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Non-Interest Accelerated Agricultural Development Scheme (AADS) Loans

by Samuel Moore

July 23, 2020 7

It is no longer news that the Federal Government of Nigeria is in support of agriculture. Since coming into office, this government has implemented several schemes to ensure a return to agriculture. In this post, we will be sharing information about the latest loan facility provided by the Central Bank of Nigeria.

This loan is known as the Non-Interest Accelerated Agricultural Development Scheme (AADS) loan. We will tell you about the objectives of this loan, eligibility, and other important pieces of information.

About the AAADS Loan from CBN

One of the goals of the CBN is to provide assistance to business owners in the critical sector of the economy. In line with this, the Apex Bank recently introduced the Non-Interest Accelerated Agricultural Development Scheme.

The main objective of this scheme is to empower up to 370,000 youth around the country in agricultural production. This should go on for the next three years to drop the rate of unemployment in Nigeria. With this scheme, the CBN in tandem with the government seeks to increase the following:

a.      Job creation

b.      Economic diversification

c.       Food security

Specific Objectives of this scheme

We have stated the broad objective of this scheme above. Let’s show you the specific objectives of this scheme.

a.      To ensure sustained interactions among the stakeholders that make up the value chain of the agricultural sector. This is expected to yield national food security.

b.      Ensure collaboration among the CBN, State Governments, and other stakeholders. The interaction comes with a promise of job generation.

c.       Provide medium and short term funding for implementing the scheme.

Who is this scheme targeted at? The target group covers individuals between ages 18 and 35 years.

What are the focal activities this scheme is designed to support? Two agricultural activities that present the State with comparative advantage.

How does this scheme work?

Here’s how the Non-Interest Accelerated Agricultural Development Scheme loan from CBN works.

Mobilization and Clustering

a.      The State governments have the responsibility of mobilizing prospective recipients from the Senatorial Zones in their States.

b.      Each State government and the FCT has to make agricultural lands available in the different senatorial zones. The lands should in clusters, each cluster not less than 100 hectares.

c.       Prospective farmers should be divided into clusters based on the commodity they intend to produce.

d.      Each beneficiary should get a land allocation of between 2 and 5 hectares from the State government.

e.      State governments are required to provide water sources, access roads, and any necessary infrastructure to facilitate agricultural practices.

f.        State governments are allowed to charge rental fees on lands to a maximum of N10,000/hectare. This charge will cover the costs of clearing the land along with other infrastructure.

Financing

a.      PFIs (Participating Financial Institutions) will disburse funds on behalf of the CBN to the beneficiaries. Such funds shall be in kind, not cash.

b.      PFIs will purchase all the required inputs before re-selling to beneficiaries. This will be done using the CBN-approved non-interest financing contract of Murabaha, Istisna, etc. The return charged will be an all-inclusive rate of 9% p.a. To finance labor, the PFIs will make use of Service Ijarah or other appropriate contracts for NIFIs approved by the CBN.

c.       The financing tenor for broiler production and grains (maize, rice, soybean, etc.) is 6 months. For cassava it is 18 months, ruminants and egg production is 24 months, and for plantation crops, 5 years.

d.      The average financing size for arable crops is N250,000/ha, for livestock it is N500,000/unit, and for plantation crops such as cocoa, oil palm, and cashew, N1.5 million.

Marketing

a.      Aggregators/Processors/Anchors must sign an uptake agreement with the PMT.

b.      Off-taking of produce shall be on a cash-and-carry basis.

c.       The contiguous nature of the farms will help to reduce logistics usually associated with aggregation.

The role of PFIs

Participating Financial Institutions are expected to:

a.      Conduct due diligence in both credit appraisal and account opening.

b.      Gain access to funds from the Central Bank on a Wakala basis. This will be used for on-financing to all eligible entrepreneurs.

c.       Make sure that all payments get to vendors of equipment directly. They must also take a lien of the purchased assets.

d.      Charge all entrepreneurs at the exact CBN rate.

e.      Monitor the utilization of facilities by the beneficiaries.

f.        Register the BVN of beneficiaries on the NCR (National Collateral Registry).

g.      Supervise projects.

Service Providers/Input Suppliers are expected to:

a.      Ensure that services and inputs are delivered on time.

b.      Provide necessary technical support.

c.       Replenish the input stock of beneficiaries within a period of 5 working days after complaints are submitted.

d.      Offer customer care services in the form of complaints and feedback management.

Processors/Anchors are expected to:

a.      Sign the off-take agreement with the PMT.

b.      Off-take the produce at the current market prices or an average of 3 market prices for the produce within that State.

c.       Pay for collected produce within 5 working days.

d.      Make logistics available for evacuation and aggregation of produce.

e.      Supply technical support for harvest and produce handling.

Beneficiaries are expected to:

a.      Handle farm management.

b.      Provide a third-party guarantor that will handle the repayment of the loan facility.

c.       Cross-guarantee each other.

d.      Agree to work in tandem with available extension workers.

e.      Commit to the terms of the loan agreement and agree to stand by these terms. They must also agree to not side-sell their produce.

f.        Ensure to repay the loan facility at the appropriate time. This will be done by surrendering all the output to the State or Anchor.

Note that the Nigeria Agricultural Insurance Corporation (NAIC) will provide the insurance cover for all the enterprises under this scheme.

Conclusion

That’s all for now about the Non-Interest Accelerated Agricultural Development Scheme. This shows that the government is indeed interested in supporting agricultural enterprises in the country. What do you think about this loan scheme? Drop your comments in the comments section.