*FOCUS AREAS INCLUDE AGRO PROCESSING, MECHANIZATION, LOGISTICS/HAULAGE, STORAGE ETC
In continuation of its efforts to increase commercial bank lending to agriculture by de-risking the sector and making it a viable, profitable investment destination for the private sector, the Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) in collaboration with Union Bank of Nigeria has launched a N10 billion Agriculture Finance Scheme.
The Managing Director of NIRSAL, Aliyu Abdulhameed and his counterpart Mr. Emeka Emuwa of Union Bank signed the Memorandum of Understanding (MoU) on Friday, 10 November to kickstart the scheme in Abuja.
Speaking at the event, the Managing Director of NIRSAL, Mr. Aliyu Abdulhameed stated that “the launch of this scheme marks yet another major step by NIRSAL to increase commercial bank lending to agriculture. We had set a target this year of getting commercial banks to commit N60billion of their balance sheet to agriculture. I am happy that we are making good progress in this regard. About two months ago, we signed a 10billion Agriculture Finance MoU with STANBIC IBTC that could be expanded to about N50billion. The coming on board of Union Bank has edged us a lot closer to our target. We are hoping to convince more banks to join the train of banks that are committing more of their balance sheets to agriculture”
Abdulhameed further stated over the past couple of years, NIRSAL has implemented an effective risk management framework for handling investments in agriculture. He elaborated that NIRSAL has deployed project monitoring offices nationwide, set up technology driven field monitoring systems, institutionalized a technical capacity support framework to ensure good agricultural practices and created links and collaborations with research institutions to increase the chances of success of agricultural projects that are helping to minimize investment risk in agriculture that is giving banks comfort to lend to the sector.
Under the terms of the partnership, Union Bank of Nigeria has set aside N10billion from its balance sheet to lend specifically to viable and bankable agricultural projects that are promoted by NIRSAL.
The categories of the qualifying agricultural projects that would benefit include primary production, Agro processing, mechanization, inputs supply, logistics/haulage, storage and post-harvest handling, and preselected value chains.
NIRSAL on its part will provide credit guarantees for the loans provided by Union Bank on the back of our $300 million risk-sharing facility. The credit guarantees will range between 30-75% of the loan value, depending on the dynamics of the project in the agricultural value chain.
To ensure proper use of the loans and success of the projects, NIRSAL will leverages its Project Monitoring and Remediation Offices (PMRO) located across the 36 states in the country. The PMROs will ensure close project supervision to ensure proper use of the loans by beneficiaries.
NIRSAL has developed an innovative system of direct payment to service providers to minimize the likelihood of loan diversion by beneficiaries. For instance, in primary production, beneficiaries will be provided with inputs such as improved seedlings, fertilizer, pesticides etc. They will also be linked with tractor providers and other providers of services required for the project that will be paid directly.
There are several Agricultural Value Chain activities into which this N10 Billion financing scheme may be utilized for. Examples of the impact of this collaboration (assuming 100% utilization) on some selected value chain activities are highlighted below:
- Farm Mechanization: 830 brand new tractors, 3,320 direct jobs, 298,000 Hectares of additional land cultivated and about 1,500,000 lives will be impacted.
- Fertilizer Financing: A total of 66,666MT of various blends of fertilizer will be distributed, 166,668 hectares of arable land will be cultivated, 833,340 direct jobs created and 4,166,700 lives impacted.
- Seeds Financing: A total of 178,570 hectares of arable land will be cultivated, creation of 892,850 direct jobs and an impact in 3,571,400 lives.
- Feed Finishing (Bull Fattening): Annually, a total of 160,000 bulls will be fattened, 16,000 direct jobs will be created, and 80,000 lives impacted.
The NIRSAL MD, thanked the Managing Director of Union Bank Mr. Emeka Emuwa for his unshakeable faith in the viability of agribusiness and for believing in NIRSAL’s institutional capacity to protect their investments. He also called on other banks to take a cue from STANBIC IBTC and Union Bank commit more of their capital to agriculture.
On his part the Managing Director of Union Bank Mr. Emeka Emuwa commended NIRSAL’s efforts in championing the cause for a viable lending scheme to the agricultural sector and introducing a complete value chain consideration in the agricultural lending process through its de-risking framework. His words: “We at Union Bank are pleased to be partnering with the team at NIRSAL through this N10 billion agricultural finance scheme. This is part of our contribution to the growth of the agricultural sector and by extension, to the diversification of the economy focused on sustainable development, job creation, value addition to our agricultural produce, food self-sufficiency and import substitution to conserve foreign exchange”