Uche Usim, Abuja
In its quest to guarantee food security, the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL) has signed a Memorandum of Understanding (MoU) with Ecobank on a N70 billion portfolio commitment from the bank to agribusiness projects initiated and de-risked by NIRSAL.
The facility, according to the agency, will be drawn down in series, with the MoU effectively kicking off an initial N15 billion agribusiness financing provision by Ecobank.
Announcing the partnership in Lagos after a business meeting with the management of Ecobank on Thursday, the Managing Director of, NIRSAL Plc, Aliyu Abdulhameed said that Ecobank’s onboarding demonstrates the growing acceptance of the Central Bank of Nigeria’s proposition of NIRSAL as an innovative mechanism targeted at de-risking lending to the agricultural sector and providing a safe climate for highly profitable private sector investments.
He added that the commitment by Ecobank is the latest fruit of NIRSAL’s focus on breaking the jinx of poor investment in agribusiness by the financial sector by providing banks with strong incentives such as risk-sharing, technical assistance and innovative insurance.
He added that the MoU was an offshoot of a meeting that took place between the two organisations on June 20, 2019, in which NIRSAL aroused Ecobank’s interest with its de-risked agribusiness model; prompting the bank’s immediate financial commitment and desire to formalize the partnership.
“It is believed that the attraction for Ecobank, and indeed other commercial banks who have recently made portfolio commitments to NIRSAL-supported agribusiness projects are anchored on NIRSAL’s Mapping-to-Markets (M2M) strategy, conceived to de-risk and make operations in commodity value chains more efficient through optimized primary production in a closed financing loop”, the NIRSAL boss said.
Abdulhameed noted that the MoU signing marks the beginning of a collaboration between NIRSAL and Ecobank on NIRSAL’s agri-business initiatives and the development of products that will support lending to actors in the agricultural value chain in conformity with Ecobank’s risk acceptance criteria and credit process.
“With Ecobank’s commitment of a N70 billion portfolio to NIRSAL’s agribusiness initiatives, the bank and NIRSAL would jointly select and develop projects that will meet the financing needs of actors in NIRSAL’s focal commodity value chains”, he added.
According to Abdulhameed, NIRSAL’s focus commodity value chains, otherwise known as the 5-4-3-2-1 commodities, include 5 Industrial Commodities – Maize, Soybean, Wheat, Cassava and Cotton; 4 Export Commodities – Hibiscus, Sesame, Ginger and Shea; 3 Consumer Commodities – Rice, Sweet potato and Beans; 2 Controlled Environment Agriculture Commodities – Fresh Fruits and Vegetables (FFV) and Aquaculture; and Integrated Livestock Commodity.
Under this agreement, and in line with its Mapping to Markets (M2M) strategy, NIRSAL will identify and refer structured projects to Ecobank to support the Bank’s deal origination and financing operations in agribusiness. On its part, Ecobank will finance the projects leveraging NIRSAL’s Credit Risk Guarantee (CRG) which is a further comfort for lenders to agriculture and agribusiness.
Also speaking at the MoU signing ceremony in Lagos, Patrick Akinwuntan, Managing Director, Ecobank Nigeria Limited said the bank is actively promoting agriculture as a strategic initiative to support national development which is critical to the wellbeing of Nigerians. According to Mr. Akinwuntan Ecobank is committed to working with NIRSAL to open up the vast opportunities that abound in agriculture and to ensure citizens benefit ultimately.
“This is a collaboration. The Federal Government had made it clear that investing in the agriculture sector is very critical for Nigeria to succeed, especially taking into consideration the natural endowment God granted us in terms of population, land and whether. We have the opportunity to make agriculture the economic spinner for Nigeria. What we are doing is to fulfil this policy direction of the Federal Government and the Central Bank of Nigeria (CBN)” he noted.
Further, Mr. Akinwuntan reiterated that “in Nigeria Ecobank hopes to contribute positively to move the economy forward, creating employment for the teeming population through agriculture. We found a natural partner in NIRSAL as they have the requisite intellectual capacity to act as a meeting point for the stakeholders in the sector. The de-risking participation of NIRSAL gives us the will to provide these facilities at single-digit rates at a maximum of 9% to ensure that the users are able to make profits. When our customers make profits, we are also able to make profits. So, it is a win-win business for everyone”.
NIRSAL’s M2M primary production strategy, to which commercial banks are opening up their balance sheets, has already been deployed for the production of Maize and Soybeans in Geo-cooperatives across Benue, Ekiti and Niger States. A fortnight ago, NIRSAL hosted value chain players across all segments of the commodities’ value chains in a roundtable where terms of engagement were discussed and adopted. The clear indication of an end-to-end control of the production and marketing process presented banks at the roundtable with opportunities to, not just invest, but to sell their retail services for the long-term.
The M2M strategy is a closed-loop financing system whereby all financing transactions on a particular project site is mandatorily maintained in a single bank. This confers cashflow visibility and control on the operating bank- a key risk management strategy, besides several other benefits. Accordingly, NIRSAL will refer input and service providers, commodity merchants and industrial off-takers under the M2M to Ecobank for account opening and debt finance hence, driving the growth of the bank’s business.