Over the past few months, the Nigerian Incentive-Based Risk-Sharing System for Agricultural Lending, (NIRSAL) has been the subject of a campaign of falsehood which is being executed by forces who have neither the interest of this important organisation nor the country at heart. The obvious goal of those behind this scurrilous campaign is to tarnish NIRSAL’s reputation by distorting both its mandate and clear achievements. They seek in the process, to persuade stakeholders at different levels that NIRSAL is not deserving of their respect and goodwill. And the central purpose of this ill-motivated effort is to define NIRSAL by invented failures rather than its well documented successes.
The evidence of NIRSAL’s impact and rigorous achievements cannot be concealed. It is simply impossible to hide what this organisation which barely existed three years ago has been able to do for the agricultural sector and the overall national economy. A good place to appreciate the difference that NIRSAL has made is to take a look at what it has done with its core mandate.
NIRSAL is a wholly owned corporation of the Central Bank of Nigeria, created to stimulate the flow of affordable finance and investments into fixed agricultural value chains. This it does through fixing of agricultural value chains, building long-term capacity, and institutionalising incentives for agricultural lending by leveraging its five strategic pillars namely: Risk Sharing, Innovative Insurance Product Development, Technical Assistance, Incentive and Rating.
It was set up to respond to a perennial problem facing Nigeria’s agricultural sector: the reluctance of banks and businesses to lend to the sector in spite of its well-documented, huge economic potentials.
In line with its mandate, NIRSAL has since its inception in 2011 facilitated over one hundred billion naira (N100,000,000,000) from banks and other parts of the financial sector into the agricultural sector. This was achieved by catalyzing funding into various value chains from the private sector – deposit money banks, the capital market, other categories of financial institutions, vendor financiers and other value chain actors.
To say the obvious, this shows that it is fulfilling its mission to help overcome the funding challenge that has caused the agricultural sector to underperform over several decades. This is significant because the funding challenge in the agricultural sector has remained in spite of the policies and actions of successive administrations in the country.
The financial flow to the agricultural sector resulting from NIRSAL’s intervention has translated to a lot of impact in the sector especially in the critical area of job creation. NIRSAL has helped to create over 400,000 direct jobs and 1.8 million indirect jobs 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.
Beyond its core mandate, NIRSAL is also playing a strong role as an active Participating Financial Institution (PFI) in the CBN’s Anchor Borrowers’ Programme (ABP). ABP was launched by President Muhammadu Buhari in November 2015 to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities. The programme thrust of the ABP is the provision of farm inputs in kind and cash (for farm labour) to small holder farmers to boost production of these commodities, stabilize inputs supply to agro processors and address the country’s negative balance of payments on food.
To achieve a strong foundation for its ABP efforts, NIRSAL conducted a comprehensive verification exercises nationwide matching the biometric details of farmers with their Bank Verification Numbers (BVN) for those who have account numbers and the creation of new ones for those who do not. Over 400,000 farmers have had their details captured nationwide in NIRSAL’s farmer database, which serves as the pool from where beneficiaries of the programme are taken.
This process has produced positive results. A few examples: NIRSAL’s ABP efforts have helped to create over 415,000 direct and indirect jobs across the country. The agency has provided improved inputs and facilitated affordable, single-digit interest rate finance of N15.8 Billion to 69,167 ABP farmers from the commencement of NIRSAL’s participation in the programme in 2017 to date. Due to NIRSAL’s robust risk management framework, the loan performance rate has also improved, and the likelihood of default by beneficiaries significantly curbed.
Clearly, NIRSAL has contributed to the momentum and upward trend in agricultural investment that has been observed in the last few years. It has played a visible role in the area of agric-finance from year to year since inception. Perhaps one of the most exciting accomplishments of NIRSAL which needs to be better known is in the area of agricultural insurance which is critical to managing and mitigating risk.
Prior to NIRSAL’s intervention, agricultural insurance in Nigeria was indemnity-based which only provided compensation equivalent to farmer’s cost of production. The uptake of this insurance product was very low. NIRSAL with its technical partner, collaborated with NAICOM and NAIC (who led a consortium of four (4) underwriters) to provide innovative and index-based insurance to protect investments in the agricultural sector, particularly those of the SHF. In this vein NIRSAL has intimated that it is currently about to unveil its fully developed proprietary NIRSAL Comprehensive Index Insurance product, the NCII
In this respect, 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 on the basis of cost incurred but also covers projected earnings.
NIRSAL expects 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 they need to lend to the agricultural sector while building the capacities of underwriters.
Another important contribution by NIRSAL to the development of agriculture in Nigeria is in the introduction of a slew of useful innovations which if well-developed could serve as a game changer in Nigeria’s agricultural sector in the coming years. These innovations range from unique and practical value-added methods of organising agricultural production to specific products which focus on boosting efficiency and productivity of agricultural projects.
One of such innovations is the Geo-cooperatives which NIRSAL has introduced to some of its operations including its participation in the ABP. With Geo-cooperatives, NIRSAL uses advancements in Geospatial technologies to map the farmer to his farmland’s geographical coordinates under a cooperative arrangement with governance put in place. The objective is to reduce the incidence of fake cooperatives with fake land claims accessing the scheme.
Geo-cooperatives are also incorporated in NIRSAL’s Agricultural Primary Production Aggregation Service System (A-PASS). A-PASS is a project which aggregates four million hectares of farmland into 16,000 NIRSAL agro geo-cooperatives of 250 hectares each. These agro geo-cooperatives focus on the production of: Industrial Commodities (maize, soya, wheat, cassava and cotton); Export Commodities (Value added hibiscus, sesame, ginger and shea); Consumer Commodities (rice, sweet potatoes, and beans); Controlled Environment Agriculture Commodities (vegetables, aquaculture) and Integrated Livestock Commodities (beef, dairy, hides and skin).
These are just a few of the defining initiatives which underscore the measurable impact that NIRSAL is making in the agricultural sector and the wider economy. There are many others. No doubt NIRSAL is doing justice to its mandate and delivering value in other aspects of agricultural financing critical to Nigeria’s current economic priorities and future plans. In the process, entrepreneurs in the sector have been supported and the lives and welfare players along the value chain including small-scale farmers have been improved. It’s indeed a laudable track record.
Paul K. Adegboyega
Adegoyega is a policy analyst living in Lagos
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