A seven-page letter from the Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB) was dropped in the office of Abba Ruma, the minister of agriculture and water resources on December 18, 2008. The letter, Re: Agricbank Facility to Kwazimbo Enterprises, was signed by Babale Girei, managing director of the bank. It was dated December 16, 2008.

Girei explained to the minister why a loan facility of N650 million was given to the Zimbabwean farmers the Kwara State government introduced to the bank and why the bank was keen on recovering its money from the state government. The bank director told the minister that the loan was given to Kwazimba Enterprises in May 2006 for expansion of its maize farms. The loan was to provide an additional 1600 hectares of maize farm to an existing 2400 hectares. Each of the 13 farmers was to manage about 308 hectares of maize.

The loan had a tenor of three years, which would expire in April this year, with a one-year moratorium on principal and interest. As at the time of approval, the interest was 14.5 per cent, but reduced to eight per cent in line with federal government directives. The loan was guaranteed by the Kwara State government through an Irrevocable Standing Payment Order (ISPO), which meant that in the event of default by the farmers, the money would be deducted from the state’s statutory allocations.

The magazine has gathered that after securing the loan, the farmers diverted it into another venture. Instead of expanding its maize production, the money went into silage production to feed diary cattle. Thus the bank’s expectation that the money would be repaid from proceeds of maize sale was dashed. The farmers have not been able to repay the loan.

As of October 2008, the amount due for repayment was N628 million, but Kwazimba Enterprises only managed to pay a meagre N122 million. More disturbing, according to Girei, is the fact that the N122 million paid back from the loan was paid by the  Kwara State government on behalf of the company, a development interpreted to mean that the company was not in a position to repay the loan.

“The implication of this massive default is that the company has failed to live up to its obligations to the bank. We have written several demand notes and appeal letters to the company and the Kwara State government as the guarantor of the loan but to no avail,” the letter stated.

Girei said further that the promise by the state government to back the loan with ISPO was a key factor the bank considered in granting the loan. “We request to invoke the ISPO in line with the loan agreement, the state government should make good its promise and direct immediate deduction from its monthly allocations. The loan was for maize production and the proposed repayment was two installments. Only a paltry sum of N122 million had been paid so far. In view of poor repayment and the huge amount in default, the bank cannot afford to entertain any further rescheduling. We therefore recommend invocation of the ISPO for deduction of the debt from Kwara State government statutory allocation,” he said in the letter.

Sources at the agriculture ministry told the magazine that Girei’s letter was a response to an earlier letter written to the minister by the Shonga farmers. The letter, signed by Alan Jack, the managing director of Kwazimba Enterprises, and dated November 18, 2008, requested for another moratorium of 18 months and a rescheduling of the loan.

Jack stated that they were asking for a rescheduling of the loan because all the 13 farmers had been linked to Shonga Farm Holdings (SFH) and received their funding from the consortium of shareholding banks. He said funding through the shareholding banks had taken longer than expected, and had led to a situation where farmers’ individual projects were running behind schedule.

The letter concludes: “We the farmers would not like the state to have to pay these debts through its ISPO, as the project is a wholly owned Private Partnership. We have the full backing of Kwara State in our endeavours.”

At the time the farmers took the agric bank loan, they had also taken N720 million from the Intercontinental bank. That is yet to be repaid, too.

Some top officials of the agric ministry and the agric bank, who spoke to the magazine, said the farmers’ letter was a ploy by Governor Bukola Saraki to dodge repayment of the loan through the ISPO and turn it into a bad debt. “No bank would give a foreigner such a loan without adequate security. But the Kwara State government said they brought the farmers and guaranteed the loan,” one of them said. 

The Zimbabwean farmers’ project in Shonga is a collaborative venture between the state government and 13 Zimbabwean farmers who were dispossessed of their farmlands in Zimbabwe. The state government said it invited the farmers in order to boost agricultural production in the state and transform the existing subsistence farming system into modern, large-scale, commercial farming. The 13 farmers came together and registered under the name of Kwazimba enterprises, which has now transmuted into Shonga Farm Holdings.

On paper, it is a fascinating business with the three components of modern farming-crop, poultry and dairy production. It was conceived to have beneficial spin-off effects on national food security. In addition, it promised to take out of the job market over 4,000 Nigerians. But since 2004 when the Saraki administration signed a collaborative agricultural agreement with the farmers, the project has been swathed in controversy. Critics, especially members of the opposition parties in Kwara State, have derided the project, saying it was a devise to siphon state money out of the country.

The performance of the project so far seems to lend credence to the allegations of critics. In the agreement signed between it and the farmers in 2004, the state was to give each of the farmers a loan of N35 million and also guarantee a private sector loan of another N35 million for each of them. Altogether, the state was expected to give the farmers a whopping sum of N1,05 billion (one billion and fifty million naira) to take off. But the money was expected to be paid back to the state, according to the agreement with the farmers, over a period of three years.

But four years after take-off, the farmers have not only failed to pay back the money given to them by the state, they are also asking for more. Governor Saraki has come under severe criticism for the seeming failure of the project. Critics say the produce of the Shonga farms is not available in local markets, and they wonder where they are being exported.

The development has forced Saraki to explore other ways of raising money for the farmers without further depleting the lean resources of the state. It had also become difficult for Saraki to persuade any bank to lend the farmers money since they had no collateral and had defaulted in payment of earlier loans. But as the chief executive of a state, he was able to get five banks to come together to jointly finance the project with the state guaranteeing the funds through an ISPO. The five commercial banks are: GTB, Intercontinental Bank, UBA, Finbank and Unity Bank. Sources said the five banks have invested nearly N1.5 billion in the Shonga farm as of January this year.

As a result of the farmers’ inability to pay back monies given by the state, the government quickly pre-empted critics by saying it has converted the funds into equity in the business. The government says the Shonga farm is a private business, and government has decided to convert the loan it gave the farmers into shares in Shonga Farm Holdings.

Gana Yissa, commissioner for agriculture, in an interview with the magazine confirmed that the loans given to the farmers had been converted into equity for the state. He said the state hence had 15 per cent stake in the farm. He also debunked the allegation that the farm project had become a financial burden on the state. “The state government has shifted the burden to the banks. There is no burden on the state. The 15 per cent equity is just what we have now, and the state is not going to give another kobo. The farmers will definitely pay back the loans they took from the banks. That was why we involved the banks in it,” he told the magazine.

But when asked why the farmers have not paid the loan taken from Agric bank, contrary to agreement reached with the bank, Yissa said he was not aware the loan had not been paid. “I remember the farmers took a loan of N650 million from the bank. But the information I have is that a substantial part of the loan had been paid. That is the information available to me,” he said. The commissioner could also not give an answer when asked to state how much the Kwara State government had invested in the Shonga farm. “I am not in a position to give you the figures,” he said. How then did the state government come about the 15 per cent shares in the farm?

But one of Saraki’s critics said Yissa’s explanation that the financial burden of the farm had been shifted to the banks was simplistic. Iyiola Oyedepo, a former commissioner for agriculture in the state, said the government could not say it was no longer financially responsible for the farmers when the state guaranteed all the loans they took by pledging an ISPO. He said the state government went to the state house of assembly to get an ISPO to the banks in order for them to release money to the farms.

Oyedepo, a lawyer, has been a vocal critic of the farm project, describing it at public fora as “a fraud.” He said the farmers came to the state without any form of capital to set up a farm business in Shonga, stressing that the government had to do everything for the farmers, including paying compensation on land acquired by private businessmen. He said in law, land could only be acquired for overriding public interest. Oyedepo did not see how the farm project constituted overriding public interest. “The whole arrangement is a fraud. If a foreign investor is coming to any country, they ought to come with their capital. This would include their resources and skill. But I know that these people did not come to Kwara with any capital. Anything you find in Shonga farm today was paid for by the state government. It is like Julius Berger coming to Nigeria and asking the federal government to buy all the equipment it would need! That is why I say the arrangement is a fraud, and the truth would become clear when Bukola Saraki vacates power.”

Oyedepo has written a 90-page book on the Zimbabwean farmers’ project in Kwara State. The book is a critique of the project. He alleged that the peasant farmers in Shonga were forcefully driven out of their land to satisfy the foreign farmers. He said the state government had not been fair to the local farmers who could have performed far better if given half the support the government gave the foreign farmers.

Yissa told the magazine that critics of the Saraki administration have deliberately shut their eyes from seeing the “good things” the farm has done to the state. He said mass production of crops was going on in the farm and over 4,000 people from the state had been employed in the farm. In addition, he said the farm had attracted infrastructure into Shonga. “But more importantly, the Shonga project has shown that given the right environment, Nigeria can produce agricultural yields that are world class. It has also put the state on the world agricultural map and many states in the country today want to replicate the Kwara example.” 

Yissa’s optimistic views on the farm project appeared to be the popular view among top government officials. There has not been any dissenting view from the government.

Shonga, the location of the farms, is a distance of about 120 kilometers from Ilorin, the Kwara State capital. It is a huge expanse of arable land parcelled out to the 13 white farmers, with each owning 1,000 hectares. For proper demarcation, the farms are marked from Farm 1 to Farm 13. The magazine gathered that the farms originally belonged to 33 local farming communities. But now the farms are on lease to the whites for 25 years. The lease is renewable.

Recently, when the magazine visited the farms, there were no green vegetation of crops, only wild plants and dry grasses. A tractor workshop was also seen in one of the farms. The magazine counted five tractors and at least a dozen other farm machinery on the farms. All the machines were idle when the magazine visited. Mohammed Yahya, a local staff of the agriculture ministry attached to the farm said the reason was because the farmers had finished harvesting and were only waiting for the next farming season. He said planting on the farms was rain-fed as there was no irrigation system in place yet.

He said the irrigation contract for the farms had been awarded, adding that the project would be completed by next year. He said until the irrigation system was in place, the farmers would not be able to do all-year farming. Water from the River Niger is just 500 metres away from the farm site.

At Farm 9, where the only dairy factory is located, the magazine spoke with the farmer running the place. Paul Retzcaff said he set up the factory in April last year due to pressure from Governor Saraki. He said the factory currently relied on the Gersy cows imported from South Africa. He brought 800 of them last year for the dairy to take off. According to him, Gersy breed produces higher volume of milk than other breeds.

Retzcaff, who also spoke on behalf of his 12 colleagues, explained why the farmers have so far been unable to repay the loans they took. He said they had to contend with delays in importation of raw materials and some of their machinery, which made it difficult for them to meet set target.

He said, “You know we have delays in importation of some raw materials and some machinery. Some of them are delayed at the Lagos port. This kind of thing increases the cost of operations but the banks don’t want to hear this. Their concern is that we gave you what you asked for, so why are you asking for more instead of repaying us. We are just asking the banks to give us a little more money, just a fraction of what they’ve given us before.”

He commended Governor Saraki, who he said made it a lot easier for them to start farming in the state by giving them all they needed for take off. He said the state did the roads, cleared the farmland and built accommodation for them. He said the state also gave them money to start business, but added that the money was given as loan. He said they would repay the loans they took from banks as soon as they started making profit. Asked when that would be, he said in the next few years.

Getting the people of Shonga community to talk on the farm project was a difficult assignment. There appears to be an unwritten law that forbids the people from speaking about the project. Those approached asked the reporter to go to the emir’s palace for the opinion of the community. Haliru Yahyah, the emir of Shonga, was said to be out of town when the magazine visited his palace.

But Mohammed Yahyah, the emir’s younger brother who spoke to the magazine, said the farm project was a blessing to his people. He said the farm had improved the economy of the community and some of the local people employed in the farm got remuneration as high as N1.2 million in a year. He said no farmer had made that kind of money before in the community. “Now people can buy their own motorcycle and build their own houses. GSM has also come to our town because of the white farmers. We have a well-equipped clinic and good road. Our people are happy because of the white farmers.” If the locals are happy, are the banks happy? But, more importantly, has the objective been achieved?

http://www.tellng.com/specialreportdisplay.asp?id=88

There was story done about this farmers a few months back on Al-Jazeera