The lingering crisis between Guaranty Trust Bank (GTBank) and Afex Commodity Exchange over N17bn Anchor Borrowers Programme loan has degenerated into a legal issue as the plaintiff drags no fewer than 60 top executives of 13 commercial banks to court. The executives, including chairmen, CEOs, directors, and company secretaries of the banks, are accused of failing to comply with a court-ordered No-Debit-Order placed on AFEX’s accounts.
In a suit numbered FHC/L/CS/911/2024 and involves Guaranty Trust Bank Limited and AFEX Commodities Exchange Limited, Justice CJ Aneke of the Federal High Court, Lagos division ordered the bank chairmen, MDs, directors, company secretaries and the liquidator of Heritage Bank (Nigeria Deposit Insurance Corporation) to be committed to jail for failing to obey its May 27, 2024, ruling.
A legal notice titled ‘Order to serve notice of disobedience to order of court vide newspaper publication’ published in some national dailies including The PUNCH on Thursday, partly read, “An order granting leave to the Plaintiff Applicant to serve Form 48 (Notice of Consequences of Disobedience to Order of Court) dated 11th June, 2024 and all other forms and processes that may be issued in this contempt proceedings inclusive of Form 49 on the 1st-60st parties cited for contempt.
While the matter was adjourned to next Thursday, parties cited for contempt include Access Bank, Citibank, Jaiz Bank, Union Bank, Fidelity Bank, First Bank of Nigeria Plc, First City Monument Bank, NDIC (liquidator for Heritage Bank), Polaris Bank, Stanbic IBTC Bank, Standard Chartered Bank, Taj Bank, United Bank for Africa and Zenith Bank alongside its principal officers.
Meanwhile, in the court ruling dated May 27, 2024, GTBank was granted permission to take over 16 warehouses owned by AFEX and located across seven states and sell the commodities stored in them.
It was gathered that the commodities were procured via the Central Bank of Nigeria Anchor Borrowers’ loan facility.
The court, which served contempt proceedings against AFEX and some of its principal officers including Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye and Koonal Ghandi earlier in the month, also ordered twenty banks to transfer monies standing to the credit of the respondent into the AFEX’s account with GTB until the N17.81bn is repaid.
N17.81bn loans comprise N15.77bn; the amount outstanding and unpaid, as of April 17, 2024, and the cost of recovery and incidental expenses in the sum of N2.04bn.
According to court papers, AFEX had sourced the Anchor Borrowers Programme Loan facility from GTB to provide finance for smallholder farmers registered under the CBN Anchor Borrower’s programme. The loan was expected to be repaid from the sale of commodities. However, AFEX failed to uphold its end of the deal even after an extension.
In a statement, AFEX has contested, stating that it has repaid 90% of the loan and is in discussions with CBN over outstanding amounts, citing economic hardships impacting farmers’ repayment capabilities. They have urged CBN to activate the collateral guarantee clause to support recovery efforts in the agricultural sector.
The commodities exchange also stated that the lingering effects of the cash crunch have continued to impact farmers, who sold at below market value to get immediate cash inflows to sustain their families during the period and remain unable to pay back.
The statement read in part, “However, a portion of the loan remains outstanding with the farmers and while we have paid out a portion out of our own purse, we remain in discussions with CBN over the outstanding amounts of the said facility.
“Over 800,000 hectares of farmland were financed through the course of the programme’s operationalization; however, significant macro and policy headwinds, including the cash crunch on the back of the Naira redesign policy, severely impacted the productive capacity and market participation of the smallholder farmers in the 2022–2023 season.
“This resulted in less than 40 cent repayment from farmers on their input loan bundles, down from our 90per cent repayment rates in the previous eight years of providing input financing for farmers. The low repayment rate ultimately impacted on our ability to refund the full value of the loan at the end of Q1 2023 and following a 6-month extension period.
“Evidenced in the attached letters, our engagements with Guaranty Trust Bank Limited, a Participating Financial Institution in the program, as well as the apex bank have seen us highlight these limitations on the part of the defaulting farmers with suggestions being made to the CBN to activate the risk-sharing structure put in place for the program and release funds accordingly to sustain activities and allow for needed recovery efforts in our agriculture sector.
“In light of these engagements, we consider the recent steps by Guaranty Trust Bank Limited to be premature, coming in the midst of open conversations that are being had with all parties to find a path to resolution that does not unduly punish farmers, who have been the biggest hit by macroeconomic conditions that they had no control over,” AFEX concluded.
When the scheme was first launched in 2015, the CBN stated that its main goal was to establish financial connections between smallholder farmers and processors in order to boost agricultural output and guarantee stable food prices.
According to the principles of the Anchor Borrowers’ Programme, farmers who profit from the programme must repay their loans with produce (which must cover the principal and interest of the loan) to an anchor, who then deposits the corresponding amount of cash into the farmer’s account.
According to reports, the Anchor Borrowers project had benefited at least 4.8 million people by 2022, and the CBN stated in a 2023 announcement that it had released N1.079 trillion under the project, of which more than N500 billion was due for repayment.
The programme has since been discontinued by the CBN as it pivots from development financing interventions to its core duty of price and monetary stability.
