 million to N50 billion with a sharing ratio of 60-40 between the Federal Ministry of Finance and the Central Bank of Nigeria (CBN)
By the provisions of the law, the maximum non-collaterized loan to be drawn from the fund is N100,000, while the maximum amount for collaterized loan granted to individuals, cooperative societies and corporate entities is now N50 million up from N10 million. A giant leap indeed. It also provides and allows for a complete Agricultural Value Chain financing arrangement. Envisaged benefits from this development include but not limited to the financing of production farm machinery, the implementation and equipment for production, processing, storage and transportation
The ACGSF has come a long way from its coming into existence by the provisions of Decree No. 20 of 1977. It started operations in April, 1978, with original share capital and paid-up capital put at N100 million and N85.6 million, respectively. The capital base of the Scheme was increased to N3 billion in March, 2001. The Fund is managed by the Central Bank of Nigeria which also handles the day-to-day operations of the Scheme. Its guidelines stipulate the eligible enterprises for which guarantees could be issued just as it guarantees credit facilities extended to farmers by banks up to 75 per cent of the amount in default net of any security realized.
Between 1978 and 1989 when the government stipulated lending quotas for banks under the Scheme, there was consistent increase in the lending portfolios of banks to agriculture, but after the deregulation of the financial system, banks started shying away from the scheme by reducing their loans to the sector due to the perceived risk. In order to reverse the declining trend several innovations and products were introduced under the Scheme such as the Self-Help Group Linkage Banking, Trust Fund Model and Interest Draw Back.
The amendment of this Act and the upward review of the capital base, in the opinion of this newspaper, is a big boost to the efforts by the Central bank of Nigeria and, in particular, the Governor, Mr Godwin Emefiele, to drive the economic diversification policy of government. From the beginning of his tenure, he has sustained his argument that agriculture is the only reliable way forward for the country already drowning in oil and gas politics with the vagaries of the market. After neglecting that sector that was the mainstay of the economy pre-discovery of hydrocarbon, it is worthy of applause that, eventually, steps are being taken to restore it to its rightful position.
What this law entails also, in our considered opinion, is that regardless of the administration in place, the provision of the Act can only be improved upon and never abandoned. All said, the sector will remain on an even keel and possibly not be susceptible to any intended or unintended policy shift and somersaults.
Similarly, the improvement in the provisions of the Act is a reflection of the commitment of the government, a buy-in of sorts, to the resurgence of agriculture pushed by the CBN which is already adding impetus to the improvement of the Gross Domestic Product (GDP). Experts in the industry see the Act as a challenge to farmers involved in the processing of agricultural value chain in the sense that finance will no longer be a hindrance to those seriously engaged in that sub-sector.
It is from this perspective that we suggest that the highly successful Anchor Borrowers’ Programme (ABP) policy deserves to be articulated and presented to the National Assembly to be enacted into law so as to shield it from undue politics and policy inconsistencies. We make this recommendation having in mind the huge impact ABP has made on small holder farmers who represent the heartbeat of the agricultural sector. A cursory look at the outcome of the implementation of the policy on food security, its contribution to reducing the money spent on food imports and the attendant preservation of foreign reserve will, in a meaningful way, justify the postulation of this newspaper.
In the meantime, while we commend the federal government and especially the CBN on this bold step taken to solidify the role of agriculture in the economy, it is pertinent to point out that the true worth of the policy lies in its implementation. Therefore, we urge the CBN to remain steadfast and watch out for abuses. The loan when disbursed must not be seen as a political largesse by any means.