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CBN, banks to raise agric sector loans to 7%

By BusinessNews Staff on December 27, 2013

The Bankers’ Committee is targeting a loan growth of seven per cent to the agricultural sector of the economy by 2015, Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi has said.

The Bankers’ Committee is an association of Managing Directors of Deposit Money Bank’s (DMB’s), top officials of the CBN, the Nigerian Deposit Insurance Corporation of Nigeria (NDIC). The group meets bi-monthly to discuss the state of banking sector and the economy. Credit to the agricultural sector rose from 1.6 per cent in 2009 to 3.7 per cent this year.

A statement from the committee said the current figure indicates an increase of 85 per cent over the 1.6 per cent growth of the agricultural sector share of banks’ credit four years ago.

Sanusi, who chairs the committee, said the group also expects credits to the sector to rise to five per cent next year. He assured Nigerians and other stakeholders in the sector to partner in promoting an efficient and stable economy for the country. He said part of the 2014 action plan of the committee would be to deliver price stability, financial stability, financial inclusion and economic growth.

He also explained that the committee has revalidated its goals to include the modernisation of the payment system; shared services and infrastructure for the financial industry to reduce cost; increased funding of small and medium enterprises; agriculture; power and telecommunication sectors.

Also, data obtained recently from the Bankers’ Committee showed that between July and November last year, the country’s lenders issued over N6 billion in credit guarantees to farmers. The average loan guaranteed was N397 million with a range of N4 million to N1.5 billion and average duration of 285 days. “It is anticipated that the Nigeria Incentive – based Risk Sharing System for Agricultural Lending (NIRSAL), collaboration between banks and counter-parties will push loans under guarantee in excess of N25 billion before the end of this year,” the CBN said.

It said the increase has been linked to the N200 billion agriculture credit scheme and N600 billion NIRSAL fund, adding that the NIRSAL guarantees up to 75 per cent of bank loans to the sector. Sources said the regulator plans to spend an estimated $500 million to create further incentives for the banks to sustain the flow of agric credit.

The NIRSAL initiative, which is the brainchild of the CBN, the Bankers’ Committee and the Federal Ministry of Agriculture & Rural Development (FMARD), seeks to create incentives and catalyse processes to encourage the growth of formal credit, direct and indirect, for the agriculture value chain, as a mechanism for driving wealth creation among value chain participants.

According to the apex bank, NIRSAL is also expected to be a catalyst for innovative risk management strategies, long-term financing for agribusiness and significant job creation by new entrepreneurs.

“The mandate of NIRSAL is to act as the custodian of all credit guarantee schemes, interest draw back schemes, and commercialisation initiatives related to an integrated value chain approach to agriculture and agribusiness in Nigeria,” the CBN said.

Under NIRSAL, there are five pillars to be addressed by an estimated $500 million that will be invested by the CBN, according to the programme document.

There is also a Risk-sharing Facility of $300 million, planned to address banks’ perception of high-risks in the sector by sharing losses on agricultural loans. There is equally an insurance Facility of $30 million intended to expand insurance products for agricultural lending from the current coverage to new products, such as weather index insurance, new variants of pest and disease insurance.

[The Nation]

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