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CBN sets maximum loan accessible under the Private Sector-Led Accelerated Agriculture Development Scheme at N2 billion per obligor

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…CBN shall bear 50% of the credit risk in the event of default by the participant.

TUE, 10 NOV, 2020-theGBJournal-The Central Bank of Nigeria (CBN) today published the guidelines for the Private sector-led Accelerated Agriculture development Scheme. (https://www.cbn.gov.ng/Out/2020/DFD/GUIDELINES%20FOR%20THE%20P-AADS.pdf).

The new guideline seen by theGBJournal, specifies commodities eligible for consideration under the Scheme, eligibility criteria, Interest rate under the intervention, collateral requirement, repayment of the facility as well as Verification/Monitoring of Projects among others.

The guideline clarifies the rule of engagement between the youths broadly targeted by the CBN’S Accelerated Agriculture Development Scheme (AADS) and the private sector expected to facilitate more rapid land clearing for production of key agricultural commodities.

To address the food security and youth unemployment challenges across the country, the CBN introduced the AADS to engage 370,000 youth in agricultural production, in collaboration with state governments.

The Private Sector-Led Accelerated Agriculture Development Scheme (P-AADS) was also developed to complement AADS by exploring private sector partnership to facilitate more rapid land clearing for production of key agricultural commodities.

According to the CBN, ‘’The broad objective of the P-AADS is to facilitate increased private sector agricultural production of staple foods and industrial raw materials, as well as support food security, job creation and economic diversification.’’

The specific objectives are to fast track land clearing for primary production of agricultural commodities,

– Promote food security through the provision of large contiguous land for agricultural production across all states

– Collaborate with agro-processors engaged in backward integration by providing financing for extended land clearing in proximal locations for cultivating commodities for supply of industrial raw materials

– Support other capable stakeholders interested in unlocking land for agriculture through appropriate financing

– Engender job creation for individual farmers that will cultivate on the cleared land.

Under the eligibility criteria, participants must be Agro-processors of agricultural commodities engaged in backward integration;

– Prime anchors and commodity associations participating under the Anchor Borrowers’ Programme (ABP) with evidence of contiguous land readily available for clearing and cultivation of agricultural commodities, and

-Other companies and individuals with evidence of ownership of contiguous land readily available for clearing and cultivation of agricultural commodities.

Agricultural commodities eligible for consideration under the Scheme are Rice, Maize, Cassava, Cotton, Wheat, Tomato, Poultry, Fish, Sorghum, Oil Palm, Cocoa, Livestock and Dairy

The CBN said any other commodities as may be listed from time to time.

Prospective P-AADS participants must also be existing or new firms engaged in agricultural production with proven capacity and bankable proposal, possess acceptable title for contiguous lands of not less than 20 hectares, have good credit record, be able to provide the required collateral for participation and, Provide evidence of capacity to cultivate a focal commodity directly or engagement of farmers, including youths as in-growers or out-growers to cultivate on the land after clearing.

The Private Sector-Led Accelerated Agriculture Development Scheme (P-AADS) shall be funded from the Anchor Borrowers’ Programme (ABP).

The maximum loan accessible under the Scheme shall be N2 billion per obligor. The facility shall be repaid from the Economics of Production (EOP) for cultivating on the cleared farmland.

The CBN said the interest rate under the intervention shall be 5.0% p.a. (all inclusive) up to 28th February 2021. Interest on the facility from 1st March 2021 shall be 9% p.a. (all inclusive).

The Loan Tenor for Annual crops is set at Maximum tenor of six (6) years with six (6) months moratorium and for Perennial crops, Maximum tenor of ten (10) years with one-year moratorium.

The collateral to be pledged by participants under the Scheme shall be title of the cleared land and other acceptable collateral prescribed under the ABP. The CBN shall bear 50% of the credit risk in the event of default by the participant.

The apex bank in the guidelines said, repayment of the facility shall be made on instalment basis through the participating banks and spread over the EOP of the cultivated commodities. The participating banks shall remit repayments received to the CBN on quarterly or annual basis depending on the commodity financed.

The guideline requires participating bank to conducts due diligence and apply to the CBN for release of funds for land clearing in line with approved schedule of average cost per hectare. Again, periodic monitoring of projects financed under the Scheme shall be conducted jointly by the PB and CBN.

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