Through innovative approaches and instruments aimed at eliminating risks associated with agriculture and improving funding to indigenous farmers, NIRSAL, the Nigeria Incentive-Based Risk Sharing system for Agricultural Lending has grown its seed capital by 75 per cent from N75 billion to N131 billion in three years, between 2017 and 2020.
Within this period, the NIRSAL, a CBN-seeded entity has also succeeded in bringing up to 408,000 farmers into existing financing windows of the CBN; the funding has helped to grow the annual outputs of Nigerian farmers.
A state-of-affairs document from the NIRSAL explained that these were parts of its accomplishments under the leadership of Aliyu Abdulhameed who has leveraged the agency’s value proposals to assuage the fears of financiers and get them to invest in Nigeria’s agriculture and agribusiness value chains.
According to it, between 2017 and second quarter 2020 (Q2-2020), a 1427 per cent growth in equity funding from N2.5 billion to N38.2 billion was recorded by NIRSAL, just as shareholders equity ratio grew from three per cent at inception to 29 per cent as at Q2 2020.
While facilitating agribusiness finance, NIRSAL ensured that up to N145 billion were distributed to various actors for mechanization activities, input distribution as well as the production, processing, trading and marketing of agricultural commodities from various sources.
Similarly, NIRSAL improved on its Credit Risk Guarantee (CRG) as a symbol of trust for lenders and investors and was able to attract over 26 financial institutions to adopt the CRG to minimize possible losses in financing agribusinesses.
“Because of NIRSAL’s solutions, commercial banks have pledged to provide an additional N160 billion to fund agriculture, provided the NIRSAL guarantee, and its structured approaches are in place.
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“NIRSAL has trained over 2,600 staff of financial institutions and engaged with 17 Bank Management Credit Committees for capacity building, joint product development, and bottom-up and top-down engagements for financing commitments. The rate of bank lending to agriculture has risen from 1.4 per cent at inception to 4.49 per cent as of December 2019,” said the document on the impacts of the NIRSAL’s CRG.
It further noted that as a major sector risk management strategy, NIRSAL has so far transitioned Nigeria’s agriculture sector from an indemnity-based to an index-based insurance; and within two years of this, the number of smallholder farmer subscriptions to agricultural insurance rose exponentially to 1.8 million.
“This is attributable to the influx of the private sector with up to nine private insurance companies adopting NIRSAL’s innovative index-based agricultural insurance products whereas, agricultural insurance was previously handled mainly by NAIC only given the dearth of viable and innovative products before NIRSAL stepped in,” the document added.
Additionally, about 2,743 ‘agro’ geo-cooperatives have reportedly been formed by NIRSAL, covering 600,000 hectares and over 408,000 farmers for funding of primary production activities while more than 700,000 farmers have been trained on good agronomic practices and financial literacy.
In its evaluation of the socio-economic impacts of Abdulhameed’s-led NIRSAL so far, the report indicated that an estimated N510 billion worth of agro-related economic activity have been generated with over 515,000 direct jobs created and sustained.
The NIRSAL, it added has also promoted climate-smart agriculture models while facilitating climate finance models for farmers.