By BABAJIDE KOMOLAFE
The Central Bank of Nigeria (CBN) has changed its decision to offer 75 percent guarantee on loans to farmers under the N75 billion Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL)
“There is a CBN initiative called NIRSAL that was supposed to provide 75 percent guarantee for agric lending but in the middle of the road the CBN changed its stance and became something else,” a senior bank executive told Vanguard.
NIRSAL was introduced in 2010 by the Bankers Committee, with a seed capital of N75 billion provided by the CBN. The scheme was aimed at generating an additional $3 billion of bank lending within 10 years to increase agricultural lending from the 1.4 percent as at 2010 to seven percent of total bank lending.
A major component of the scheme is the $300 million Risk-sharing Facility, which guarantee 75 percent of banks’ lending to the agricultural sector. The guarantee is to reduce the risk perception of banks to agricultural lending and thus be encouraged to lend to the sector.
A bank executive director confirmed to Vanguard that the banks and the CBN are still discussing on the new level of guarantee that would be offered under the scheme. He said that the 75 percent was reversed because it could encourage reckless lending on the part of the banks or a situation whereby borrowers view the loans as a national cake and hence not willing to repay. He said the discussion between the CBN and banks is to agree on a risk guarantee level that encourages responsible lending and borrowing.
Last year, NIRSAL attracted N176 million grants from the German International Cooperation (GIZ). In its Half year report for 2013, the CBN said, “The programme also attracted funding and technical support from multilateral organizations and stakeholders in the agricultural value chain. In this regard, the German International Cooperation (GIZ) gave a grant of N176.0 million for four (4) selected commodities namely, tomato, rice, cocoa and cotton in twelve (12) states.
Also, the GIZ under the Farmer Business School Programme, trained 5,000 cotton outgrowers by the West African Cotton Company Limited in Funtua, Katsina State. In addition, NIRSAL signed an MoU with the United States Agency for International Development (USAID) and the Federal Ministry of Agriculture and Rural Development on technical partnership to facilitate access to a US$100 million USAID fund, earmarked to guarantee counterparties for agricultural lending. Besides, twenty-three (23) Credit Risk Guarantees (CRGs) valued at N6.7 billion were issued to 23 counterparties during the first half of 2013. The number of projects across the focus areas stood at input distribution (1), agro processing (11), and crop production (11)