While a lawsuit between GTBank and Afex Commodity Exchange about a N17 billion loan under the Anchor Borrowers Program remains outstanding, Guaranty Trust Bank has brought no less than sixty senior officials of thirteen commercial banks before the court.
The 60 executives, which include the chairmen, CEOs, directors, and company secretaries of the 13 banks, are being held in contempt for allegedly neglecting to carry out a No-Debit-Order that was purportedly placed on the Afex Commodity Exchange’s bank accounts.
The Federal High Court, Lagos division, presided over by Justice CJ Aneke, signed an order in suit no. FHC/L/CS/911/2024 involving Guaranty Trust Bank Limited and AFEX Commodities Exchange Limited, mandating that the bank chairsmen, MDs, directors, company secretaries, and liquidator of Heritage Bank (Nigeria Deposit Insurance Corporation) be committed to jail for disobeying the court’s May 27, 2024 ruling.
“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,” according to a legal notice titled “Order to serve notice of disobedience to order of court via newspaper publication,” which was partially published in some national dailies.
The topic was postponed until next Thursday.
The following banks and their principal officers have been cited for contempt: Access Bank, Citibank, Jaiz Bank, Union Bank, Fidelity Bank, First Bank of Nigeria Plc, First City Monument Bank, NDIC (heritage bank liquidator), Polaris Bank, Stanbic IBTC Bank, Standard Chartered Bank, Taj Bank, United Bank for Africa, and Zenith Bank.
Twenty banks were instructed to send funds to the respondent’s credit into AFEX’s GTB account until the N17.81 billion is paid back in the court order dated May 27, 2024.
The N15.77 billion outstanding and unpaid balance as of April 17, 2024, and the N2.04 billion cost of recovery and incidental charges make up the N17.81 billion loans.
Additionally, the Central Bank of Nigeria Anchor Borrowers’ loan facility was used to purchase the commodities housed at AFEX 16 warehouses spread across seven states. The court ordered an injunction enabling GTB to seize control of these warehouses and sell the items within.
The court had filed a contempt order against AFEX and many of its top executives, including Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi, earlier this month.
Court documents state that AFEX obtained the GTB loan facility for the Anchor Borrowers Program in order to finance smallholder farmers who were enrolled in the CBN Anchor Borrower’s program.
It was anticipated that the loan would be paid back through commodity sales. Even with an extension, AFEX did not fulfill its half of the agreement.
Following the temporary court ruling, AFEX said it had paid back almost 90% of the loan facility in a statement.
The exchange stated, “Yet, we are still in talks with CBN regarding the outstanding amounts of the aforementioned facility, even though we have paid out a portion of the loan from our own funds to the farmers.”
Additionally, it stated that beginning in 2020, farmers received input for three straight seasons at full loan value.
The exchange further stated that it had continued to reimburse the loans up until economic challenges affected the farmers to whom they had disbursed the funds.
“During the program’s operationalization, over 800,000 hectares of farmland were financed; however, notable macro and policy headwinds, such as the financial crunch resulting from the Naira redesign policy, significantly impacted the smallholder farmers’ productive capacity and market participation in the 2022–2023 season.
After eight years of providing input finance to farmers, we saw 90% repayment rates from farmers; as a result, this time around, farmers only returned less than 40% of their input loan bundles. After a 6-month extension period and at the end of Q12023, our ability to repay the entire loan amount was eventually hampered by the low payback rate, AFEX continued.
Additionally, according to the commodities exchange, farmers who sold at a discount to obtain quick cash infusions to support their family during the period and were unable to repay, are still being negatively impacted by the financial constraint.
AFEX has demanded that the Nigerian Central Bank implement the Anchor Borrowers program’s clause guaranteeing up to 70% of the collateral.
“As shown in the attached letters, we have been highlighting these limitations on the part of the defaulting farmers in our engagements with Guaranty Trust Bank Limited, a Participating Financial Institution in the program, and the apex bank. We have suggested to the CBN that it activate the risk-sharing structure put in place for the program and release funds accordingly to sustain activities and allow for much-needed recovery efforts in our agriculture sector.”
“Considering these interactions, we deem the latest actions taken by Guaranty Trust Bank Limited as untimely, transpiring amid candid discussions with all stakeholders to identify a course of action that avoids unduly penalizing farmers, who have been most severely impacted by macroeconomic circumstances beyond their control,” AFEX declared in its conclusion.
When the program 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 guidelines of the Anchor Borrowers’ Program, farmers who profit from the program 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.
The Anchor Borrowers scheme 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 scheme, of which more than N500 billion was due for repayment.
Since then, the CBN has ended the initiative as it shifts its focus from interventions in development financing to maintaining price and monetary stability, which is its primary responsibility.
