According to a recent report published by the National Bureau of Statistics (NBS), the distribution of loans under the Agricultural Credit Guarantee Scheme Fund (ACGSF) has maintained a downward trend since 2017.
This is despite concerted efforts by the Federal Government to drive investment and growth in the country’s agricultural sector.
The recent report showed that fund distribution under ACGSF declined by approximately 31.62% from N11.90 million allotted in 2017 to N8.14 million in 2019.
The significant decline was also recorded both in terms of the volume and value of loans under the scheme over the period under view. For example, the volume of loans worth N100,000 and below declined by 37.14% from 26,825 in 2017 to 16,862.
In case you missed it
Recall that Nairametrics had earlier reported CBN’s plan to increase funding in the agricultural sector from 4% to 10% of the entire credit in the banking system. CBN revealed that the country needs to increase its level of bank credit to the agricultural sector by over 50% within the next 4 years to boost food production.
What you should know
The Agricultural Credit Guarantee Scheme Fund (ACGSF) was established by Decree No. 20 of 1977 and commenced business in April 1978. Its original share capital and paid-up capital were N100 million and N85.6 million respectively. The Federal Government holds 60% and the Central Bank of Nigeria holds 40% of the shares. The Capital base of the scheme was increased to N3billion in March 2001. The fund guarantees credit facilities extended to farmers by banks, up to 75% of the amount in default net of any security realized.
What this means
This indicates a decrease in the lending portfolio of banks to agriculture due to perceived risk. This has been the trend since the deregulation of the financial system unlike between 1978 and 1989 when the government stipulated lending quotas for banks under the Agricultural Credit Guarantee Scheme (ACGSF). To reduce the declining trend, several innovations and products were introduced under the scheme such as;
- The Self-Help Group Linkage Banking
- Trust Fund Model
- Interest Draw Back
Why this matters
Given the present regime’s drive to diversify the economy and ensure food sufficiency and security, all hands will now be on deck in achieving this goal.