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The Central Bank of Nigeria (CBN) yesterday said it has
developed a mechanism that would facilitate access to financing for
small-holder farmers, agro-processors, agri-businesses, and input suppliers in
the agricultural value chain.

The mechanism called Nigeria Incentive-based Risk Sharing System
for Agricultural Lending (NIRSAL) will be operated in collaboration with the
Alliance for a Green Revolution in Africa (AGRA), United Nations Industrial
Development Organisation (UNIDO), and other agricultural operators in the
country.

AGRA is an Africa based organisation working in partnership with
governments, agricultural research organisations, farmers, private sector,
civil society, and other rural development operators to improve the
productivity and incomes of resource poor farmers in Africa.

The aim is to provide farmers with affordable financial
products; reduce the risk farmers face in securing loans under other financing
programmes offered by financial institutions; help build capacities of banks to
expand lending to agriculture; deploy risk sharing instruments to lower risks
of lending, and develop a bank rating scheme to rate banks based on their
lending to the agricultural sector.

Home grown instrument

As part of the agreement signed yesterday to mark the formal take
off on the mechanism, the Central Bank governor, Sanusi Lamido Sanusi,
expressed dismay that though agriculture accounts for over 40 percent of
Nigeria gross domestic product (GDP), only one percent of total commercial bank
loans goes into the development of that sector, describing NIRSAL as Nigeria’s
home grown instrument for achieving transformation.

Mr. Sanusi, who described a productive and efficient
agricultural sector as the foundation for the food and economic security of the
country, said, “Unlocking access to bank financing for agriculture and
developing risk-sharing approaches is therefore critical for stimulating
innovations in agricultural lending and increasing food production.” The
Central Bank, he said, has initiated major reforms in the banking sector to
bring it in line with its priorities for sustainable economic growth, pointing
out that financing agricultural development is central to Nigeria’s economic
future.

Namanga Ngongi, the AGRA President, said the Central Bank’s
initiative has paved the way for new opportunities in the agricultural value
chain through leveraging financing from commercial banks, adding that the
NIRSAL example, if successful, is capable of setting the tone for the rest of
Africa.

“Agriculture is not different from any other businesses.
Agriculture is a business, not a way of life,” Mr. Ngongi said, arguing that
the key to its success is through the provision of farmers with access to
improved farming technologies, financial resources and market linkages as well
as financial literacy to help them use financing better.

Patrick Komala, the Country representative of UNIDO, noted the
CBN’s effort to promote agricultural development, adding that UNIDO is proud to
be a partner in the alliance for the development of the NIRSAL project even as
the agency looks forward to future collaborations to champion agricultural
development in Africa.