Agriculture value chain, Agricultural lending, Nigeria Incentive-based Risk Sharing System for Agricultural Lending, Agriculture's Growth Enhancement Scheme (GES), NIRSAL


There is no gainsaying that agriculture is one of the most important sectors in the Nigerian economy as it employs at least 60% of Nigerians and contributes up to 23.11% of the country's GDP. The performance of the agricultural sector has not been encouraging over the years, resulting in the importation of over N 1.0 trillion in wheat, rice, sugar and fish. Policy responses towards channeling financial resources to the agricultural sector in Nigeria have a long history through government and CBN sponsored programmes. Among CBN intervention schemes is the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL). It is a $500 million public liability company wholly owned by the CBN aimed at providing farmers with affordable financial products, while reducing the risk of loans under financing programmes offered by banks. The NIRSAL financing mechanism has five solution components namely: Risk Sharing Facility (RSF), Insurance Component (IC), Technical Assistance Facility (TAF), Bank Incentive Mechanisms (BIM) and Agricultural Bank Rating System (ABRS). NIRSAL absorbs a large chunk (up to 75%) of the risk, to enable banks and other lenders to finance agriculture more sustainably. Since incorporation in 2015, NIRSAL has provided Credit Guarantees for over 454 agricultural projects valued at N61.161billion: paid out over N753.36 million as interest rebate to borrowers; and guaranteed up to 40% (207) of the Federal Ministry of Agriculture's Growth Enhancement Scheme (GES) projects valued at N39.49 billion. In addition, NIRSAL has trained 112,000 farmers and primary producers in four (4) value chains namely: Rice, Cocoa, Cotton and Tomato among others. To make NIRSAL a better success story that will further unlock billions of Naira to the agricultural sector, the Management of the institution must ensure the buy-in and active participation of DMBs, development finance institutions, farmers groups/associations, development partners, NAIC and other commercial insurance firms, government at all levels and other stakeholders that have been identified to have a role to play with the scheme. In addition, there is need for strengthening of NIRSAL by diversifying its areas of coverage and allowing independent investors to own shares thereby making it more efficient in providing credit risk guarantees to agricultural projects.

Author Bio

The author is a principal economist from the Governor's Department, Central Bank of Nigeria.

Publication Title

CBN Bullion







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