As part of effort to provide support to the growth of agricultural sector in the country, Bank of Industry, BOI, and the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, NIRSAL, have initiated a new collaborative arrangement to increase agricultural loan portfolio.
The agencies would provide more support to all the stakeholders in the value chain including input producers, farmers, agro dealers, agro processors, industrial manufacturers as well as trade and export merchants.
Speaking with journalists at the signing of Memorandum of Understanding (MoU) between two agencies, the Acting Managing Director and Chief Executive Officer of BOI, Mr. Waheed Olagunju, said that agricultural producers would have unprecedented access to loans at low prices as the risk-sharing collaboration sought to lower interest rates.
He added that the collaboration between the agencies would make agriculture an attractive business to investors by de-risking lending to the sector within the scope outlined in the Memorandum of Understanding.
According to him, the MoU embodies the totality of the terms, conditions and stipulations as agreed by the two parties and shall be amenable to review at the instance of either party at such time as shall be agreed by the parties.
“In the arrangement, NIRSAL will provide Credit Risk Guarantee to enhance BOI’s confidence to lend along identified value chain which shall traverse from production through processing to marketing.
“Another derivative from the Presidency’s directive for cross-collaboration amongst MDA’s stems from the fact that such synergies would not only impact positively on the ease of doing business, but would also facilitate risk and knowledge sharing between sister agencies as the case maybe,” he explained.
He added that the agencies journey was towards increasing finance to the Agricultural Sector by deploying risk sharing instruments that lower the risks of lending to the sector.
The BOI boss further said, “Suffice to mention that financing is just one of the integral ingredients for the sustainable rejuvenation of the agricultural sector, but it is a fundamental one. I therefore wish to affirm the commitment of the Bank of Industry to collaborate with all relevant agencies and stakeholders towards ensuring that Nigeria’s agricultural sector takes its rightful place in the scheme of things.
“As we execute these agreements, the two institutions are expected to bring their resources and expertise to bear on this initiative to ensure that the national objectiveis achieved within a reasonable time.”
He further explained that expanding ending to the agricultural sector would ease doing of business, noting that agricultural
lending accounted for only 1.4 per cent of total lending in the country, which has even declined since 2006. He said that high performing developing countries, such as Brazil, Mali, Burkina Faso, lend over 10 per cent to agriculture as a percentage of total loans.
He noted that with the dwindling crude oil revenue, the Federal Government has decided to diversify the economy from dependence on the oil sector to the agriculture sector, as key revenue earner and major contributor to the GDP thorough commodity based value chain approach.
He further added that the government has initiated efforts aimed at addressing the financing needs of the agric and agro-allied sectors with clear directives for the agencies to create a synergy towards realising the government’s goals of making agriculture a catalyst for job creation, poverty alleviation and income generation as part of the inclusive growth strategies.
In his remarks, the Managing Director of the NIRSAL, Mr. Aliyu Abdulhameed, commended BOI boss for his acceptance, cooperation and commitment to the success of the initiative. He said the signing of MoU was a conclusion of several months of intense engagement between NIRSAL and BOI with focus on defining a collaborative framework to increase financing to the agric sector by leveraging the strengths of the organisations. He noted that agriculture lied at theheart of the nation’s economy and contributed 24 per cent to GDP, while it stood asthe source of income for 75 per cent of the population and remained the mainstay of the rural economy.
However, he said that for agric to work and contribute its quota to economic growth and guarantee decent incomes for farmers, it has to be properly linked to industry lamenting that unfortunately, the linkages between agriculture and industry were weak and this reduced the ability of both sectors to contribute to economic growth.
“For instance the supply of agricultural inputs (fertilizer, seeds, agro-chemicals, farm tools and processing equipment) by industry, needed to increase agricultural productivity, is low in relation to effective demand. Also industry currently does not provide a significant outlet for agriculture output, lacks capacity to help stabilize agricultural markets and plays only a marginal role in opening up attractive new uses for crops. For many of the major crops, industrial use accounts for less than 10 percent of total production,” he said.
Explaining the role of his agency in the collaboration with BOI, the NIRSAL Boss said they would provide the Agricultural Promotion Policy (The Green Alternative) of the Federal Government with practical solutions for activating the potential of agriculture to ignite pro-poor growth, job creation and food security by facilitating private sector finance into agricultural production.
According to him, the thrust of their efforts would be to package, de-risk and enable the flow of affordable financing of agricultural projects within the priority crop and livestock sub-sectors under the APP. He explained that they would do this by bridging the competitiveness gap with the rest of the world in agriculture and agro industry, noting that it was the high level of competitiveness that would attract sustainable commercial and private finance to Nigeria’s agricultural economy.