Uche Usim, Abuja
The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) is providing Agro Traders Limited, a Cocoa processing and export company in Ondo State, with 50 per cent Credit Risk Guarantee (CRG) for N2 billion working capital to export 22,000 metric tons of cocoa.
The deal, which is in line with NIRSAL’s core mandate, will see the Nigerian Export-Import Bank (NEXIM) and United Bank for Africa (UBA) finance the purchase, storage, processing and export of 22,000 metric tons of cocoa beans.
The business between the four parties also supports thousands of smallholder cocoa farmers who supply agro traders with a guaranteed offtake market for their produce every year.
Also playing a key role in the deal is NIRSAL’s CRG, drawn from its risk sharing pillar, a mechanism that gives comfort to banks and other providers of finance to increase their lending to agriculture and agribusiness.
This, the agency said, is in line with the global trend where governments, through their central banks, use blended finance to drive the development of slow but crucial sectors of the economy.
Barely a year ago, NIRSAL signed a master agreement with NEXIM Bank for opportunities of this nature in the agricultural value chain.
By this transaction, therefore, NIRSAL continues to facilitate the flow of finance and investments into fixed Agricultural Value Chains, empowering smallholder farmers, and building long term capacities amongst value chain actors, while NEXIM is fulfilling its objective of boosting exports.
While proposing similar collaborations with specific development finance institutions that have mutual objectives, NIRSAL is wooing all commercial banks to open up their balance sheets to agriculture. The call is made with the assurance that the NIRSAL CRG would secure substantial parts of bank loans to agriculture and that its comprehensive risk management framework would forestall defaults. It is a call that banks like UBA are heeding.
Speaking during a tour of Agro Traders factory in Akure, NIRSAL’s Managing Director/CEO, Mr. Aliyu Abdulhameed, recalled that NIRSAL also covered Agro Traders’ N1 billion facility granted by UBA in 2017 for a period of 12 months.
“Due to the company’s diligence in loan repayment, it was issued an Interest Drawback totaling N8.9 million which went a long way in reducing the cost of the fund. This time around, NEXIM’s nine per cent interest rate, together with NIRSAL’s 50 per cent CRG cover, present an even more attractive financing proposition for the cocoa beans processing company.
“We are happy to use Agro Traders Ltd as an example to other Agro-allied companies on how they can grow their agribusinesses with NIRSAL’s support.”