FG, USAID Sign MoU on Agric Financing

18 Jan 2013

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Minister of Agriculture, Mr. Akinwunmi Adesina

James Emejo in  Abuja

The Federal Government and United States Agency for International Development (USAID) thursday signed a Memorandum of Understanding (MoU) to increase private financing to the agricultural sector.
The agreement, signed in Abuja between USAID, the Central Bank of Nigeria (CBN) as well as the Federal Ministry of Agriculture is the fallout of the CBN-backed Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).
Under the MoU, the USAID was expected to provide technical assistance to banks, and leverage $100 million (out of the envisaged $3 billon) worth of credit guarantee to enable the commercial banks make credit available to farmers and agricultural businesses-and at lower interest rate.

Speaking at the ceremony, the Administrator of USAID, Mr. Rajiv Shan, said: “The United States would guarantee the quality of that loan and we would guarantee that the business would pay that loan back.”
The deal will also involve other interventions that would encourage the growth of the sector.
CBN Governor, Mallam Sanusi Lamido Sanusi, said progress had been made since the launch of NIRSAL as the agricultural sector now accounted for over four per cent of the portfolio of banks compared to only one per cent recorded four years ago.
He said about N300 billion had already been invested into agriculture, adding that additional efforts were still required.

Sanusi said: “It is not enough to preach to banks, it is not enough to complain about banks; there has to be a process of working together and recognising that there are many parties involved in unlocking finance. The tentative steps taken last year have started convincing the banks that it was possible to extend credit to this sector without huge losses.”
While commending the USAID for the landmark initiative, the apex bank boss said necessary steps were being taken and pursued to execution to encourage large scale lending by banks to agriculture.

On his part, Minister of Agriculture, Mr. Akinwunmi Adesina, expressed confidence in the agreement, stressing that it would help to build capacity in the agricultural value chain and within banks as well as reduce the risk facing banks to lend to the sector.
He said it was currently estimated that NIRSAL would be able to unlock about $3 billion worth of investment into the agricultural sector.
According to him, “We are today running agriculture not as a development activity but a business. In the last one year that we have launched the agricultural transformation agenda, we have been able to attract $8 billion worth of private investment into the sector. We have embarked on reforms which makes it interesting for banks to lend into the space.”

He said the promoters had been encouraged by the fact that the initial government guarantee for banks to lend into agricultural sector had yielded results last year given that the over N3 billion loan which was received by farmer were paid back.
“There was zero per cent default rate in lending to agriculture,” he said.
The USAID said it hoped to increase the guarantee to about $3 billion in the near future.

“Our MoU would provide credit guarantees up to $100 million of agricultural credit that banks would provide to Nigerian farmers and agricultural businesses. Our specific part of the $3 billion vision is to take the first $100 million and say we would guarantee that the agricultural sector would pay that back to banks so that they have the courage and conviction to make those loans in the first place,” Shan added.

Tags: Featured, FG, MoU, News, Nigeria, USAID

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