House of Representatives’ Public Accounts Committee has applauded the Central Bank of Nigeria (CBN’s) agribusiness transformation, being anchored by the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), under the leadership of its Managing Director/Chief Executive Officer, Aliyu Abdulhameed.
The commendation for Abdulhameed’s efforts to position the risk-management agency as a major driver of agricultural development in Nigeria came during an engagement with NIRSAL’s management to clarify and share ideas on its mandate, track record and accomplishments.
The Chairman of the Committee, Oluwole Oke, expressed satisfaction with NIRSAL’s performance, adding that it now has a friend in the National Assembly.
Other committee members described Abdulhameed as a round peg in a round hole, and a man of undoubted capacity. They also congratulated NIRSAL on its commendable performance in terms of agribusiness financing, noting that other agencies should learn from NIRSAL’s rigorous processes of due diligence.
In his remarks, Abdulhameed gave the committee members an in-depth analysis context and rationale that informed the creation of NIRSAL, its mandate and transformative achievements in Nigeria’s agribusiness space.
He explained that prior to the creation of NIRSAL, financiers were averse to lending to agriculture, citing perceived high risks in the sector, especially in the upstream segment of the agricultural value chain where primary production takes place, often referred to as the “black hole” in agriculture.
In response to these concerns, and as part of efforts to diversify Nigeria’s economy from crude oil-dependence, the CBN formulated NIRSAL to catalyse the flow of much-needed financing into agriculture by redefining, measuring, re-pricing and sharing agribusiness-related credit risk with financiers.
He that the CBN, in its foresight, established NIRSAL as a Public Liability Company registered under the Companies and Allied Matters Act. This gave financial institutions more confidence and ease to do business with NIRSAL, as opposed to the limited transactions they could enter into with public sector institutions and the legal complexities therein.
In terms of NIRSAL’s mandate, he informed the committee that the agency is built on five broad pillars of Risk Sharing, Insurance, Technical Assistance, Incentives and Rating. These strategic pillars are geared towards increasing bank lending to the agricultural sector by over 6% in the short to medium term, hence, bridging the gap between the finance and agricultural sectors.
Principally, NIRSAL is facilitating finance to agriculture through its Credit Risk Guarantee (CRG), through which it shares 30%, 50%, or 75% of agribusiness-related risks with financiers depending on the agricultural value chain segment receiving finance.
Through the risk guarantee, NIRSAL has attracted investment into agribusiness and guaranteed 697 agribusiness loans worth $505.9million, paid N1.274billion Interest Draw Back to 271 obligors, creating over 400,000 direct jobs, and impacting over 2,000,000 lives in the process.
In terms of insurance, NIRSAL has developed and launched the Area Yield Index Insurance (AYII) product and protected up to N6.47billion in revenues of 35,492 farmers over 37,399 hectares of land with N122million paid out in compensation to farmers.
Furthermore, Abdulhameed pointed out that NIRSAL has facilitated the granting of licences to five insurance companies by the Nigerian Agricultural Insurance Corporation (NAIC), to underwrite index-based Agricultural insurance.
Leveraging on its technical assistance pillar, NIRSAL builds the capacity of financiers and agricultural value chain operators on lending and good agronomic practices (GAP) respectively. Accordingly, NIRSAL has trained 1,221 middle management and agric desk officers of commercial banks, and provided training on GAP to 700,000 farmers and 74 extension workers.
Continentally, NIRSAL has overseen the establishment of risk sharing facility (RSF) models for African countries through the African Development Bank (AfDB), and recently, established the Togo Incentive-Based Risk Sharing System for Agricultural Lending (TIRSAL), known locally as, Mécanisme Incitatif de Financement Agricole Fondé sur le Partage de Risques (MIFA).
Other African countries have also sought NIRSAL’s guidance on how to set up similar agribusiness risk-sharing models. They include Ghana and Benin among others.
The committee has also tasked NIRSAL on tackling the issue of postharvest losses by strengthening commodity exchange systems in which farmers can trade their commodities round-the-clock.
Coincidentally, NIRSAL recently partnered with Wema Bank and Cellulant for the development and deployment of a commodity financing model designed to link smallholder farmers in the upstream segment of the value chain to community-based produce aggregators, and commodity buyers servicing the downstream segment.
Based on the success of the deliberation, the Committee has recommended a workshop whereby NIRSAL will enlighten both the Senate and House of Representatives, who will, in turn, educate their constituents, and by extension, all Nigerians, on NIRSAL’s operations for smallholder farmers continued benefit and poverty alleviation.