The Central Bank of Nigeria (CBN) and Alliance for a Green Revolution in Africa (AGRA) signed a financing agreement, which will provide farmers with the needed financing to unlock the country’s agriculture potential.

The Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) initiative will reduce the risk of loans extended to farmers by financial institutions. 
Beneficiaries will include smallholder farmers, agro-processors, agribusinesses and input suppliers in the agricultural value chain.

AGRA works in partnership with governments, agricultural research organisations, farmers, private sector, civil society and other rural development stakeholders to sustainably improve productivity and incomes of resource poor farmers in Africa.

The CBN says the initiative will build capacities of banks to expand lending to agriculture, deploy risk-sharing instruments to lower risks of lending and develop a bank rating scheme to rate banks based on their lending to the agricultural sector.

‘In Nigeria, agriculture accounts for over 40% of GDP, yet receives only 1% of total commercial bank loans. Unlocking access to bank financing for agriculture and developing risk-sharing approaches is therefore critical for stimulating innovations in agricultural lending and increasing food production,’ says CBN governer Sanusi Lamido Sanusi.

Agriculture was an important foreign exchange earner before Nigeria’s independence, contributing more than 50% of the Gross Domestic Product (GDP). The rapid expansion of the oil economy relegated the development of the sector to the back burner.

Says the Food and Agricultural Organisation (FAO): ‘Under-investment, a steady drift away from land to urban areas, increased consumer preference for imported foodstuffs (particularly rice and wheat) and outdated farming techniques continued to keep the level of food production well behind the rate of population growth.’

Source: Business day Nigeria