The Central Bank of Nigeria (CBN) says it has so far guaranteed N25 billion loans to the nation’s agricultural sector through the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) since July last year, when the initiative was introduced.
As a result of the pledge, latest data from the apex bank showed, lending to the sector once treated as a pariah by the financial services industry, has grown from 1.5 per cent of total banking sector loans in 2009, to 4 per cent on the average.
The feat, the apex bank said, was achieved, with NIRSAL, the brainchild of the CBN, the Bankers’ Committee and the Federal Ministry of Agriculture & Rural Development (FMARD), guarantying up to 75 per cent of bank loans to the nation’s agric sector.
The initiative seeks to create incentives and catalyse processes to encourage the growth of formal credit, direct and indirect, for the agriculture value chain, as a mechanism for driving wealth creation among value chain participants.
The apex bank plans to spend an estimated $500 million to create further incentives for the banks to sustain the flow of agric credit.
There is also a Risk-sharing Facility of $300 million, planned to address banks’ perception of high-risks in the sector by sharing losses on agricultural loans.
Others include an insurance Facility of $30 million intended to expand insurance products for agricultural lending from the current coverage to new products, such as weather index insurance, new variants of pest and disease insurance, in addition to a Technical Assistance Facility of $60 million to enable banks undertake sustainable lending to players in the agriculture value chain.