The Federal Government signed a $3bn (N480bn) agriculture financing agreement with the United States Agency for International Development to leverage agricultural financing.
While the Governor of the Central Bank of Nigeria, Mallam Sanusi Lamido and the Minister for Agriculture, Dr Akinwumi Adesina signed on behalf of the Federal Government, the USAID administrator, Dr Rajiv Shah signed on behalf of the agency.
The agreement will enable the parties to use co-guaranties, technical assistance, combined training and workshops for local banks and agriculturally-linked enterprises to encourage the growth of the agricultural sector in Nigeria.
The agreement signing took place at the CBN headquarters.
Speaking at the event, Shah said under the agreement, the US would immediately provide up to $100m in commercial lending to Nigerian banks. This, according to him, would help increase private financing of the sector and reduce the apathy of banks to agricultural lending.
He said, “We are very proud of this partnership agreement because we know that in all of the promise and success that the future holds for Nigeria; agriculture nearly 70 per cent of small scale farmers lack access to financing.
“Because of this partnership, hundreds of millions of dollars will be made available so that farmers can access and improve their production system and their processing operations.”
The minister in his speech said the guarantee would help to address some of the issues affecting lending to the sector, such as high interest rates, persistent decline in the quantum of lending to the sector and risk of default.
“What this facility is going to do, and I really commend the Central Bank governor, is to reduce the risk of lending by banks. We had a meeting last week with the CBN governor and the managing directors of banks, and they were thrilled at the level of activities in the sector.
“They were thrilled at the $8bn investment commitment into this sector in one year and they were also thrilled by the fact that of the N3bn that was lent last year to seeds and fertilizer companies, the default rate was zero per cent.
“So, on this facility, the central bank will put out risk sharing instruments, which will leverage the excess liquidity from the commercial banks. The total amount that we are looking at is $3bn overtime,” he said.
Adesina said the amount would be facilitated under the Nigerian Incentive-based Risk Sharing for Agricultural Lending and had about four components: reducing the risk to banks, providing technical assistance to banks, improving the agricultural value chain and providing insurance cover.
He said the agreement is an endorsement of the fact by the central bank and the banking community that there is an agricultural revolution going on and their willingness to back it with financing.
Also speaking, Sanusi said the process for the agreement began in 2009 at the peak of the banking sector crisis, adding that the steps so far taken in reforming the sector had started yielding fruits.
He said, “The tentative steps taken last year have started making banks to give credit to this sector without securing losses. We have so far made progress in the agriculture sector.
“Four years ago, the agric sector accounted for less than one per cent of the portfolio of banks; last year, it was four per cent and we had over N300bn already into agriculture but we can do more.”
