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CBN guarantees 224 projects for farmers through NIRSAL

By on June 12, 2015

The Nigeria Incentive-Based Risk Sharing Agricultural Lending (NIRSAL) said it had guaranteed 224 projects for farmers  worth N53 billion in the last two and half years.

NIRSAL, an initiative of the Central Bank of Nigeria (CBN), the Bankers Committee (BC) and the Federal Ministry of Agriculture & Rural Development.

It provides guarantee in form of Credit Risk Guarantee (CRG) as a comfort for the Banks to lend and also incentivise the farmers through provision of Interest Drawback Program (IDP) to be paid quarterly based on the agricultural project. The Guarantee ranges from about 30-75per cent depending on the Agricultural value chain involved. IDP also ranges from 20-40per cent depending on the category.

Head,  NIRSAL Project Implementation Office and Development Finance Department, Mr. Aliyu Hameed, discloses at a zonal sensitisation workshop on the financing framework for agricultural value chain held in Sokoto, that the huge amount was guaranteed to borrowers in different agricultural value chain, especially those engaged in poultry farming.

“Most of the guarantee amounting to N53 billion went to the processing segment of the value chain but I can tell you that the poultry segment got most of the money and support from NIRSAL in the last two and half years,”he said.

He said  NIRSAL had been able to give interest-drawback support to farmers worth N698 million in the last two and half years.

Hameed stated that the initiative was aimed  at boosting food security and reducing import bill in the country.

He admitted that financing for agriculture was a very big challenge to all stakeholders, hence the move by the CBN to see how it could make commercial banks finance agriculture in Nigeria.

“What we actually do is to serve as a middleman between farmers and the banks and as such issue credit-risk guarantees to the commercial banks. So, it is a form of collateral which can encourage the bank to lend money to farmers through their farming associations provided that the project is viable.

“And if the borrower successfully pays back the loan then NIRSAL issues him an interest-drawback support,”Hameed explained.

According to him, the workshop was aimed at providing value chain players and other agribusiness stakeholders an overview of the NIRSAL initiative and the requirements towards accessing the NIRSAL guaranteed facilities and bank incentives.

He emphasised that the workshop was organised in the zone to sensitise the people on the activities of NIRSAL in view of the fact that farmers in Sokoto, Kebbi and Zamfara states were not actively involved in the scheme.

“We discovered that we do not have farmers coming through our window to borrow money in Sokoto, Kebbi and Zamfara states, that is why we organised this workshop to tell them that they can use CBN branches in the zone to participate in the scheme by approaching commercial banks,”he stated.

He explained that an entrepreneur could borrow a maximum of N50 million,  farming cooperatives and associations could borrow over N50 million while large scale enterprises could access up to N2 billion from the scheme.

The Head of NIRSAL added that farmers participating in the scheme could borrow at the interest  rate of four percent.

In a remark, the Branch Controller, CBN Sokoto, Malam Mohammed Idris, said agricultural lending represents only 2 per cent of the total lending of banks in Nigeria.

He said banks do not lend to agriculture due to lack of understanding of the agricultural sector while the credit assessment processes were still poor and the sector regarded as highly risky.

Idris pointed out that NIRSAL tackles both the agricultural value chains and the agricultural financing value chain in moving the sector forward in Nigeria.

“The strategic intent of NIRSAL is to spark agricultural industrialisation process through increased production and processing of the greater part of the commodities produced in the country so as to boost economic earnings across the value chain and create jobs for our teeming unemployed youth.

“So, NIRSAL will build capacity of Nigerian banks and other financial service providers to lend to agriculture and provide technical assistance for farmers to reduce the risk exposure of financial institutions that lend to the sector,”he added.

 

[ThisDay]