The ongoing dispute between Afex Commodity Exchange and Guaranty Trust Bank (GTBank) regarding a N17 billion loan under the Anchor Borrowers Programme has escalated into a judicial battle. The plaintiff is suing no fewer than sixty senior executives from thirteen different commercial banks. These executives, including chairpersons, CEOs, directors, and corporate secretaries, are charged with disobeying a court-issued injunction against debiting AFEX’s accounts.
The Federal High Court, Lagos Division, presided over by Justice CJ Aneke, issued an order in suit no. FHC/L/CS/911/2024 involving Guaranty Trust Bank (GTBank) Limited and AFEX Commodities Exchange Limited. The order mandates that chairpersons, managing directors, directors, company secretaries, and the liquidator of Heritage Bank (Nigeria Deposit Insurance Corporation) be committed to jail for disobeying its injunction issued on May 27.
A legal notice titled “Order to serve notice of disobedience to court order via newspaper publication,” appeared in several national newspapers on Thursday. It partially read: “An order was granted allowing the Plaintiff Applicant to serve Form 48 (Notice of Consequences of Disobedience to Court Order) dated June 11, 2024, and all related documents for this contempt proceeding, including Form 49, to the 1st-60th parties cited for contempt.”
The parties cited for contempt include Access Bank Plc, Citibank Nigeria Limited, Jaiz Bank Plc, Union Bank of Nigeria Plc, Fidelity Bank Plc, First Bank of Nigeria Limited, First City Monument Bank Limited, Nigeria Deposit Insurance Corporation (as liquidator for Heritage Bank), Polaris Bank Limited, Stanbic IBTC Bank Plc, Standard Chartered Bank Nigeria Limited, Taj Bank Limited, United Bank for Africa Plc, and Zenith Bank Plc, along with their principal officers.
In a court ruling dated May 27, 2024, twenty banks were ordered to transfer the respondent’s funds into AFEX’s account at Guaranty Trust Bank (GTBank) until the N17.81 billion debt is repaid. This debt includes N15.77 billion, which was the outstanding amount as of April 17, 2024, along with N2.04 billion for recovery costs and incidental expenses.
The court also issued an injunction allowing GTBank to seize and sell commodities from AFEX’s 16 warehouses across seven states. These commodities were purchased using the Central Bank of Nigeria’s Anchor Borrowers’ Program loan facility.
Earlier in the month, the court initiated contempt proceedings against AFEX and some of its principal officers, including Ayodele Balogun, Jendayi Frazer, Justin Topilow, Mobolaji Adeoye, and Koonal Gandhi.
According to court documents, AFEX obtained the Anchor Borrowers Programme Loan from GTBank to finance smallholder farmers under the CBN Anchor Borrowers’ Programme, intending to repay the loan through commodity sales. However, AFEX failed to meet this obligation even after an extension was granted.
Following the interim court order, AFEX stated it had repaid about 90 percent of the loan facility. “However, a portion of the loan remains outstanding with the farmers, and while we have paid out a portion from our own funds, we remain in discussions with CBN regarding the outstanding amounts,” the exchange said. The full loan amount was used to provide inputs to farmers over three consecutive seasons starting in 2020.
AFEX consistently repaid the loans until economic challenges affected the farmers’ operations. “Over 800,000 hectares of farmland were financed through the programme; however, significant macro and policy headwinds, including the cash crunch from the Naira redesign policy, severely impacted the smallholder farmers’ productivity and market participation in the 2022/2023 season. This resulted in less than 40 percent repayment from farmers on their input loan bundles, down from our 90 percent repayment rates over the previous eight years of input financing for farmers. The low repayment rate affected our ability to refund the full value of the loan by the end of Q1 2023, even after a 6-month extension,” AFEX added.
The ongoing cash crunch effects have continued to impact farmers, forcing them to sell at below market value for immediate cash, leaving them unable to repay. Meanwhile, AFEX has urged the Central Bank of Nigeria to activate the collateral guarantee of up to 70 percent included in the Anchor Borrowers programme. “Our engagements with Guaranty Trust Bank (GTBank) Limited, a Participating Financial Institution in the programme, and the apex bank have highlighted the limitations of the defaulting farmers. Suggestions have been made to the CBN to activate the risk-sharing structure of the programme and release funds accordingly to sustain activities and allow for necessary recovery efforts in our agriculture sector. In light of these engagements, we consider the recent steps by Guaranty Trust Bank (GTBank) Limited to be premature, coming in the midst of ongoing conversations.”
At the start of the Anchor Borrowers’ Programme in 2015, the CBN aimed to create economic linkages between smallholder farmers and processors to enhance agricultural output and stabilize food prices. According to the programme’s guidelines, farmers repay their loans with produce, covering the principal and interest, to an anchor who then credits the farmers’ account with the cash equivalent.
By 2022, over 4.8 million people had benefited from the programme. In a 2023 statement, the CBN announced it had disbursed N1.079 trillion under the programme, with over N500 billion due for repayment. The CBN has since discontinued the programme, shifting its focus from development financing to its primary responsibilities of price and monetary stability.
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