Thursday, August 29, 2013

CBN Disburses N6bn Agric Loans to Farmers

The Central Bank of Nigeria (CBN) has said it disbursed over N6 billion loans to farmers under its credit guarantees as at December last year. A report from the Bankers’ Committee at the weekend,  also anticipated that with the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and collaboration between banks and counterparties, the loans under guarantee would have risen to over N20 billion by end of the first quarter of this year.
The increase in agric sector credit was linked to the N200 billion agriculture credit scheme and the N600 billion NIRSAL interventions.

The NIRSAL guarantees up to 75 per cent of bank loans to the sector. The NIRSAL initiative, which was conceived by the CBN, the Bankers’ Committee and the Federal Ministry of Agriculture and Rural Development (FMARD), 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.

According to the central bank, NIRSAL is also expected to be a catalyst for innovative risk management strategies, long-term financing for agribusiness and significant job creation by new entrepreneurs.
“The mandate of NIRSAL is to act as the custodian of all credit guarantee schemes, interest draw back schemes, and commercialisation initiatives related to an integrated value chain approach to agriculture and agribusiness in Nigeria,'' the CBN said. Under NIRSAL, there are five pillars to be addressed by an estimated $500 million that will be invested by the CBN,” the programme document explained.

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. There is equally 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. Besides, there is also a technical assistance facility amounting to $60 million, meant to equip banks to lend sustainably to agriculture, producers to borrow and use loans more effectively and increase output of better quality agricultural products, among others.

“The current improvement in the sector’s  was linked to access to credit through the new policy focused on increasing private sector participation, emphasis on the entire agriculture value chain, and using agriculture to boost employment, wealth creation and food security,” it added.