Agro-processing firms get a N73 billion credit risk guarantee from NIRSAL.

The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Plc has facilitated the flow of over N73 billion into Nigeria’s agro processing industry to date from various sources, including deposit money banks, development financiers, private equity investment firms, and other fiduciaries, in order to carry out its mandate of creating a stronger linkage between segments of Nigeria’s Agricultural Value Chain (AVC) and subsequent AVC-linkage to commercial bank finance.

Farmers in the upstream AVC segment have a reliable market in the form of agro processors who offtake farmers’ produce, thanks to NIRSAL Plc’s strategic support for agro processors operating in the midstream segment of the AVC.

The support of NIRSAL Plc comes at a time when developing economies are increasingly shifting away from just producing raw materials and toward both production and value addition in order to boost foreign exchange earnings and social development.

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Pre-upstream, upstream, and downstream AVC operators involved in inputs production and supply, mechanization service provision, primary production, and logistics are also beneficiaries of NIRSAL Plc’s financial assistance.

This accomplishment, which has made a significant contribution to the federal government’s agricultural promotion efforts, was made possible by NIRSAL Plc’s efficient use of its credit risk guarantee instrument.

The core product of NIRSAL was used to share up to 75% of agribusiness-related credit risks with commercial banks and financiers, depending on the segment in which applicants operate. The higher the percentage of risk NIRSAL Plc shares, the riskier the farmer group or agribusiness operations.

NIRSAL Plc has increased financiers’ and investors’ confidence in lending to players in the Agric sector, which was once widely regarded as a no-go area in finance circles, by protecting them from possible losses in a credit transaction.

With the support of the NIRSAL CRG, farmer groups and agribusinesses that previously struggled to obtain loan approvals from commercial banks now have a faster approval process for the loans they need to expand their operations, increase profits, and improve their livelihoods.

NIRSAL Plc’s Interest Drawback (IDB) scheme goes the extra mile to reward diligent borrower behavior by providing discretionary rebates of up to 40% of interest paid on NIRSAL CRG-backed agribusiness loans, providing additional support to Nigeria’s farmers and agribusinesses. NIRSAL Plc has paid out over N1.64 billion to date, effectively lowering the effective interest rate for borrowers with good credit histories.

NIRSAL Plc’s constant engagements with commercial banks and training of their officers are also crucial in the creation of NIRSAL CRG-backed loans. Over 4,250 bank officers have been trained on the NIRSAL CRG guidelines and efficient agric lending to date, resulting in a better understanding of the two, improved bank attitudes toward Agric lending, and increased bank lending.

Bank lending to agriculture stood at 1.4 percent at the time NIRSAL Plc was founded. Since then, the NIRSAL CRG has helped to raise this figure to 5.4 percent in Q3 2021.

Aliyu Abdulhameed, managing director of NIRSAL Plc, said the organization’s support has benefited financiers, borrowers, and the nation’s economy. He claims that financiers can now invest with confidence in profitable agribusiness ventures.

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NIRSAL Plc’s injection of finance into the agricultural sector, according to Abdulhameed, has resulted in broad socio-economic growth. Agribusinesses have been able to expand their operations and staff, with NIRSAL CRG beneficiaries reporting increases in capacity utilization, productivity, number of markets served, and sales value of 20-60%.

Through agricultural products/outputs and other value chain economic activities, NIRSAL Plc’s finance facilitation efforts have generated an additional $2.5 billion in economic activity, created 360,000 direct jobs, and positively impacted the lives of 1.8 million Nigerians.

Commercial banks have pledged a total of $500 million to fund agriculture and agribusiness as a result of the success of NIRSAL Plc’s risk-sharing model. In addition, other African countries have approached NIRSAL Plc for assistance in establishing and implementing Risk Sharing facility models in their respective jurisdictions.

The latest achievement of NIRSAL Plc also coincides with the development of the Nigeria special agro-industrial processing zones program, which NIRSAL Plc is supporting across the country. “SAPZ will mobilize private sector investment into the selected zones to enhance productivity and integrate production, processing, and marketing of agric commodities,” he said, citing NIRSAL Plc’s finance-facilitation mandate.