The recent unveiling of the Nigeria Incentive-Based Risk Management System for Agricultural Lending (NIRSAL) by the Central Bank of Nigeria (CBN) has continued to attract reactions from operators in the finance and agricultural sectors of the economy.

NIRSAL, a N450 billion special credit portfolio, set aside by the CBN as its own contribution to the Agricultural Transformation Agenda of the federal government, according to the CBN, is a dynamic and holistic approach that tackles both the agricultural value chain and the agricultural financing value chain.

The apex bank explained that NIRSAL does two things at once; fixes the agricultural value chain, so that banks can lend with confidence to the sector and, encourages banks to lend to the agricultural value chain by offering them strong incentives and technical assistance.
CBN added that NIRSAL, unlike previous schemes which encouraged banks to lend without clear strategy to the entire spectrum of the agricultural value chain, emphasises lending to the value chain and to all sizes of producers.

Economy watchers said the latest intervention by the apex bank was timely given the growing frustration of farmers who complained of lack of adequate support from the financial institutions on one hand, and banks, whose grouse with farmers was a combination of their misplaced priority, difficulty in recouping their money from farmers and the twin problem of poor infrastructure and lack of a robust agric insurance platform to indemnify banks against risks in agricultural lending.

The centrality of agricultural sector to Nigeria’s economy is underscored by the fact that it accounts for 40 percent of the Gross Domestic Product (GDP) and providing over 60 percent of employment. However, the sector represents only one percent of exports. Over the last decade, agricultural growth has slowed down and today it is under-performing despite enormous potentials.

Experts believe that to reverse the trend, there will be need to tackle some of its major challenges such as low productivity, poor technology and cultural practices, low research and development, and under-financing of the agricultural value chain.

The CBN noted that funding level in the agricultural sector stands at about two percent of the total lending of banks as against six percent in a country like Kenya. Some of the reasons for the low funding include lack of understanding of the agricultural sector, perceived high risks, complex credit assessment processes/procedure and high transaction costs.

The apex bank believes that addressing these issues require an innovative approach, hence the introduction of NIRSAL.

Assurance
Giving an insight into the operation of the new arrangement, the Head of NIRSAL Project Implementation Office under the Development Finance Department of the CBN, Mr. Jude Uzonwanne, said the guarantee would be issued by the NIRSAL to the farmers in the states and FCT through commercial banks and other financial institutions. He explained, “NIRSAL mobilises financing for Nigerian agribusiness by using credit guarantees to address the risk of default. NIRSAL is a flexible financing tool designed to change the behaviour of financial institutions.

“It covers all crops and livestock activities in Nigeria, while driving improved investment outcomes and job creation. It is also building on a legacy of previous CBN interventions in agriculture that has helped create thousands of jobs.”

He stated that the CBN programme was designed to create access to finance by integrating end-to-end agriculture value chains such as input producers, farmers, agro dealers, agro processors and industrial manufacturers with agricultural financing value chains – loan product development, credit distribution, loan origination, managing and pricing for risk, and loan disbursement.

“The integration is driven by NIRSAL’s five pillars, particularly the risk sharing pillar and the technical assistance pillars such as risk sharing facility (N45 billion), insurance facility (N4.5 billion), technical assistance facility (N9 billion), agricultural bank rating scheme (N1.5 billion), and bank incentive mechanism (N15 billion),” he stated.

NIRSAL is expected to share risks with banks ranging from 30% to 75% of loss depending on the segment.
According to the CBN, six pilot crop value chains have been identified based on existing crop production levels and potentials in six high-potential breadbasket areas. The crops are: tomatoes; cotton; maize; soya beans; rice and cassava.

NIRSAL Targets
The initiative is aimed at generating an additional $3 billion of bank lending within 10 years to increase agricultural lending from the current 1.4 to 7 percent of total bank lending. It also seeks to increase lending to the “pooled” small farmer segment to 50 percent of the total (typically, banks do not reach these producers individually but through “pools”, i.e., aggregating mediators, such as MFIs and cooperatives).

Another objective of NIRSAL is to reach 3.8 million agricultural producers by 2020 through pooling mechanisms such as value chains, MFIs, and cooperatives and to reduce banks’ break-even interest rate to borrowers from 14 to 7.5-10.5 percent.

Benefits
The initiative is expected to lead to increased lending to agriculture from 1.4 to 7 percent of total bank lending within 10 years, increased income, GDP, foreign exchange earnings and the implication on the apex bank’s ability to manage the value of local currency. In addition, the project will absolve the bank of the need for endless and voluminous subsidies to the agricultural sector.

On the part of banks, there will be opportunity to maintain long term human, institutional and cultural capacity for value chain financing capacity and enjoy lower loan origination and distribution costs. NIRSAL is expected to give agricultural producers increased access to credit. It is also expected to bring about enhanced adoption of better cultural and agronomic practices, use of improved inputs like seeds and fertilisers, increased productivity and profit, income, standards of living, job creation and poverty reduction.

Farmers Shun Agric Loans
However, some analysts have urged the CBN to put in place adequate arrangement to make the implementation of NIRSAL work. They argued that rolling out new programmes when previous ones have not been able to achieve the goals for which they were set up may amount to playing to the gallery. Their position was obviously informed by the report that only N37 billion out of the N189.294 billion which the CBN disbursed to money deposit banks for lending to states and farmers’ cooperatives under its  Commercial Agriculture Credit Scheme (CACS)has been accessed in the past three years.

The report which was attributed to the CBN governor, Sanusi Lamido Sanusi, was described as quite discouraging, given the efforts of government to assist farmers and diversify the economy.

As part of its developmental role, the CBN, in collaboration with the Federal Ministry of Agriculture and Rural Development, established CACS in March 2009 for the promotion of commercial agricultural enterprises in Nigeria.

Experts React
Reacting to THISDAY enquiries last week on the new agricultural policy rolled out by CBN, Managing Director, Renaissance Group, West Africa, Mr. Rotimi Oyekanmi explained that “The agricultural sector is made of mostly subsistence farming. Therefore it relies on mostly smallholders,” adding that cooperatives is not wide spread in agriculture. Oyekanmi said part of the problem is the land use act which means farmers do not own large tracts of land. According to him, urbanisation and rural –urban migration is also a problem, a development he blamed for the neglect of agricultural practice especially by youths.

Insisting that Nigerian farmers will embrace the use of modern farming techniques once the small holders are helped to graduate to large scale farming, Oyekanmi said:“Our farming is also primitive which is caused by small holders. Where we are able to encourage large scale farming, there will be modernised farming methods and practices.”

He said “The large farmers will be able to work with more small holders thus providing essential support by way of farming methods, irrigation and highbred seeds/varieties.

“As we look for improvements required in agriculture, we need to critically evaluate all aspects of farming and the needs to make farming a viable industry with many successes.
“In my view, funding is not the critical requirement for agriculture to be a success and this is evident by the amount accessed from the funds in earlier facilities as reported.”

He maintained that funds would be accessed by viable businesses that have the ability to repay the loans from their farming operations. “We need to focus on the skills and techniques that are more critical – are we producing at competitive yields? If not, why not? It is when we are producing competitive yields that our businesses can be successful, do we even know what yields are for our products?” he asked.
Another stakeholder who spoke on the latest initiative from the CBN is former president, Finance Houses Association of Nigeria, Mr. Eddie Osarenkhoe, who described as worrisome the problem of the sector over the year.

Osarenkhoe said the effective use of the fund would lead to development, bridge the financial agricultural gap and reduce bank’s perception of agriculture as highly risky.
He said the fund would facilitate easy access to loans and agriculture facilities that would enhance performance in the sector.
According to him, the implementation of the loan would determine the level of the success of the scheme.


If there is effective and transparency in the disbursement of the loan, obviously the scheme would record a greater success,” he said.
Speaking in the same vein, former president, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe, said the scheme would boost food production in the economy.

Nzekwe said: ``The scheme would stimulate the real sector and reduce the importation of rice and other local products within the country.”
He also said the CBN should ensure that the interest rate charged on such scheme was low in order to achieve its objective. Nzekwe urged the Federal Government to introduce measures that would stimulate the real sector to future challenges.
``If there is effective and transparency in the disbursement of the loan, obviously the scheme would record a greater success,” he said.
Speaking in the same vein, former president, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe, said the scheme would boost food production in the economy.

I wonder why people will just sit@a place and say the FG is not doing anything,woe unto u blind critics GJ must deliver on the good agenda he has for the people.

woe unto any sycophant who comes here talking about some phantom acheivements we only read on d pages of papers

philip0906: woe unto any sycophant who comes here talking about some phantom acheivements we only read on d pages of papers

Curse be unto any man who deliberately turns a blind eye to the achievements a fellow being just for the purpose of critiscm in bad faith,woe unto the ignorant blind critic for he'll never know.

ubandire:

Curse be unto any man who deliberately turns a blind eye to the achievements a fellow being just for the purpose of critiscm in bad faith,woe unto the ignorant blind critic for he'll never know.

curse be unto any paid/unpaid internet warrior who deliberately does praise singing to the phantom acheivements a fellow samba dancing ijaw man for the purpose of being a sycophant,woe unto the blattant lier for his eyes will never be opened.

philip0906: woe unto any sycophant who comes here talking about some phantom acheivements we only read on d pages of papers

it's obvious you have been paid to blackmail Gej on Nairaland. But my problem with you is that you're so unprofessional about it. A more intelligent hireling will first of all put forward some little facts in aid of his criticism before going on a rampage of abusive words.

Right from the first letter, your sinister motive is betrayed. I am very sure that you did not bother to read thru that article in your haste to attack Gej. If you had, you would have had a better response than " woe unto you". For the third time, I have chosen to educate you once more on issues but this time around on the Agricultural sector. Anybody who has been following events in the polity will admit that the Agricultural Minister has been very visible and outstanding.

A leading newspaper in the country ranked him as the best Minister in Nigeria.( see Sunday THISDAY, May 27th 2012). At the Nigerian Economic Summit Group(NESG) parading captains of industry and the best brains in our economy, the Agricultural Minister received a standing ovation for his remarkable reforms in the agricultural sector. At the MTN investment forum , he was commended and honored for his giant strides in the Agric sector. In less than one year, the minister has brought reforms to the process of fertilizer distribution in Nigeria. Before now, fertilizer distribution was monopolized by a cartel who served as middlemen between govt and farmers.

This system gave room for so much corruption and sharp practices which made their pockets fatter and fertilizer out of the reach of poor farmers. Faced with this challenge, the minister came in and initiated a scheme that ensured that the fertilizer cartel was eliminated. His philosophy was that if coca cola can be in the open market and accessible to all, then fertilizer should take the same dimension. Gradually, fertilizer is finding its way to the open market without the cartel and the farmers can now access it.

Not done, the Agric minister initiated a revolution in the Agric sector with the cassava bread initiative. At this juncture, I know some critics will be furious over the hype about cassava bread so I will go out of my way to give a detailed X-ray of this wonderful initiative. The Agric minister is not a politician but he was one of those intellectuals engaged by Gej from USA to run his transformation agenda. He believes that Nigeria has comparative advantage in the production of cassava but unfortunately we have not been able to process it and refine it for maximum benefits and growth of our economy. In less than a year, the minister brought out the initiative to use cassava flour to bake bread which is an essential commodity for millions of Nigerians. He made a model of the cassava bread and brought it to the Federal executive council meetings. This was not for showmanship as some critics will say. Rather it's a well calculated attempt to publicise cassava bread for local consumption .

Thereafter, he launched a national campaign for the consumption of cassava bread. But this is not all about the transformation. In addition to the cassava bread, he proposed the imposition of higher tariffs and duties on the importation of wheat, flour, rice etc. The idea is that when higher duties are imposed on the importation of these products., it will lead to a corresponding increase in cost of the products in the local market as against those locally produced. It's simple economics. For you to grow the home economy, you need to discourage importation.

It is therefore expected that with the additional taxes on imported flour and wheat, the prices of bread produced from the imported flour will be more expensive than bread which is made from cassava sourced locally. At the long term, we will be self sufficient, curb unemployment, and export to the world.

Not all that surprising that there's been some slight improvement in this area so far actually.

The agriculture minister, like the minister for power, is an accomplished academic, and although academics don't always produce the desired results, I think people who have actually accomplished something in their career before being appointed to their positions - whether those achievements are in business, academia, philanthropy, education, or some other significant field - have more of an incentive to work hard and produce results in order to uphold the image of themselves as achievers to themselves and to others. It's highly unlikely that Dr. Adesina will spend the next few years of Jonathan's tenure doing anything other than improving the agricultural sector, given his background.

I've been led to understand that there are some recycled ministers from previous administrations in GEJ's cabinet and some people that are viewed with distrust or outright contempt, but agriculture is one area in which I think the GEJ administration actually has a chance of delivering good results.

PhysicsQED: Not all that surprising that there's been some slight improvement in this area so far actually.

The agriculture minister, like the minister for power, is an accomplished academic, and although academics don't always produce the desired results, I think people who have actually accomplished something in their career before being appointed to their positions - whether those achievements are in business, academia, philanthropy, education, or some other significant field - have more of an incentive to work hard and produce results in order to uphold the image of themselves as achievers to themselves and to others. It's highly unlikely that Dr. Adesina will spend the next few years of Jonathan's tenure doing anything other than improving the agricultural sector, given his background.

I've been led to understand that there are some recycled ministers from previous administrations in GEJ's cabinet and some people that are viewed with distrust or outright contempt, but agriculture is one area in which I think the GEJ administration actually has a chance of delivering good results.

I totally agree. This is one area where there is remarkable activity. Adesina is doing all the right things and the sector is picking up fast. You will be amazed at the number of people who are seeking to key into Agribusiness opportunities because of the right message Adesina is sending.

PapaBrowne:

I totally agree. This is one area where there is remarkable activity. Adesina is doing all the right things and the sector is picking up fast. You will be amazed at the number of people who are seeking to key into Agribusiness opportunities because of the right message Adesina is sending.

. When it is t ime, I will join issues with the blind critics who will never see anything good in Nazareth. It is interesting to note that another person has been following the developments in the agricultural sector, just like what I noted in the power sector and nearly got verbally lynched by the uninformed and misinformed criticising deviants on nairaland. Whether they like it or not, those of them that are trailblazers in the GEJ administration will remain undaunted in their quest for finesse and their desire to raise this sleeping giant called Nigeria from slumber. Rome like we know was not built in a day. There is a time for everything under the sun and GEJ is using this time to plant and like the bible said, when the sower was sowing, the enemy came in the night and sowed tares,he was patient till the time of harvest,lest he weeds out the tare with the good plants that he took time to sow. That is why some of you who has vowed to see this administration fail has resorted to using BH,negative press, negative criticism and inciting social unrest to undermine the good points this administration is scoring. I would say shame on all you detractors,warmongers and destroyers because I do not think you have any other country save Naija and she will never succumb to your whims.