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April 21, 2009

Nigeria rolls out agricultural finance facility

The Central Bank of Nigeria has released the guidelines to be adopted in the course of disbursing the N200bn agriculture fund to likely beneficiaries. The apex bank has also named First Bank of Nigeria Plc and United Bank for Africa as the administrators of the funds.

In a circular titled, ‘Guidelines for Commercial Agriculture Credit Scheme,’ the apex bank said to participate in the scheme, the borrower shall be a limited liability company with an asset base of not less than N350m with the prospect to grow the net asset to N500m in the next three years.

The potential beneficiary is also expected to have a clear business plan as well as provide up-to-date records on the business operation if any. He is also expected to have an out-growers’ programme where appropriate as well as satisfy all the requirements specified by the lending bank.

The circular also indicated that those wishing to benefit from the facility under the medium scale commercial farms/agro-enterprises, must be limited liability companies with asset base of not less than N200m with the prospect to grow the net asset to N350m in the next three years.

The farmer should also have a clear business plan with its lending bank as well as provide up-to-date record on the business operation if any and satisfy all the requirements specified by its lending bank.

On the part of the state governments, the apex bank also directed them as well as the Federal Capital Territory to submit “an expression of interest, put in place appropriate institutional arrangements by setting up a secretariat and staffed with experienced agricultural experts and credit officers dedicated for the administration of the fund to be borrowed.

In picking the two participating banks, the circular described it as a competitive selection process by the CBN, pointing out that the qualified banks were selected based on adequate considerations for the bank’s capacity, assets, branch network, liquidity, experience in agricultural lending, credit risk exposures, among others.

According to the circular, “The CBN has approved two banks to administer the fund, namely, United Bank for Africa, Plc and First Bank of Nigeria Plc.”

The apex bank in collaboration with the Federal Government, represented by the Federal Ministry of Agriculture and Water Resources established the Commercial Agriculture Credit Scheme for the purpose of promoting commercial agricultural enterprises in the country.

UBA recently floated a N50bn agric support scheme, being one of the largest private sector initiative to support agricultural development in the country.

The fund is targeted at all segments of the agric chain, from small and medium scale farmers to large, industrial farming projects.

The scheme has been described as part of the bank’s food for the nation programme aimed at improving food security, poverty alleviation and providing a timely boost to agriculture.

Sub-sectors covered by it include poultry, fishery, crop cultivation, production, plantation, farm machinery and hire services.

The facility would be available to farmers at below single digit interest rates through three credit products namely, Agric Credit Support Scheme, Agric Credit Guarantee Scheme and Food Security Support. It attracts a maximum of eight per cent interest per annum.

A statement from the bank on Monday, further indicated that interest rate on all forms of loans remained at the maximum rate of 22 per cent per anum just as other charges must not exceed two per cent bringing the total to 24 per cent.

According to the statement, insurance fee is not a surcharge, but an insurance against theft, done with reputable insurance companies

This Fund will complement other special initiatives of the CBN in providing concessionary funding for /agriculture such as the Agricultural Credit Guarantee Scheme which is mostly for small scale farmers, Interest Draw-back scheme, Agricultural Credit Support Scheme among others..

The scheme is expected to be financed from the proceeds of the N200bn bond to be raised by the Debt Management Office and will be made available to the participating bank(s) to finance commercial agricultural enterprises.

The circular also disclosed that state governments and the FCTA could also borrow up to 20 per cent of the bond proceeds for on-lending to farmers while the ceiling to the states may be reviewed as the need arises by the Project Management Committee.

Punch

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