As part of measures to address the challenges of accessing loans by Micro small and Medium Enterprises (MSMEs) the Central Bank of Nigeria (CBN) is making plans to allow farmers use off-taker agreements for collateral.
An off-taker agreement is an agreement between a producer and a buyer to buy and sell a certain amount of the future production. It is generally negotiated long before the farmer plants the crop to guarantee a market for future production and improve chances of getting finance.
The CBN said it will start this alongside an anchor borrower programme, starting with Sokoto and Benue states in the next two weeks, according to Olasupo Musa, head, research and development, national collateral registry development finance department, CBN.
Farmers who spoke with BusinessDay were excited that their yearnings have finally been met.The said they expect that his development would enable them increase production.
Abiodun Oyelekan, chief executive officer, Farm Fresh Agric Ventures said, “It is a very good development. It will give us relief as farmers because it provides leverage to continue with production.
“All the Federal Government needs to do is create awareness so that farmers can benefit from the scheme. We farmers now just need to get an off-taker agreement,” he said.
“This is a programme that farmers have been expecting long ago. The main problem with farming is looking for loan and getting access to the market. The programme has addressed both problems,” said Salim Saleh Mohammed, president, Wheat Growers Association of Nigeria.
“Most farmers don’t have a guaranteed off-taker agreement currently. It is only in the northern part of the country that you have some companies signing off-taker agreements with farmers to ensure they get steady supply of crops for their production,” said Abiodun Olorundenro, chief executive officer, Green Vine Farms.
Collateral registry which is a financial infrastructure for MSME lending is one of the quick ways the CBN is using to reposition the economy which is already in recession.
Stakeholders who gathered in Lagos Tuesday at the CBN and International Monetary Fund (IFC) interactive forum on national collateral registry and credit reporting system, were excited on hearing the new development, as they believe it would enhance access to loans by Micro Small and Medium Enterprises (MSMEs) that have been starved by deposit money banks due to high demand for collateral.
Other speakers at the forum include Tunde Popoola, managing director/CEO, CRC Credit Burau limited, Jameelah Oyedun, managing director/CEO, CR Services, Credit Bureau.
Musa noted that the CBN in February 2015, issued a circular on “Registration of security interests in movable property by banks and other financial institutions in Nigeria, while the Bill on Secured Transactions in Movable Assets 2016 is currently at the National Assembly.
The CBN’s next step to the national collateral registry include the official launch of the registry, which comes up soon, capacity building for judges and the legal community, as well as training of financial institutions (FIs).
Other achievements of the CBN include software developed, customised and servers installed, the first and second UAT System testing, and demonstration for financial institutions completed, stress testing conducted, Disaster Recovery Server Installed, and live operation commenced on 25th May, 2016.
HOPE MOSES-ASHIKE & JOSEPHINE OKOJIE
