• Friday, March 29, 2024
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NIRSAL grows balance sheet to N100bn, facilitates N102bn Agric credit

Aliyu Abdulhameed

The Nigerian Incentive-Based Risk Sharing System for Agricultural Lending, (NIRSAL) has grown its balance sheet to N100billion, the Managing Director/CEO, Aliyu Abdulhameed confirmed.

A wholly-owned Non-Bank Financial Institution of the Central Bank of Nigeria (CBN), NIRSAL Plc, was set up with N72.5 billion capital and runs specifically to redefine, measure, re-price and share agribusiness-related credit risk.

So far, it has facilitated over N102 Billion loans from commercial lenders across the various Agricultural Value Chains in Nigeria, creating over 40,000 jobs, according to figures seen by BusinessDay.

The N102 billion represents total being financing facilitated from lenders for agribusiness since its inception some three years ago.

A breakdown shows that under its Credit Risk Guarantees and other Agricultural Risk Management Tools & Products, NIRSAL leveraged some N6.7 Billion for agricultural Inputs; N1.7 Billion for Mechanization; and N18.6 Billion for Primary Production.

N34.4 billion was facilitated for Processing; N580 million for logistics; N39.4 billion for Growth Enhancement Scheme; and N940 million for rural financial institution.

In a bid to further de-risk Nigeria’s agriculture industry for investors and financiers, NIRSAL as the Agricultural Finance Risk Management Corporation of the Central Bank of Nigeria has dimensioned the entire Agricultural value chain into the pre-upstream, upstream, midstream and downstream.

Abdulhameed pointed out that even at the maximum cover of 75 percent credit-risk guarantee on agricultural loans, NIRSAL has maintained a crystallized guarantee ratio of about one percent only, against the financial industry average ratio of 7.9 percent.

He also mentioned that NIRSAL has paid out a total of N4.6 Billion as claims to Deposit Money Banks on Credit Risk Guarantees that crystallized.

An additional N1.2 Billion, he said, has been paid to prudent borrowers as Interest Drawbacks who have found their cost of funds and businesses boosted as a result.

“It is important to state that through NIRSAL’s facilitation, over 400,000 jobs have been created and 2 million lives positively impacted in the pre-upstream, upstream, midstream and downstream segments of the agricultural value chain, specifically in the areas of Mechanization, input supply, primary production and processing,” Abdulhameed stated at a press meeting Abuja.

The CEO further explained insurance as a critical measure deployed by NIRSAL in managing and mitigating risk and an essential component of its five pillars to cut down reduce credit risk and increase lending across the agricultural value chain.  .

“NIRSAL’s goal is to expand insurance uptake by primary producers from 0.5 million to 3.8 million by 2026 and continually develop insurance products that will give financial institutions and agricultural value chain players the comfort to lend to the agricultural sector while building the capacities of underwriters,” he added.

Prior to NIRSAL’s intervention, agricultural insurance in Nigeria was indemnity based which only provided compensation equivalent to farmer’s cost of production and that the uptake of this insurance product was very low.

Working with its technical partner, NIRSAL collaborated with NAICOM and NAIC (who led a consortium of four underwriters) to provide innovative and index-based insurance to protect investments in the upstream segment of the agricultural value chain, particularly those of smallholder farmers.

Abdulhameed announced that NIRSAL is in the final stages of developing the proprietary NIRSAL Comprehensive Index Insurance (NCII) product.

“In this regard, NIRSAL is leading a consortium of Agricultural Insurance underwriters to strategically transition their product focus from indemnity-based insurance to Area Yield Index, Revenue Index, Hybrid Index and finally to the NIRSAL Comprehensive Index Insurance product.

“This suite of innovative products does not only provide compensation to farmers based on the cost incurred but also covers projected earnings.”

According to him, as at end December 2019, a total of 35,160 farmers cultivating 36,347 hectares have used the NIRSAL Area Yield Insurance Index product to protect a total harvest value of over N4.77 Billion.

Insured farmers who suffered low area yields during the 2019 Wet Season have received appropriate compensation, he added.

Abdulhameed said more importantly, “NIRSAL business model has shown remarkable resilience and sustainability, having proven to be an astute agricultural finance risk management institution that has demonstrably sustained its operations, preserved and expanded its capital base, thus one can safely say that its future sustainability is strongly assured.

“With Agriculture contributing over 29.25% to Nigeria’s GDP, it is safe to say that organizations like NIRSAL are positively driving the transformation of the economy through agribusiness.”

Onyinye Nwachukwu, Abuja