In a move aimed at getting more funds into agricultural sector, the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) has commenced engagement with the Management Credit Committees of commercial banks in a bid to tap into opportunities in agribusiness investments.
NIRSAL informed on Monday in a statement that the engagement was to explore promising investment-friendly developments in Nigeria’s emerging agribusiness sector and the expanding opportunities for value chain actors, with the aim of unlocking banks’ balance sheets to agribusiness lending.
According to NIRSAL, in the course of the first phase of these engagements that it has made extensive presentations on its agribusiness models, financing frameworks, tools, techniques, methodologies and partnerships in meetings with Union Bank, Sterling Bank, GTBank, United Bank for Africa (UBA), Keystone Bank, Standard Chartered Bank, Heritage Bank and Unity Bank, over the last five months.
NIRSAL also explained that after the first phase of engagement, more banks and other financial institutions had expressed interest to be engaged in the subsequent phases over the coming weeks.
The context for these efforts, NIRSAL said was that for years, the agriculture sector has received less than 3% of total bank lending, leaving it largely underdeveloped and its vast potentials for economic growth untapped. To address this concern, the Central Bank of Nigeria (CBN) created NIRSAL to collaborate with all public and private sector stakeholders to fix broken agricultural commodity value chains and de-risk the sector to enable increased inflow of finance and investments.
It explained further that the meeting with banks, is geared towards pitching its Agricultural Finance Risk Management innovations and Agribusiness models that take cognizance of banks’ desire to finance/invest but only in secure, risk-controlled, and structured environments.
Leading the presentations at each of the banks, NIRSAL’s managing director, Aliyu Abdulhameed, presents “Unfolding Opportunities in Agricultural Financing” and gives an overview of NIRSAL’s work in the four segments of the Agricultural Value Chain namely; the Pre-Upstream, Upstream, Mid-Stream and Downstream.
In these presentations, Abdulhameed focused on the Upstream Segment (primary production), which NIRSAL calls “the Black-hole” because of the high risks involved and banks’ consequent aversion to it.
Abdulhameed in the presentation informed of NIRSAL’s efforts in acquisition and planned utilisation of geospatial technologies for identification of the most ecologically endowed areas for specific commodities, and for the aggregation of fragmented farmlands.
These technologies include the acquisition of Satellite Imaging data to be supported by Unmanned Aerial System (UAS) platforms adjudged to be the most efficient technological platform for monitoring large swathes of farmlands, remote sensing of crop health status and to serve as an early warning system to control risk events in the field.
NIRSAL’s engagements with banks started with the successful NIRSAL-sponsored Bank Chief Risk Officers’ (CRO) Retreat held in Lagos in October 2018.
The retreat, moderated by the Risk Management Department of the CBN, focused on agribusiness and SME-related risks. It had CEOs and CROs of Deposit Money Banks, Merchant Banks, Credit Institutions and MSME operators in attendance.
The presentations from NIRSAL,the statement said elaborated the corporation’s risk management tools and general approach to Agricultural Finance with particular emphasis on its Credit Risk Guarantee (CRG) cover, the interest draw-back support and its innovative index-based agricultural insurance products. Most significant is the Mapping To Markets (M2M) strategy under which NIRSAL is “pre-selling” smallholder farming Geo-cooperatives to finance.
According to NIRSAL, these Geo-cooperatives are developed and mapped in sync with the natural ecologies of specific commodities. The geo-cooperatives, it states will have ready farmers who, after being technically and financially enabled, would be advised on what to produce and how much to produce in order to service the offtake market coordinated by NIRSAL in accordance with pre-agreed quantity, quality and price parameters.
NIRSAL confirmed also that it has received strong indications that banks are interested in “buying” its de-risked and structured Geo-Cooperatives. In the five months of these engagements with Deposit Money Banks, while leveraging NIRSAL’s CRGs and other de-risking mechanisms, over N14.5 Billion in additional financing from banks’ balance sheets have been catalysed and a further N48 Billion are at various stages of approval.
Consequently, banks’ staff are being nominated to constitute Joint-Technical-Committees with NIRSAL in order to pursue this new and innovative agriculture/agribusiness financing framework.
