• Bank MD admits ABP loans fail because recapitalization fails
• BPE says BoA is not viable, difficult to recapitalize

Strong indications have emerged that the Bank of Agriculture (BoA) has become technically unsustainable and riddled with bad debt to the tune of 77.1 billion naira. This comes against the backdrop of the failure of the restructuring and recapitalization plans that had been proposed since 2019.

More than two years after the bank was billed for a recapitalization through a public offering of shares primarily targeting farmers, processors and the public, the plan has failed to materialize.

This is substantiated as the House of Representatives is currently examining how N91 billion for the Anchored Borrower Program (ABP) was disbursed by the BoA and why the bank has not been able to collect the loans.

This despite threats of arrest by the Central Bank of Nigeria (CBN) against farmers who fail to repay ABP loans. According to Bauchi branch CBN controller Saladu Idris, most of the loan arrears were found in particular among rice farmers.

Recall that in November 2015, President Muhammadu Buhari launched the ABP to stimulate agricultural production and reverse Nigeria’s negative balance of payments on food. Farmers captured under this program include those who grow cereals (rice, maize and wheat).

The program aimed to create a link between anchor companies involved in food processing and smallholder farmers of key agricultural commodities required, through commodity associations.

To date, the ABP has disbursed 864 billion naira to 4.1 million farmers cultivating 5.02 million hectares of land, including the 91 billion naira disbursed by the BoA.

BoA chief executive Kabir Mohammed Adamu, who appeared before the House of Representatives Committee on Agricultural Products and Services at a public inquiry hearing into the matter last week, said N14 678 423 065.03 had been repaid, leaving a balance of N77 179,823,985.20 (principal) unrecovered as of October 31, 2021.

His explanation, however, was not well received by lawmakers as they demanded relevant documents on the disbursements, which the BoA boss failed to produce.

Hon. Awaji-Inombek Abiante had requested the revocation of the hearing to allow the Director General to provide the commission with the relevant documents requested.

Analysts said the failure is an indication that the bank has gone completely bankrupt, with very low chances of recovery.

They said that due diligence, taking precautionary measures to prevent failure, damage or danger, must have been ignored, or that corruption within the system must have dealt a devastating blow to the bank.

Due diligence in banking and finance, they added, is a painstaking process to find out more about clients, whether businesses or individuals.

Part of the due diligence in the BoA context should have been tracking loan usage as planned and presented to the bank, a process that analysts say was not taken with ABP loans.

A project manager in the facilities department of an older generation bank, who requested anonymity, told the Guardian that the BoA should have followed five due diligence procedures before disbursing facilities. The procedures are, the character of the loan seeker; loan repayment capacity; the capital already available to the applicant; collateral and loan condition. If the loan is for agricultural purposes, it should be used for that purpose. Farmers must comply with the condition of approval of the loan, he said.

A palm oil investor and former chairman of the National Palm Produce Association of Nigeria (NPPAN), Henry Olatujoye, said the bank’s unsustainable state has to do with how the BoA is structured.

He said that ordinarily the BoA would have to be a leading institution that provides loans to farmers and food processors, but the collateral guarantee attached to the facility could not be met by real, but by small farmers.

He suggested that “the BoA needs to be restructured” so that it gives farmers access to facilities necessary for food production, farmer productivity and food security. “

On a related note, Cocoa Research Institute of Nigeria (CRIN) executive director Dr Patrick Adebola said the bank may be going bankrupt because real farmers are not getting the loans.

“I think the bank should target farmers who are directly involved in production instead of funding agricultural marketing. The interest rate should also be reduced to single digits.

“Real farmers don’t get the facility probably because of the guarantees. I also think that the farmers could invest in the recapitalization of the bank if they are sure of the return on the investment. The bank should also try to gain the confidence of the farmers, ”Adebola said.

The technical and regulatory director of agricultural solutions, Adewole Fatokun, explained that the BoA has not been well funded since the inauguration of President Muhammadu Buhari.

He said: “NIRSAL, a branch of CBN, currently does most of the agricultural finance through various PBA programs. BoA is actually sidelined now.

In addition, a former Southwest Regional Director of the Federal Agriculture Ministry, Mr Julius Odeyemi, said the ministry’s expected impetus to boost the bank was no longer there, unlike in the days when the Dr Akinwumi Adesina was Minister.

“Remember that Nigerian banks want quick returns, which agriculture does not easily provide. So when that push is not there from the government, they avoid it. This is the truth, and until we have another person who can lead it, it will remain that way. A personal opinion however, because I have been involved before, ”he said.

The president of Answer Industries Ltd, feed manufacturers and egg processors, Segun Shewoniku, said that in the mid-1970s it was known as the Nigerian Agricultural and Cooperative Bank (NACB) . It was well funded and its loans were mainly made to cooperative groups of farmers and in collaboration with river basin authorities.

Unfortunately, he added, the bank’s focus was distracted and negative influences from the line ministry, which clashed with business goals. “The result,” he explained, “is the granting of loans to paper producers and the highest-bidding collaborators in crime.”

Shewoniku said recapitalization efforts might not be visible because the bank might not have what it takes to provide a transparent and verified list of loan recipients and accounts.

“With such negativities, without consequences, such an organization is likely to be less viable,” he said.

“The way forward,” he added, “is to take full control of the ministerial bureaucracy, identify leaks and gaps, put the right hands on the bridge and invite in the councils Board of Directors relevant professional and interest groups with the opportunity for agro-related companies to join us Board of Directors as shareholders.

Likewise, the agency in charge of the BoA’s recapitalization project, the Bureau of Public Enterprise (BPE), in an exclusive disclosure to the Guardian, also affirmed the sad state of the bank.

Responding to inquiries, Public Communications Officer, BPE, Amina Tukur Othman, explained that the BoA’s proposed recapitalization and restructuring has not materialized to date due to the extent of mismanagement and of the bank’s malfunction.

“The transaction is slightly behind schedule due to the detailed processes and procedures involved in negotiating the terms and conditions of restructuring and recapitalization by the bank’s shareholders.

“Remember the bank has been plagued by various problems ranging from years of mismanagement, huge non-performing loans, to the lack of corporate governance and a working organizational structure,” the holder said. word of BPE.

The office added that the problems had posed a challenge to its efforts to get existing shareholders to inject new capital to resuscitate the bank.

It will be recalled that the former Minister of Agriculture and Rural Development, Audu Ogbeh, in an interview with the Guardian on May 27, 2019, said that the BOA was not viable, and that the BPE had completed the plans for revitalization.

He said: “The lead consultant has now taken on the responsibility of marketing the idea to the public and when that happens we start selling stocks. The idea is that farmers will own 40 percent of the bank’s shares.

“The CBN will hold 10 percent; the Ministry of Finance, 10 percent; private sector operators, 30 percent. This is the structure we want to use.

The idea was that farmers should think of it as their bank, put their money there as 40 percent equity of a recapitalization target of between 200 and 250 billion naira for the bank so that farmers could borrow. at an interest rate of five percent.

“We believe that, in about two months, the sale of the shares should be carried out,” the former minister said in 2019.

However, the BPE spokesperson said intense stakeholder consultations were underway with a view to closing the deals without further delay and that shareholders recently agreed on the terms of the recapitalization.