Guaranty Trust Bank has brought no fewer than sixty senior officials of thirteen commercial banks before the court while a lawsuit between GTBank and Afex Commodity Exchange about a N17 billion loan from the Anchor Borrowers Programme remains outstanding,
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, as reported by PUNCH.
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.
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
The matter 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 scheme in order to finance smallholder farmers who were enrolled in the CBN Anchor Borrower’s scheme.
It was anticipated that the loan would be paid back through commodity sales. Even with an extension, AFEX did not fulfil 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.
“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,” the exchange said.
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.
“Over 800,000 hectares of farmland were financed through the course of the programme’s operationalisation; 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,” AFEX added.
The commodities exchange added that farmers, who sold at below market value to receive quick cash inflows to support their family during the period and were unable to repay, are now being affected by the cash crunch’s aftereffects.
AFEX has demanded that the Nigerian Central Bank implement the Anchor Borrowers program’s clause guaranteeing up to 70% of the collateral.
“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.
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.
Since then, the CBN has ended the scheme as it shifts its focus from interventions in development financing to maintaining price and monetary stability, which is its primary responsibility.
