Central Bank of Nigeria guarantees N100bn for farmers under new agriculture lending scheme
The Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) initiated by the Central Bank of Nigeria (CBN) has guaranteed close to N100 billion for farmers.
The scheme has also helped push bank lending to the agriculture sector to about 4 percent, from just less than one percent as at 2010.
But, NIRSAL targets to raise total bank-agricultural lending to at least 10 percent by 2017 and especially change the way the financial system and the economy see agriculture.
Jude Uzonwanne, head, NIRSAL Implementation Office, said that between July 2012 and January 2013, the scheme sold approximately N14 billion in guarantees, while between January and the end of March, 2013, about N12 billion guarantees were sold to the farmers.
The scheme recently signed an agreement with the ministry of agriculture to issue up to N60 billion guarantees to its Growth Enhancement Scheme (GES), Uzonwanne also disclosed.
“We started selling guarantees in 2012 and if you put together what we have done since last year and the GES scheme for 2013, our portfolio is fairly getting close to N100 billion lending to agriculture and the critical thing is that there is no one kobo of CBN or government involved but private sector money in form on-lending from the banking system.
“In 2010, the level of lending to agriculture was under 1 percent of all lending in the Nigerian banking system. Today it is about 3.6 percent and our goal is to get that number to 10 percent by 2017. So we have tripled the levels of lending to agriculture in less than basically three years and our goal is to do it again and do it in a better way,” Uzonwanne told BusinessDay in an interview.
“NIRSAL is owned 100 percent by the CBN as at date, the goal however is to scale down most of the apex bank’s position in future, so that private sector operators can come in.
The scheme emerged out of lessons from inefficiencies of the CBN’s past agricultural lending programmes which yielded less to the farmers and the economy as they were unable to unlock the kind of bank lending that was expected into the agriculture sector.
Uzonwanne confirmed that key lessons from a comprehensive review of past CBN efforts at boosting lending to the agricultural sector resulted in NIRSAL with a few other experiences.
“One of the lessons is that we made the mistake of simply throwing money at the problem rather than using a combination of money, expertise, and much more kind of equity type hands-on involvement. The second lesson was that guarantees do work, but you do have to offer them in a very prudent way, and the third lesson was that a lot of financial institutions have simply forgotten how to lend to agriculture and did not have a deep bench of agriculture bankers, so you needed to give them time to build that capacity,” he further explained.
Apart from guaranteeing bank lending to farmers, NIRSAL also works ahead to help find industry-wide solutions to some of the challenges the operators face in order to ensure sustainability of their businesses.
Uzonwanne’s said, “We view ourselves not just as people who provide financial guarantees, but we are building capacities for these industries with technical advice and help through the value chain solutions that will help them get their products distributed widely across the country, organise themselves better, introduce them to banks. We basically do a better job at the fundamentals of running business.
“One other thing we do is that we help the industry to negotiate industry-wide solutions and this is what we have done for the tomato industry to help them think other strategic ways with which they can domesticate more paste production.
“We import roughly about 300,000 tonnes of paste from China, Italy and a couple of other places but in the last two years, we have been negotiating with the industry to try and get them to produce more paste domestically and as part of that process, we committed to making a representation to the minister of finance to help change the tariff on imported pastes.
“ We have done it, we have written the letter, it has gone to the budget office, we understand that they are discussing it at the moment, we are about to begin a similar process with the finished leather goods industry, incredible potential- the Nigerian leather which people look down upon”.
Uzonwanne further pointed out that NIRSAL is involved in some sort of private equity behaviour where, for instance in the case of the ‘finished goods industry’, they could help the operators, working with an advertising agency, set up branding campaign and help to change peoples’ perception of some of these locally made products.
“We would help them find other channels to sell their goods, and for the fashion designing which is actually an industry that has grown up almost without government help, we want to help uplift their profile. For the other companies like the Amira yoghourt in Abuja that has been very successful, the talk now is how do we help them get to the next stage of growth like the supply chain that will get your product distributed more widely,” he stressed.