Uche Usim, Abuja
The Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL Plc) and Stanbic-IBTC bank have facilitated over N23 billion investments across the agricultural value chain in Nigeria under the Credit Risk Guarantee (CRG) programme.
Farmers in Kaduna were also given a N6 billion loan to invest in strategic projects in the pre-upstream and midstream segments of the agricultural value chain.
Speaking during a tour of the premises of the benefiting agriculture firms, NIRSAL’s Managing Director/CEO, Mr. Aliyu Abdulhameed noted that the agency has provided Stanbic-IBTC Bank with CRG cover on a credit facility worth N875 million to Hulhulde Nigeria Limited – a fertilizer Super Agro Dealer, as well as N3.6 billion and N1.72 billion facilities for LoryB & DP Ventures Limited and Nalmaco Nigeria Limited respectively – both grain processing companies in Kaduna State.
He said: “Nationwide, NIRSAL’s partnership with Stanbic-IBTC Bank has led to the facilitation of a total of N23.1Billion in agribusiness loans under its CRG cover. The partnership continues to set the pace in NIRSAL’s relationship with commercial banks as it pursues its goal of significantly increasing total bank lending to agriculture.
“NIRSAL’s 75% CRG cover on Hulhulde’s facility supports its value chain financing logic as it gives access to reliable and affordable fertilizer to the thousands of smallholder farmers served by the Super Agro Dealer.
“In like manner, the issuance of 50% CRG cover to the LoryB & DP Ventures Limited and Nalmaco Nigeria Limited facilities creates guaranteed markets for the local smallholder farmers who supply the grain processors. Thus, by providing finance in one segment of the value chain, other segments are positively impacted.
Leveraging on its $300 million Risk Sharing Facility with which it secures up to 75% of agricultural loans, NIRSAL continues to woo banks to increase lending to agribusiness by investing in a risk-free, profitable financing ecosystem”
Abdulhameed explained that with the current low pricing of financial assets, NIRSAL’s call becomes more resonant given that the real sector now presents banks with the best opportunities for higher earnings.
“In addition to guaranteeing agribusiness loans, NIRSAL deploys its project monitoring mechanisms aimed at ensuring the success of projects and the preservation of NIRSAL’s balance sheet”.
The NIRSAL boss pointed out that the CRG cover gives a boost to the beneficiaries’ businesses in more ways than one: Firstly, it eliminates complex collateral requirements in accessing the facility by using inventory as security; secondly, it will reward good loan behaviour with Interest Drawbacks of up to 40%, effectively reducing the cost of capital. These incentives ultimately improve the bottom-lines of the companies, enabling them to engage more labour and generate more output.
According to him, NIRSAL structures financing deals that are collateralized by inventory, making access to finance easier and smoother for borrowers. The organization has developed financing frameworks that speak to different commodity value chains, most notably for fertilizer and grains (Fertilizer Financing Framework & Grain Financing Framework).
Present at the event were executives of the benefiting companies, representatives from Stanbic IBTC Bank, as well as staff from NIRSAL’s Project Monitoring, Reporting and Remediation Office (PMRO) in Kaduna. NIRSAL’s PMROs are in all states of the Federation and the FCT specifically to provide round-the- clock monitoring of NIRSAL-supported projects to ensure that they perform well and meet the expectations of all stakeholders.
In his remarks, the Deputy Chief Executive, Stanbic-IBTC Bank, Wole Adeniyi restated the Bank’s commitment to supporting the real sector of the economy – especially agriculture – to aid the diversification of the Nigerian economy. For this reason, he said, Stanbic IBTC Bank dedicated a financing portfolio of N10billion in partnership with NIRSAL for projects across the agricultural value chain in 2017.
He said, “The financing portfolio limit was recently increased to N50billion. Value of lending covered by NIRSAL CRG is currently in excess of N12billion, with another set of transactions totaling N11billion at final stages of processing, for onward submission to NIRSAL for issuance of its CRG cover.
“The bank’s goal is to exhaust the N50 billion NIRSAL portfolio limit within 2020 FY and continuously seek more opportunities to further deepen financing of the agribusiness”.
Also speaking at the event, Alhaji Ya’u Adamu Dan Fulani, the Chairman of Hulhulde, expressed delight in having a full house for the CRG-backed project launch, a testament that many are seeing the logic in NIRSAL’s approach to agribusiness. Represented by the Coordinating Manager, Finance, Administration and General Services, Umar Mohammed, the MD pledged to continue to engage the fertilizer blending companies from whom they buy to consistently deliver premium fertilizer blends to Nigerian farmers.
In Zaria where the NIRSAL/Stanbic IBTC-Bank team toured Nalmaco Nigeria Limited’s facility, the Chairman and Managing Director of the grain processor, Alhaji Nuhu Aliyu, said “We are glad to go into a partnership with the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) PLC, to provide financial support in form of low interest rate credit facilities to thousands of farmers. The aim of this project is achieving food sufficiency, stimulating economic growth and creating jobs through agribusiness through its various value chain activities”.
Alhaji Nuhu expressed delight in the project’s objective of increasing the capacities of thousands of local farmers to uplift their lives and help them create wealth.
On her part, Dr. Loretta Balogun, the Chief Executive Officer of LoryB & DP Ventures Limited, hailed Stanbic IBTC Bank who has been their partners for the past twenty years. She acknowledged, however, that the grain processing company’s cost of funds has been reduced by the entrance of NIRSAL into the now three-way relationship. Having enjoyed a 20% Interest Drawback on their previous NIRSAL-guaranteed facility, Dr. Balogun appealed for an increase to further lower the company’s cost of funds and boost its positive contribution to the economy.
Through its support of LoryB & DP Ventures Limited and Nalmaco Nigeria Limited, NIRSAL’s goal of developing value chains according to Agricultural Ecological Areas (ACEAs) is advanced in the North-West region, Nigeria’s grain belt. Its support for Hulhulde Nigeria Limited will help propel the crucial Pre-Upstream activities that will avail grain farmers in the Upstream (farming)segment of the agricultural value chain with quality inputs. NIRSAL’s CRG support highlights the importance of affordable finance to agripreneurs, as it triggers a cycle of activities that gainfully engage many in the creation of value.
Owing to NIRSAL’s CRG cover, these grain processing companies have increased their pool of smallholder grain suppliers by a combined 50%, and their capacity utilization and cash flow by an average of 17.8% and 8.3% respectively. Furthermore, over 390 full and part-time staff are currently employed by these companies; this is more than 60% growth in just 12 months.
On the way to its mid-term goal of increasing bank finance and lending to agriculture from current 4.2% to 7% by 2026, NIRSAL is catalyzing the inflow of sustainable finance and investments into the agricultural value chain and supporting the Federal Government’s Agricultural Promotion Policy.