Assets of the National Cereals and Produce Board (NCPB) risk auction over a Sh7.3 billion debt.
The board used its assets as collateral to secure the loan from the Kenya Commercial Bank.
The cash-starved State agency further has an additional Sh4.1 billion maize subsidy debt and Sh1.11 billion owed to State Department of Devolution, Agriculture Development Corporation (ADC), Agriculture Food Authority (AFA) and County Government of Murang’a.
NCPB chairman Mutea Iringo (pictured) told the National Assembly’s Agriculture committee that the board has been holding an un-serviced bank loan of Sh6.38 billion as at February 28, 2021.
The facility continues to accrue interest and penalties of Sh110 million per month at a rate of 22.5 per cent.
Currently, the total interest charged stands at Sh3.1 billion.
“It was worth noting that the total loan exposure is Sh7.3 billion – Sh6.38 billion unserviced KCB facility and Sh1.0 billion being the interest charges paid from NCPB resources which is reimbursable,” he explained.
Failure to pay
He said due to the failure to pay the loan, KCB recalled the entire loan facility in March last year, overdrawing the NCBP operating accounts held with the bank.
He said this action blocked NCPB from accessing banking services from KCB, which is its main banker.
“In the event of this position not being regularised soon, the bank will exercise the right to liquidate the NCPB properties which are held as collateral for the loan as per the facility financing covenants,” he explained.
He told MPs that the credit worthiness of NCPB has been greatly impaired to other bankers, with the bank pursuing CRB listing of the current board of directors.
The board said the financial constraints has made it impossible for NCPB to fully participate in the ‘Big 4’ Agenda under the Warehousing Receipt System Project due to dilapidated stores.
The financial struggles by the board emerged even as it became apparent that the government was yet to make a decision on the request for disposal on five non-core assets by the cereals board.
“The implementation of the 2020/2023 strategic plan will require funding to the tune of Sh24.3 billion which will be sourced largely from the liquidation of the government debts, borrowings and disposal of non-core assets,” said Iringo.
He told the committee chaired by Silas Tiren (Moiben) that the request for disposal of the assets was under consideration by the government following approval by the board’s directors.
The State agency is also owed billions of shillings by various institutions.
“Currently NCPB is owed Sh16.22 billion by various government ministries and agencies for services rendered and fertiliser supplied,” said Iringo.