ORGANISED PRIVATE AGRICULTURAL SECTOR (OPAS) AND THE PROVISION OF

N200 BILLION PUBLIC FUNDS FOR COMMERCIAL AGRICULTURE IN NIGERIA

by

MR. JOE ALEGIEUNODirector

Development Finance Department

Outline of Presentation Introduction Objectives of CACS Target Agricultural Commodities Funding Management Eligibility for Participation Modalities & Tenor Acceptable Collateral Procedure For Applying for the Loan New Developments

INTRODUCTION

As part of its developmental role, the Central Bank of Nigeria in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR), has established the Commercial Agricultural Credit Scheme (CACS).

The scheme was created to promote commercial agricultural enterprises in Nigeria, which is a sub-component of the Federal Government of Nigeria Commercial Agriculture Development Programme (CADP) being anchored by the Federal Ministry of Agriculture and Water Resources (FMA&WR).

INTRODUCTION CONT’D

CACS was also introduced to complement other initiatives of the Bank aimed at providing funding for agricultural development. Such initiatives as the Agricultural Credit Guarantee Scheme (ACGS) which is for small and medium scale farmers, Interest Draw-back Programme and Agricultural Credit Support Scheme (ACSS), etc.

OBJECTIVES OF CACS To fast track development of the agricultural sector of the

Nigeria economy by providing credit facilities to commercial agricultural enterprises at single digit interest rate.

To enhance national food security by increasing food supply and effectively lower the prices of agricultural produce and products, thereby promoting low food inflation.

To reduce the costs of credit in agricultural production and enable farmers exploit the full potentials of the sector.

To increase output, generate employment, diversify the revenue base of the economy, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

TARGET AGRICULTURAL COMMODITIES Cash crops: cotton, oil palm, rubber,

Jatropha carcus, sugar cane

Food crops: Rice, maize, cassava, wheat, fruits and vegetables.

Livestock: dairy, poultry and piggery.

Fisheries.

MOBILIZATION OF FUNDS FOR THE SCHEME An MOU to enable the Debt Management Office

(DMO) raise N200.0 billion was signed on August 28, 2009.

The DMO had provided N100 billion.

The DMO is expected to raise the balance of N100 billion to be disbursed to the CBN in two more installments between September and October, 2009

FUNDING The N200 billion being raised by the DMO

shall be in two tranches.

The first tranche envelope of N100 billion had been released to the participating banks, United Bank for Africa Plc. (N75billion) and First Bank of Nigeria Plc. (N25 billion) representing 50% of the Fund.

The second tranche will be released to new banks that will be brought under the Scheme in the nearest future.

MANAGEMENT CBN and the FMA&WR collaborate to ensure the

success of the programme.

Day to day implementation of the Scheme, the Development Finance Department of the Central Bank and Technical Implementation Committee (TIC) headed by Director Development Finance Dept.

The Secretariat of TIC is located in the Secretariat of the Commercial Agriculture Development Programme (CADP) of the FMA&WR. TIC reports to the Project Steering Committee (PSC) which is the highest policy organ.

MANAGEMENT CON’T The PSC meets quarterly to review progress,

consider proposals from the Technical Implementation Committee (TIC) and make changes if required in the running of the programme, give approvals and is responsible for the overall direction of the Scheme.

Credit support to the target commodities and sub-sectors would be administered along the entire value chain of; Production, Storage, Processing, Market and Enterprise Development.

ELIGIBILITY CRITERIA FOR PARTICIPATING BANKS Liquid assets Branch network Agricultural lending infrastructure Total assets

Agricultural lending experience Supplementary credit to augment agricultural

finance

ELIGIBILITY FOR PARTICIPATION FOR PROJECTS (CHECKLIST)

Not less than N350 million for an integrated farm with prospects of growing the assets to N500 million within the next three years

N200 million for non-integrated farms/ agro-enterprise having the prospect to grow the net asset to N350 Million in the next three years .

ELIGIBILITY FOR PARTICIPATION FOR PROJECTS (CHECKLIST) Be a limited liability company and complies

with the provision of the Company and Allied Matters act (1990).

Have a clear business plan. Provide up-to-date record on the business

operation, if any. Have out growers programme, where

appropriate. Satisfy all the requirement specified by its

lending Bank.

ELIGIBILITY FOR PARTICIPATION FOR PROJECTS (CHECKLIST) Applicants that meet the pre-qualification criteria

would then be required to:

Meet all the conditions precedent to loan disbursement by the participating banks (PB).

An encouraging aspect of this Scheme is a 40% grant component that will be provided by the Federal Government to successful applicants, depending on the project.

MODALITIES & TENOR Agricultural loans to be granted shall not

exceed 9% per annum interest rate, inclusive of all charges

Loans under the CACS shall be for a maximum tenor of seven (7) years.

The working capital facility shall be for one year with provision for roll-over. The Scheme also allows for the moratorium in the repayment of loans.

ACCEPTABLE COLLATERAL

A charge on land in which the borrower holds a legal interest or

A right to farm, or a charge on the land including fixed assets,

crops or livestock. A charge on the movable property of the borrower. A life insurance policy, a promissory note or other

negotiable security Stocks and shares Any other collateral acceptable to the participating

banks. Note that PBs take all credit risks under the Scheme

PROCEDURE FOR APPLYING FOR THE LOAN All applications for loans under the

scheme shall be made to the PBs

in duplicates. One copy of which will be stamped by the

PB concerned and forwarded to the Development Finance Department of CBN and CADP Secretariat of the FMAWR.

NEW DEVELOPMENTS States are no longer to participate under the Scheme

as a result of their un-preparedness to issue ISPO that will enable their smallholder farmers borrow under the Scheme.

FMA & WR, is to develop 385 Farm Nucleus Estates (FNEs) in every two local governments in the country. This component is expected to commence with 24 pilot projects.

The FNEs are expected to attract a new generation of entrepreneurs to engage in farming as a business, generate employment, minimize rural-urban migration, and consolidate farms, farmers and farming requirements within the estate to leverage on economies of scale and market linkages.

NEW DEVELOPMENTS (Cont’d) Each FNE will occupy 2,000-3,000 hectares of

land (to be provided by the State Governments with built up infrastructures), accommodated farmers would be organized into production clusters, input suppliers and marketers so as to enjoy subsidized inputs, foster relationships themselves,

FNEs will also have access to storage and processing facilities, and physical and virtual markets (commodity exchange).

ACHIEVEMENTS

UBA Plc.

FBN Plc.

TOTAL

Details of Applications Considered

No.

Value (N)

No.

Value (N)

No.

Value (N)

(a) Applications received

85

161,465

123

131,222.31

208

292,687.71

(b) Total Number of “No Objections Issued”

43

70,470.10

57

36,373.50

100

106,843.60

(c) Breakdown of “No Objections Notes” into investment areas.

- Processing

- Production

36

7

47,370.10

23,100.00

43

14

31,928.80

4,444.70

79

21

79,298.90

27,544.70

THE END

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