Guidelines of CBN Agriculture Credit Loan for Farmers

Recently, to make it a possibility for all farmers in the country to have access to the agriculture credit loan, the Central Bank of Nigeria has opened Development Offices in all its branches nationwide. The agriculture credit loan was established by the apex bank in the country by Decree No. 20 of 1977 and was tagged Agricultural Credit Guarantee Scheme Fund (ACGSF).

The agriculture credit loan is a guaranteed credit facility extended to farmers by banks up to 75% of the amount in default net of any security realized. The credit loan is managed by the Central Bank of Nigeria, which handles the day-to-day operations of the Scheme. The Guidelines stipulate the eligible enterprises for which guarantees could be issued under the Scheme.

The Objectives of the CBN Agriculture Credit Loan

  • To fast track development of the agricultural sector of the Nigerian economy by providing credit facilities to commercial agricultural enterprises at a single-digit interest rate;
  • Enhance national food security by increasing food supply and effecting lower agricultural produce and product prices, thereby promoting low food inflation;
  • Reduce the cost of credit in agricultural production to enable farmers to exploit the potentials of the sector;
  • Increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

The CBN Agriculture Credit Loan is being managed by the management of the Central Bank of Nigeria through the
Board of Directors and the Committee of Governors. The Committee of Governors shall be responsible for the overall administration of the Scheme while the Development Finance Department shall be in charge of the day-to-day implementation of the Scheme.

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Eligibility for the CBN Agriculture Credit Loan

This CBN Agriculture Credit Loan is mainly targeting the Agriculture Commodities and value chains to cover the key Agriculture commodities

Production

  • Cash Crops: Cotton, Oil Palm, Fruit Trees. Rubber, Sugar Cane,
  • Jatropha Curcas and Cocoa.
  • Food Crops: Rice, Wheat, Cassava, Maize/Soya, Beans/Millet,
  • Tomatoes and Vegetables
  • Poultry: Broilers and Eggs Production
  • Livestock: Meat, Dairy and Piggery
  • Aquaculture: Fingerlings and Catfish
 CBN Agriculture Credit Loan
  • Processing: Feed mills Development, Threshing, Pulverisation and other forms of transmutation for value addition.
  • Storage: Commodities, Agro-Chemicals and Warehousing
  • Farm Input Supplies: Fertilizers, Seeds/Seedlings, Breeder Stock,
  • Feeds, Farm equipment & Machinery.
  • Marketing: Agricultural commodities under the focal investment areas.

Participating Banks

The Central Bank of Nigeria has approved the participation of all deposit money banks, including non-interest banks, under the Scheme. All Participating Banks (PBs) are required to sponsor projects from any of the target areas indicated in the Guidelines and bear all the credit risk of the loans they will be granted.

The single obligor for any project from a participating bank under the Scheme shall be N2.0 billion while for State Governments shall be N1.0billion. However, for special schemes and programmes for agricultural development, State Governments may be granted concessionary approval for more than N1.0 billion

Those that are eligible to apply for the CBN Agriculture Credit Loan

 CBN Agriculture Credit Loan

Corporate and Large Scale Commercial Farms/Agro-Enterprises

Limited liability company with an asset base of not less than N100 million and having the prospect to grow the net asset to N250 million in the next three years and comply with the provision of the Company and Allied Matters Act (1990);

  • Have a clear
  • Provide up-to-date records on the operation if any
  • Have an out-growers programme, where appropriate
  • Satisfy all the requirements specified by its lending bank

Medium-Scale Commercial Farms/Agro-Enterprises

To participate in the CBN Agriculture Credit Loan, the borrower shall

A limited liability company with an asset base of not less than N50 million and having the prospect to grow the net asset to N150 million in the next three years and complies with the provision of the Company and Allied Matters Act (1990).

  • Have a clear business plan
  • Provide up-to-date records on the business operation
  • Have an out-growers programme, where appropriate
  • Satisfy all the requirements specified by its lending bank
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State Government and the FCT

To have access to the CBN Agriculture Credit Loan under the Scheme, the States shall;

  • Submit an expression of interest;
  • Present an Irrevocable Standing Payment Order (ISPO) in favour of the participating bank, duly signed by the State Governor, Commissioner of Finance and the State Accountant General;
  • Adhere to the repayment agreement reached with the PB; upon contravention, the CBN shall assist the PB to invoke the ISPO;
  • Have appropriate/functional structures on the ground or set up structures for the deployment of the funds, which must include existing, registered Cooperative Societies/Unions;
  • Commit to deploy CACS funds to farmers’ cooperative societies and other areas of agricultural development provided such initiatives/interventions are line with the objectives of CACS;
  • Satisfy all the requirements specified by the lending bank.

Guidelines to app for the CBN Agriculture Credit Loan

  • All applications for CBN Agriculture Credit Loans shall be made to the participating banks. All applications under the Scheme shall be treated by participating banks with due diligence.
  • The Loans shall have a maximum tenor that is based on the gestation period of the enterprise/or working capital facility of one year with rollover provision.
  • The CBN Agriculture Credit Loans allows for a moratorium in the loan repayment schedule taking into consideration, the gestation period of the enterprise

The Key Stakeholder of the CBN Agriculture Credit Loan

  • Federal Government of Nigeria Represented by Federal Ministry of
  • Agriculture and Rural Development (FMA&RD)
  • Central Bank of Nigeria (CBN)
  • Debt Management Office (DMO)
  • Participating Banks
  • Borrowers
  • Nigeria Agricultural Insurance Corporation (NAIC)

Responsibilities of the loan borrowers

  • Utilize the funds for the purpose for which it was granted;
  • Ensure the project being financed with the Nigerian Agricultural Insurance Corporation (NAIC);
  • Make the project records available for inspection and verification by the CBN, and PBs;
  • Adhere strictly to the terms and conditions of borrowing under the Scheme;
  • State Governments/FCT shall utilize the funds as specified by the CACS objectives;
  • Obtain NAIC certificate, evidencing payment of insurance premium inline with section 13 of the NAIC Act.
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The Central Bank of Nigeria has said that borrowers of the loans must use it for purposes for which they are obtained, any diversion of the loan would attract a 5-year jail term. All participating banks must remind prospective borrowers under the Scheme that it is an offence for which one may be imprisoned for 5 years to apply the loan for purposes other than those for which are mentioned above.

The single obligor limit of the BN Agriculture Credit Loan for non-tangible collateral at N100,000, while the obligor limit for individual, group/co-operative or a corporate society is N50,000,000.00 (Fifty million naira only) for secured loans.

Central Bank of Nigeria has also said that the Revised Regulatory and Supervisory Guidelines of MFBs must be strictly adhered to as it stipulates that the maximum principal amount for a microloan should not exceed N500,000.00 or 1% of the shareholders’ fund unimpaired by losses. You can download the PDF copy of the CBN Agriculture Credit Loan guidelines for more information.

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Lawrence

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