AN ASSESSMENT OF THE POTENTIAL BENEFITS OF THE ANCHOR BORROWERS’ PROGRAMME FOR SMALL-SCALE FARMERS IN NIGERIA
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CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Nigeria, as a vast and expansive country, boasts a terrain that is highly suitable for the cultivation of a diverse array of crops and the raising of various types of livestock. The nation is endowed with abundant human and natural resources. Despite this, crude oil has only contributed a relatively minor 2.7 percent to the overall export earnings, while non-oil exports, amounting to N321.2 million, constituted a significant 97.3 percent of total exports during that period (Akpasak, 2019). According to Evbuomwan (2021), although oil exports form a substantial component of Nigeria’s export revenues, their contribution to the Gross Domestic Product (GDP) is notably lower compared to that of the non-oil sector.
There has been a noticeable decline in the proportion of crude petroleum and natural gas contributing to Nigeria’s GDP, decreasing from 14.95% in 2017 to 9.61% in 2021. In contrast, the agricultural sector has shown a more stable contribution, accounting for 23.35% and 23.11% of GDP during these respective years (CBN, 2021). Furthermore, the role of oil refining in the nation’s GDP is minimal, less than 0.5 percent, primarily due to Nigeria’s focus on exporting crude oil and the fact that crude oil prices are determined externally. The recent downturn in the fortunes of the oil industry has had serious repercussions for the Nigerian economy (Charles et al., 2020). The decline in crude oil prices (Ikenna, 2022) has amplified calls for Nigeria to reduce its heavy dependence on oil and to seek diversification into other economic sectors. Given the country’s rich agricultural resources, it is clear that this sector holds significant potential for accelerating the diversification of the Nigerian economy (Prince, 2021).
It is important to highlight that a substantial portion of the Nigerian population derives their income from the non-oil sector, with the agricultural sector employing over 70 percent of the workforce. Nonetheless, there has been a noticeable increase in the value of imported food and live animals, which rose from N1.8 billion—accounting for 14.1% of all imports in 1981—to N2,885.4 billion in 2016, representing 20.2% of total imports (CBN, 2018). Additionally, the importation of animal and vegetable oils and fats, essential components of the food industry, has also seen a significant rise, climbing from N0.1 billion in 1981 to N144.7 billion in 2016. This represented 0.8% and 1.3% of total imports during those respective years (CBN, 2018).
The potential of the agri-business sector to serve as a significant employer for Nigeria’s growing labor force and a generator of foreign revenue has unfortunately diminished. Mike (2021) emphasized that the agricultural sector is a primary source of employment and plays a crucial role in creating wealth and alleviating poverty, as a substantial portion of the population relies on agriculture and related activities for their livelihoods. Nevertheless, the current challenges facing Nigeria’s agricultural industry stem from a range of issues that hinder its optimal functioning.
Key problems include the small size of many farms, which limits their efficiency, and the lack of mechanization and modern inputs that could enhance productivity. Additionally, inadequate infrastructure, such as poor roads and insufficient facilities for transportation, processing, and storage, further exacerbates the difficulties faced by the sector. Post-harvest losses are also a significant concern, driven by pests and diseases that undermine the quality and quantity of produce (Ojo and Evbuomwan, 2017; Evbuomwan, 2021).
In response to these challenges, various funding policies and initiatives have been introduced in Nigeria with the aim of boosting the productivity of small-scale farmers and revitalizing the agricultural sector as a whole (Evbuomwan, 2021). Given the critical role that agriculture plays in Nigeria’s economy and the persistent difficulties encountered by small-scale farmers, it is imperative to assess the potential benefits of specific programs such as the Anchor Borrowers’ Programme.
This study seeks to evaluate the impact of the Agricultural Business Promotion (ABP) program on small-scale farmers in Nigeria. The focus will be on several key aspects, including the accessibility of financial resources, improvements in productivity, and changes in income levels for these farmers. By examining these factors, the study aims to provide a comprehensive understanding of how the ABP program could influence the agricultural sector and contribute to its development.
1.2 Problem Statement
Small-scale farmers in Nigeria encounter a range of significant challenges despite their crucial role in the country’s agricultural sector. These challenges include limited access to financial resources, poor infrastructure, and a lack of adequate support services, which collectively hinder their productivity and effectiveness. In response to these persistent issues, the Central Bank of Nigeria (CBN) introduced the Anchor Borrowers’ Programme (ABP) with the goal of addressing these obstacles and improving conditions for small-scale farmers (Akan, 2019). The ABP is designed to facilitate a connection between anchor enterprises engaged in the processing of agricultural commodities and small-scale farmers. The program’s primary objective is to provide farmers with essential resources, including financial assistance, to enhance their productivity and improve their quality of life. By offering various potential benefits such as increased availability of financial resources, enhanced operational efficiency, improved market access, and opportunities for skill development (CBN, 2017), the program aims to support and uplift small-scale farmers. Despite these ambitious goals, it remains crucial to conduct a thorough evaluation of the potential advantages of the Agricultural Business Platform (ABP) specifically for small-scale farmers in Nigeria.
However, the Anchor Borrowers Programme faces several limitations that affect its effectiveness. According to Akinwale (2021), these limitations include unpredictable weather conditions, challenges related to transportation, inadequate extension services, and insufficient financial resources. Abiodun et al. (2020) have pointed out that the state of infrastructure in rural Nigeria presents considerable barriers to the success of the ABP. Specifically, inadequate transportation networks and storage facilities pose significant challenges. Farmers often face difficulties in transporting their agricultural products from farms to markets due to poorly maintained and impassable roads, limited transportation options, and unreliable logistical services (Akinwale, 2021). Additionally, the lack of proper storage infrastructure exacerbates the problem of post-harvest losses, which results in reduced earnings for farmers and increased food poverty in local communities. The inadequate infrastructure impedes the smooth functioning of the agricultural value chain, restricting farmers’ access to broader markets and limiting their ability to maximize their agricultural investments (Abang, 2022). Furthermore, Ibukub et al. (2019) have identified several other issues with the Anchor Borrowers Programme, including a shortage of extension agents, the practice of side selling by farmers, and the distribution of ineffective or failed inputs and seeds. These problems further complicate the effectiveness of the program and its impact on the agricultural sector.
The Anchor Borrowers Programme is specifically designed to enhance the agricultural productivity of smallholder farmers, who constitute the largest segment within Nigeria’s agricultural sector. The initiative seeks to achieve this goal by offering these farmers access to improved seeds, promoting the adoption of best practices in farm management, and establishing valuable connections with buyers and processors. By addressing these areas, the program is expected to drive significant economic growth and development throughout Nigeria. This growth is anticipated through increased agricultural productivity, the creation of wealth, and reductions in both poverty and unemployment. However, the sustainability and long-term success of these outcomes are heavily dependent on the active involvement and commitment of all relevant stakeholders (Akinwale, 2021).
For the Anchor Borrowers Programme to achieve its objectives, it is crucial that all involved parties demonstrate complete dedication. To transform agriculture into a more lucrative sector, the initiative needs substantial investment in agricultural research and development. Additionally, ongoing training and support for smallholder farmers from both the government and development partners are essential. Such investments and support will enable the farmers to adopt advanced agricultural practices, which in turn will lead to increased profitability. Long-term improvements in agricultural productivity necessitate a focus on advancing research and development practices, as well as enhancing extension services that provide farmers with the knowledge and resources they need to succeed (Amanam, 2023).
These combined efforts will ensure that the benefits of the program are not only realized but also sustained over time, ultimately contributing to a more robust and prosperous agricultural sector in Nigeria.
Objectives of the Study
The main aim of this study is to thoroughly evaluate the potential advantages of the Anchor Borrowers Programme for small-scale farmers in Nigeria. The specific objectives of this study are:
- To analyze how the Anchor Borrowers Programme improves small-scale farmers’ access to affordable credit for agricultural activities.
- To examine the effects of the Anchor Borrowers Programme on the productivity levels of small-scale farmers.
- To investigate how the Anchor Borrowers Programme influences the income levels of small-scale farmers in Nigeria.
- To evaluate the impact of training programs provided under the Anchor Borrowers Programme on the skills and capabilities of small-scale farmers.
Research Questions
In alignment with the study’s objectives, the following research questions will be addressed:
- To what extent does the Anchor Borrowers Programme improve access to affordable credit for agricultural production among small-scale farmers?
- What are the effects of the Anchor Borrowers Programme on the productivity of small-scale farmers?
- How does the Anchor Borrowers Programme affect the income levels of small-scale farmers in Nigeria?
- What is the impact of the training programs offered under the Anchor Borrowers Programme on the skills and capabilities of small-scale farmers?
1.5 Research Hypotheses
To evaluate the effectiveness of the study, the following null hypotheses will be proposed and tested at a 0.05 significance level:
- Ho: The Anchor Borrowers Programme does not significantly impact the productivity of small-scale farmers.
- Ha: The Anchor Borrowers Programme significantly impacts the productivity of small-scale farmers.
1.6 Significance of the Study
Assessing the potential benefits of the Anchor Borrowers Programme for small-scale farmers in Nigeria is vital for developing comprehensive agricultural policies, promoting sustainable development, and improving the welfare of rural communities. This study aims to provide valuable insights that will help policymakers create an environment conducive to agricultural advancement and poverty reduction in Nigeria.
By evaluating the effectiveness of the ABP, policymakers can gain crucial insights into how to enhance and optimize existing agricultural financing programs. The study is intended to offer evidence-based recommendations to refine the design, implementation, and impact of similar initiatives aimed at supporting small-scale farmers across Nigeria. The findings will be valuable to stakeholders, including government agencies, development organizations, financial institutions, and non-governmental organizations (NGOs), by highlighting the challenges and opportunities in supporting small-scale farmers. This understanding can foster better collaboration and partnerships to expand successful interventions and maximize their effectiveness.
Additionally, providing access to financial resources and improving agricultural efficiency are key factors in lifting small-scale farmers out of poverty. This study seeks to clarify how participation in the ABP influences poverty reduction through increased income levels, improved household welfare, and enhanced economic resilience within rural communities.
Given the significant role small-scale farmers play in Nigeria’s agricultural sector, contributing substantially to food security and the stability of the rural economy, evaluating the benefits of the ABP can help identify strategies to improve farmers’ access to loans, boost productivity through superior inputs and technologies, and encourage sustainable agricultural practices.
Moreover, researching the advantages of the Anchor Borrowers Programme (ABP) contributes to the broader body of knowledge in agricultural financing and rural development in Nigeria. This research will lay the groundwork for future studies and discussions on effective strategies to support small-scale farmers in accessing financial services and addressing structural challenges in agriculture.
1.7 Scope of the Study
This study is primarily focused on a thorough evaluation of the potential benefits offered by the Anchor Borrowers Programme to small-scale farmers in Nigeria. The central aim is to determine how the Anchor Borrowers Programme impacts small-scale farmers, particularly in terms of their access to affordable credit necessary for agricultural production. The study will delve into how well the programme facilitates financial accessibility for these farmers, aiming to assess its effectiveness in enhancing their ability to secure the needed resources for farming activities.
In addition, the study will investigate the broader effects of the Anchor Borrowers Programme on the productivity levels of small-scale farmers. It will explore whether the programme leads to improvements in the efficiency and output of agricultural practices among these farmers.
Furthermore, this research will evaluate how the programme influences the income levels of small-scale farmers across Nigeria. By examining the financial impact, the study seeks to understand whether the programme contributes to increased earnings and economic stability for these farmers.
Another key aspect of the study will be the assessment of the training programs provided under the Anchor Borrowers Programme. The research aims to determine the impact of these training initiatives on the skills and capabilities of small-scale farmers, evaluating whether such training improves their agricultural practices and overall effectiveness.
The scope of this study is geographically confined to Nigeria, focusing exclusively on the Nigerian context to provide a detailed analysis of the Anchor Borrowers Programme within this specific setting.
1.8 Limitations of the Study
Like any research, this study encountered several limitations. A significant challenge was the scarcity of comprehensive literature and data on the subject matter, particularly regarding the evaluation of the benefits of the Anchor Borrowers Programme for small-scale farmers in Nigeria. This lack of existing research necessitated a considerable investment of time and effort to locate relevant sources and gather the necessary data for a thorough analysis.
Additionally, the study faced constraints related to its relatively small sample size and its focus on a specific geographical area—Nigeria. The limited scope means that the findings of this study cannot be generalized beyond the Nigerian context, highlighting the need for further research to explore similar topics in other regions or broader contexts.
Financial limitations also posed difficulties, as the researcher, a student with limited personal resources, struggled with the high costs associated with transportation, which were further impacted by the inflationary pressures in Nigeria. These financial constraints affected the researcher’s ability to conduct fieldwork effectively.
Moreover, the study was constrained by time limitations. Balancing the demands of this research with academic responsibilities, such as attending lectures and participating in other educational activities, created additional challenges for the researcher.
1.9 Definition of Terms
- Anchor Borrowers Programme: The Anchor Borrowers Programme (ABP), launched by the Central Bank of Nigeria (CBN) in November 2015, is designed to create economic linkages between smallholder farmers and larger anchor enterprises engaged in agricultural processing. The programme aims to improve the economic viability of small-scale farming by providing financial support and fostering connections with key market players.
- Small-Scale Farmers: The term “small-scale farmers” refers to individuals who operate on relatively small plots of land—typically less than 5 acres in Nigeria. These farmers focus on subsistence agriculture, growing crops primarily for personal consumption, alongside cultivating one or two cash crops for income generation.