NIRSAL provides breakdown of $373m facilitated for agriculture

A breakdown of the $373 million said to have been facilitated to different areas of the agricultural value chain by the Nigerian Incentive Based Risk Sharing System for Agricultural Lending, (NIRSAL), has been provided to BusinessDay.

In a detailed response provided by NIRSAL, showing the Credit Risk Guarantees and other Agricultural Risk Management Tools and Products, it was indicated that the agency has facilitated N43.8 billion for Agricultural Inputs; N1.7 Billion for Mechanization; N19 Billion for Primary Production, and N20.9 Billion into Processing.

Aliyu Abdulhameed, NIRSAL’s Managing Director, also clarified that the agency is not a lending institution, but created to stimulate the flow of affordable finance and investments into fixed agricultural value chains.

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He emphasised that the agency is able perform this mandate through fixing of agricultural value chains, building long-term capacity, and institutionalising incentives for agricultural lending leveraging its five (5) strategic pillars namely: Risk Sharing, Innovative Insurance Product Development , Technical Assistance, Incentive and Rating.

“Thus, NIRSAL serves as a catalyst that enables providers of finance and investment, to lend and invest in agribusinesses by leveraging on its Credit Risk Guarantees and Risk Management Products, Tools, Techniques, Methodologies and Strategic Partnerships,” Abdulhameed noted.

He further explained that, through its Credit Risk Guarantee, NIRSAL has facilitated about N85.5 billion since Incorporation by the CBN in 2013 to date. “At the prevailing exchange rate year on year, this translates to well over $373 million up to Q3, 2018,” he said.

Abdulhameed added “This amount was not facilitated for the upstream (Primary Production/Farming) segment alone (largely at the level of the smallholder farmers); but across all four segments of the agricultural value chain.”

Breaking the financing down, he said “a total of N45.6 billion in the pre-upstream segment of the agricultural value chain was facilitated primarily to mechanization and agricultural inputs such as fertilizer, seeds and agrochemicals required before primary production.

“Over N19 billion into the upstream which is mainly the primary production of maize, cassava, soybeans, rice, cotton, poultry among other commodities; as well as N20.9 Billion midstream segment of the agricultural value chain used predominantly in the processing of cassava chips, rice milling, cotton, oil palm, and cocoa.”

Abdulhameed said that to date, NIRSAL has paid a total of N4.6 Billion as claims on Credit Risk Guarantees that crystallized to providers of finance (Deposit Money Banks).

Further analysis of the numbers has revealed that in addition to paying out on crystallized guarantees, NIRSAL has also paid about N1Billion as Interest Drawback (IDB) to borrowers. NIRSAL’s Interest Drawback scheme was established to reduce the burden of interest paid on loans by value chain actors under NIRSAL’s agricultural Credit-Risk Guarantee scheme, who perform well in their loan repayment.

“It is important to state that through NIRSAL’s facilitation, a total of 373,752 direct jobs have been created and 1.8 Million indirect jobs in the pre-upstream, upstream, midstream and downstream segments of the agricultural value chain, specifically in the areas of Mechanization, input supply, primary production and processing,” Abdulhameed also stated.

He also noted that insurance is a critical measure deployed by NIRSAL in managing and mitigating risk.

“It is an essential component of NIRSAL’s five (5) pillars. This Insurance facility is designed to expand agricultural insurance products to reduce credit risk and increase lending across the agricultural value chain.

“NIRSAL’s goal is to expand insurance uptake by primary producers from 0.5 million to 3.8 million by 2026 and contiunally develop insurance products that will give financial institutions and Agricultural Value Chain players the comfort they need to lend to the agricultural sector while building the capacities of underwriters.

“Prior to NIRSAL’s intervention, Agricultural insurance in Nigeria was indemnity based which only provided compensation equivalent to farmer’s cost of production. The uptake of this insurance product was very low,” noted the NIRSAL CEO.

 

Onyinye Nwachukwu, Abuja