N200bn agric loan: NAIC criticises banks over non remittance of premium

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The Nigerian Agricultural Insurance Corporation (NAIC) has condemned the failure of some major commercial banks participating in the disbursement of the N200 billion commercial agric loans to remit the mandatory 2.5 percent premium due from the already disbursed

N133.1 billion to the corporation. The corporation, empowered with the exclusive mandate by an enabling Act to underwrite all agricultural credit facilities to farmers in Nigeria, lamented that the non-compliance with the provisions of the Act establishing it was a grave disservice to Nigerian farmers and the food security programme of the Federal Government.

Since inception of Commercial Agricultural Credit Scheme (CASC) in 2009, the Central Bank of Nigeria (CBN) has released a total of N133.1 billion out of the N200 billion for disbursement by the 13 participating banks to 139 beneficiaries made up of 115 individuals/private promoters and 24 states governments. The banks include United Bank for Africa, GTBank, Skye Bank, First Bank of Nigeria, Union Bank, Access Bank, Fidelity Bank, Oceanic Bank, Stanbic IBTC, Unity Bank, Zenith Bank, Citibank, and Diamond Bank.

Kwatri Kwaga Yusuf, managing director of NAIC who made this disclosure in an exclusive interview with BusinessDay in Abuja, however, noted that three out of the participating banks had remitted the statutory 2.5 percent premium subsidy in full to the corporation. 
Yusuf explained that “Section 14 of the NAIC Act clearly stipulates that – A lending institution shall subject to the provision of this Act and other directives that may be given by the board, deduct the insurance premium due from the loan or credit at source and remit same to the corporation not later than 30 of disbursement of part or the whole of the loan or credit.”

The NAIC managing director added that NAIC had therefore through its solicitors given a 30-day ultimatum to the remaining 10 banks yet to comply to remit the premium subsidy for the sum total of the volume of loan and credit already disbursed by each of them. They are also to submit the list of farmers who are the beneficiaries to enable the corporation provide insurance cover against natural disasters. 
He also argued that the excuse being given by the defaulting banks that they were awaiting further directive and clarification from the CBN to act appropriately on the matter, according to the apex bank’s guidelines, was not tenable because the NAIC Act, which is a federal law, superseded the CBN guidelines.

On the threat by the corporation to institute a legal action against the defaulting banks, he said NAIC was empowered by Section 14(2) of its enabling Act, to sue and recover from the lending institution the unremitted amount (premium) in any court of competent jurisdiction. 
The NAIC boss however lamented that the failure to factor insurance element into the loan facility in the first placed had rendered the scheme ‘dead on arrival,’ since the funds would most likely be diverted to other ventures that were not allied to agricultural production.
Yusuf further observed that taking a cue from what befell some of the rested agricultural development programmes initiated across the country –

Operation Feed the Nation, Green Revolution and others, one can see very clearly why the Federal Government ventured into setting up a specialist agricultural risk insurer (NAIC) and still maintained full ownership of the company till date in spite of its privatisation and commercialisation agenda. “When the issue of this N200 billion commercial agricultural credit scheme came up during the time of the former minister of agriculture, Abba Ruma, we alerted the minister that we have a law backing us on agricultural loans and that they should carry NAIC along as a stakeholder in that scheme.

“Unfortunately, they did it without taking NAIC into consideration thereby sidelining the Act establishing the corporation because Section 13 of the Act states clearly that – all lending institutions including government, banks and other financial institutions giving out agricultural loans must insure with NAIC,” he stressed. What the banks are supposed to do, according to him, is to deduct the premiums at source and inform the various borrowing states that the premium for NAIC has been deducted and whenever they are disbursing to the farmers or their cooperatives societies, they should inform the corporation in order to go and inspect the farms and issue covers to them.

He revealed that N1 billion was released to each of the state governments without recourse to NAIC, and that the corporation was not going after the benefiting state governments but the banks who disbursed the loans without paying the mandatory premium to NAIC as stipulated in the provisions of its establishing Act. “In our opinion, that section of the law has been breached by the current disbursements being made by various banks not taking NAIC and the Act into consideration, but they continued to insist that the guidelines issued by the CBN did not carry NAIC along. “We believe that the legal departments of the various banks need not go to court for clarification for them to know that an Act of the National Assembly supersedes the guidelines issued by CBN or any regulatory body,” Yusuf further argued. 

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