The House of Representatives has urged the Central Bank of Nigeria (CBN) to provide an additional $3 billion for small-scale farmers through the Nigeria Incentive-Based Risk Sharing for Agricultural Lending to boost their productivity.
This followed the consideration of a motion during Tuesday’s plenary session on “Repositioning the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending and De-risking Agribusiness in Nigeria,” moved by the member representing Idemili North/Idemili South Federal Constituency, Anambra State, Rep. Uchenna Okonkwo.
While leading the debate, the lawmaker recalled that in 2011, the CBN launched NIRSAL, “a dynamic, holistic $500 million public-private initiative to define, measure, price, and share agribusiness credit risk.”
NIRSAL’s objectives are to enhance agricultural and financial value chains by promoting good practices in agricultural financing, loan utilisation, and repayment, thus reducing the risk of agricultural lending.
Despite this noble initiative, the lawmaker noted that the agricultural sector, “which accounts for 40 percent of the nation’s Gross Domestic Product and provides for over 60 percent of employment, has experienced slower growth recently and is underperforming despite enormous potential.”
To reverse this worrisome trend, Okonkwo argued that there was a need to address the challenge of underfinancing agricultural value chains by providing NIRSAL with an additional $3 billion for lending to agricultural value chain actors in Nigeria.
He also called for a reduction of banks’ break-even interest rate for agricultural value chain borrowers to between 7.5 and 10.5 percent.
After the motion was passed through a voice vote, the House urged the CBN to increase agricultural lending by banks from 1.4 to 7 percent of total lending within the next five years, ensuring that 50 percent of lending goes to smallholder farmers through micro-finance institutions, farmer cooperatives, and value chain commodity associations at an interest rate of 7.5 to 10.5 percent.
It further mandated the Committees on Banking Regulations and Agricultural Production and Services, Nutrition and Food Security, and Finance to monitor compliance and report for further legislative action within four weeks.
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