The Federal Government of Nigeria and United States Agency for International Development (USAID), today, Thursday in Abuja, signed a Memorandum of Understanding (MoU) on Nigerian Incentives-based Risk Sharing system for Agricultural Lending (NIRSAL).
Confirming this to NaijaAgroNet, the Special Assistant on Media and Strategy to the Minister of Agriculture, Dr. Olukayode Oyeleye, said that the MoU involved Federal Ministry of Agriculture and Rural Development (FMARD), the Central Bank of Nigeria (CBN) and USAID.
In his remarks at the ceremony, the Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina, was quoted as saying the MoU will play a significant role in reformation going on in the sector, which is in line with President Jonathan’s transformation agenda and in order to make the agric sector attractive to lending.
Dr. Adesina, also said that the implementation of the MoU would address the issue of low lending rate to the agriculture sector, stressing that the effort would further get the banks to lend to the farmers as it would reduce the risk of lending.
“NIRSAL can unlock about N300 billion into the sector but we have to embark on significant reforms that can make the sector attractive to lending,” he was quoted as saying in a press statement endorsed by Dr. Oyeleye and made available to NaijaAgroNet.
Additionally, he said the MoU provides risk mitigation, financing, trading, and other strategic assistance to agribusiness, a programme which was launched in July 2011 in Abuja.
In his part, the CBN Governor, Malam Sanusi Lamido Sanusi, said the MoU was a landmark achievement of the apex bank in its effort to ensure enhanced agricultural sector in the country.
Sanusi noted that commercial banks, with the recent development, would lend to farmers without much losses as the incentive would go a long way to reduce the risk in business.
NIRSAL,: he said, will help the banks to diversify; and the banking industry cannot develop on a sustainable basis unless it locks itself into production.
“So, we say let’s go to agriculture, manufacturing, SMEs and also into financial inclusion and development which is central to financial stability,” the CBN governor said.
Sanusi further said that the apex bank would meet with the managing directors of banks and the minister of agriculture to evaluate the implementation and the progress so far made. Pointing out that the sector had made progress as it accounts for four per cent of banks portfolio as against one per cent in the last four years.
“We save more money with what the ministry is doing with staple crop process zones, reforms of fertiliser regime, research and development of high yielding varieties (of crops), the whole process of standardisation and commodity exchanges: these are critical and necessary steps to take and pursuits to execute before banks can lend to agriculture,” Sanusi said.
He was optimistic that in the next one year, there would be revolution in the sector with the introduction of NIRSAL.
USAID Administrator, Dr Rajiv Shah, observed that the agreement would equally make agriculture a source of wealth creation in Nigeria, adding that 70 per cent of farmers in the country lack access to credit facility.
He expressed hope, however, that the MoU would provide credit guarantee of about 100 million dollars of agricultural credit to Nigerian farmers.
“We will guarantee that the agricultural sector will pay that loan back to banks. So they will have the courage and conviction to lend the loan to the farmers,” Shah said, emphasizing that the government of the United States was aware of some of the works the Nigerian ministry was doing in the agricultural sector.
As said by Shah, USAID has the markets initiative on rice, cocoa, sorghum and maize, adding the agreement could help develop their value chain programmes.
NIRSAL, NaijaAgroNet recalls, was established to spur additional financing for agriculture lending based on its experience with various guarantee programmes, including USAID’s development credit authority.
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