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Farmers’ benefits from the Nigerian Incentive-based Risk Sharing for Agricultural Lending (NIRSAL)

Nigeria Incentive-Based Risk Sharing System for Agricultural Lending

The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) is an initiative of the Central Bank of Nigeria (CBN), the Bankers Committee (BC) and the Federal Ministry of Agriculture & Rural Development (FMA&RD). The mandate of NIRSAL is to facilitate the flow of credit to agribusinesses and collaborate with Stakeholders to fix broken agricultural value chains in Nigeria.It is anchored on five pillars namely, Risk Sharing Facility, Insurance Facility, Technical Assistance Facility, Agricultural Bank Rating System and bank Incentive Mechanism.

Nigeria is targeting $10 billion of investment in farming to boost food production by 2015. This initiative will provide opportunity of low-interest rate credit to over 70 million farmers and other agro-allied investors in their efforts to optimise operations boost productivity and ensure returns on investments in the hitherto poorly funded sector.The initiative covers all crops and livestock activities of farmers and addresses all technical, administrative and financial activities (land preparation, preparation of water bodies and irrigation programs, cluster development, inputs procurement, planting, harvesting, storage and post-harvesttransportation, logistics and maintenance, processors, packaging, wholesale downstream distributors and specialized service providers)of farmers along the agricultural value chain commodities in which the country has comparative advantage.

The major benefits to farmers are increased access to credit, enhanced adoption of better cultural and agronomic practices, use of improved inputs like seeds and fertilizers, higher productivity and profit, reduced post-harvest losses because of access to improved processing facilities, improved standards of living, job creation and poverty reduction and enhanced food security.

Since its inception, food production has risen by about 8 million tons in 2012 which is about 40 percent of its four-year objective, according to the agriculture ministry.Also, in the same year, agriculture exports rose by N128 billion ($788 million) and food imports fell by N850 billion with an increase in the production of rice, cassava, wheat, sorghum, corn and cocoa which is set to go up by more than a third this season.

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 with the following broad parameters: average loan guaranteed amounting to N397 million, with a range of N4 million to N1.5 billion and average duration of loans at 285 days. It was anticipated that under NIRSAL, collaboration between banks and counterparties will push loans under guarantee in excess of N20 billion by end of the first quarter of this year. The facts on ground indicate the target might have been exceeded.

Furthermore, about 70% of farmers now receive subsidised fertiliser and seeds, compared with 11% under the program previously run by state governments and some notable investments by the private sector recently include PZ Cusson’s $56 million palm oil refinery joint venture with Wilmar International, Transcorp’s investment in a fruit concentrate plant and the Dangote Group’s planned $1.9 billion Greenfield fertiliser plan and proposed tomato processing plant.

Credit: FUNAAB University ECIATA Team: Ms Sarah Edewor, Graduate Student: This email address is being protected from spambots. You need JavaScript enabled to view it.

Disclaimer: The views expressed in this website do not necessarily reflect the views of the European Union

Njala University


Federal University of Agriculture