The Nigeria Incentive-based Risk Sharing system for Agricultural Lending (NIRSAL) is about to commit three quarter of its balance sheet to guarantee mechanization of agricultural value chain in Nigeria, according to the Managing Director of NIRSAL, Aliyu Abdulhameed.
Under the new scheme launched on Thursday in Abuja, NIRSAL is providing 75 percent guarantee for banks to release the total amount required to be able to service 10,000 tractors annually for the next ten years in the country. The project initiators hope that the project if well implemented could catalyse up to N1 trillion agriculture contribution to the nation’s annual GDP.
“At an average price of about N12 million tractor plus basic equipment, that will be equivalent to about N120 billion worth of equipment that is needed to be serviced,” Abdulhameed said.
NIRSAL will be implementing the project in partnership with the Machine and Equipment Consortium Africa (MECA) and National Agency for Science and Engineering Infrastructure (NASENI).
Abdulhameed said the project represents a giant leap for the mechanization of agricultural value chain in Nigeria and that “it basically speaks to the need for primary production mechanization, particular factorization and the density of tractor services in Nigeria Agricultural production space.”
NIRSAL is Nigeria’s innovative mechanism targeted at de-risking lending to the agricultural sector, is designed to provide the singular transformational and one bullet solution to break the seeming jinx in Nigeria’s agricultural lending and development.
The goal really is to trigger an agricultural industrialization process through increased production and processing of the greater part of what is produced to boost economic earnings across the value chain.
At the event, Abdulhameed said the project was borne out of NIRSAL’s concern that there are just approximately 6.5 tractors for every 100 square kilometers of arable land in Nigeria as against the global average of 200 tractors for every 100 square kilometers. He said most of the tractors which have gone bad are not being repaired despite that the country’s need for mechanized farming.
Quoting available statistics, he said Nigeria needs a minimum of 10,000 tractors each year for the next the years for any visible impact to be made in primary production in agriculture.
He said that the practice of allowing the tractors to go into a state of despair 6 to 12 months after purchase does grave harm to the government’s effort to develop agriculture.
He said, “If Nigeria requires 10,000 tractors every year for the next ten years inorder to meet the global average of 200 tractors for every 100 square kilometers, it means that each of those tractors doing an average of three hectares per day for 120 days, we will end up doing 3.6 million hectares.
“And this, at an average yield of 4 tonnes of hectares of grain will result in about 1.2 million metric tonnes of grain, with at an average price of 100,000 per metric tonnes of grain will result in over N1 trillion worth of naira equivalent that we will add to this economy,” Abdulhameed explained.
He said every tractor that requires repair will be financed to the tune of N1. 5 million following outcomes of research in this regard.
“NIRSAL is encouraged that this project will deliver on its objective because of the records set by MECA as a global platform for the full utilisation of equipment that are underutilized or redundant.
“We believe in it. We believe in the kind of results we expect to get. 14.4 million metric tonnes of grains will be produced when this is done, 10,000 tractors every year in Nigeria. That is a huge quantum leap,” the MD stressed.
He said the new project has never been done anywhere in the history of Nigeria and that with the anticipated quantity of grains, Nigeria will leapfrog to one of the largest producers of grain in the world.
He explained that the states and local governments have these assets that are scattered all over the country and that they will not be required to commit funding into the framework.
“Financing will be catalyzed through commercial banks, insurance companies will insure the project while execution will be done by MECA and the service centres will be provided by NASENI.
“But the main beneficiaries are the owners of these assets, including the states and local governments. It is a project that will interest the banks, equipment manufacturers and generate the kind of return that convince the banks and insurance companies to commit to this programe.
“NIRSAL will not put its money but will provide guarantees for commercial banks to release their own money. By putting up to 75 percent guarantee behind the project means that NIRSAL will absorb all the risks that will likely arise from this project.”
He said following the launch, the NIRSAL, MECA and NASENI team will move into the market to take stock and that NIRSAL will advertise in all the papers and that the private individual tractor owners will join the scheme in the second phase.
I.B Gashinbaki, Country Director/ Chief Executive officer of MECA noted that his organization as the core anchor of the project together has selected three major brands, including Mahindra who will provide spare parts, working with a pool of professionals from NASENI to provide technical support and also certify that the tractors are okay.
He said they already have about eleven collocations workshops that are being retooled, and unscaled to ensure that the broken down tractors are recovered with speed.
He said they will involve the department of state ministries of agriculture and the states will also sign off on this project individually.
He said they will require them to come forward with expression of interest and thereafter the recovery project will commence once they meet all the necessary requirements.
