Kenyans losing KSh4.1m daily in repaying bank overdraft for fertiliser subsidy
Kenyans losing KSh4.1m daily in repaying NCPB’s bank overdraft borrowed by the government to finance fertiliser subsidy
Kenyans losing KSh4.1m daily in repaying NCPB’s bank overdraft borrowed by the government to finance fertiliser subsidy.
According to the Auditor-General, the National Cereals and Produce Board (NCPB) is annually paying more than Sh1.5 billion in interest and default fees on debts owed to KCB Bank.
After borrowing an additional Sh1.29 billion to pay for the government’s fertiliser subsidy, NCPB’s overdrafts at the lender had grown to Sh6.7 billion by June of last year, according to Auditor-General Nancy Gathungu, who noted the loss-making body’s deteriorating financial status.
The Auditor-General noted in the 2020/21 report on the organization charged with managing the government’s national food reserves that while NCPB losses soared by nearly 200 percent during the year, its overdraft increased by 24 percent from Sh5.4 billion in 2019/20.
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“The bank overdraft is related to the government fertiliser subsidy programme that was being implemented by the board on behalf of the Ministry of Agriculture. As previously reported, KCB continues to charge 12.5 percent interest and 10 percent default rate on the outstanding loan,” Ms. Gathungu reported.
The 12.5 percent interest translates to Sh841 million per year, while the 10 percent default charges translate to Sh672.9 million per year.
In total, NCPB is incurring Sh1.51 billion annually on both charges, or about Sh4.1 million daily.
The report signed on September 2 noted that the overdraft is negatively impacting NCPB’s operations and liquidity.
“In the circumstances, the Board continues to incur default charges and interest on the bank overdraft balance of Sh6,729,563,152, which may affect its liquidity,” it states.
NCPB’s revenues have also continued on a downward trend, reducing by 53 percent in the year to June 2021 to Sh774 million from Sh1.66 billion in 2019/20.
The report observed that NCPB sales declined by Sh885.8 million during the year, even as it raised questions over some fertiliser and maize transactions in the Meru and Nakuru depots.
“Similarly, the operating loss increased from Sh1,098,935,685 reported in 2019/20 to Sh3,128,788,783 in the current year under review. In the circumstances, the Board may not internally generate enough revenue to finance its operations in the future without relying on government support,” the report states.
The report further observes that while NCPB continues to face financial turbulence, it has debtors owing it nearly Sh800 million that has been outstanding for over eight years and which it may not recover.
“Included in the amounts are debts totaling Sh725.6 million that have been outstanding for more than eight years. Further, the gross balance of Sh1.6 billion also includes an amount of Sh115.9 million relating to staff debtors. Included in the staff debtors is an amount of Sh62.6 million that has been outstanding for more than eight years,” the report notes.
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