Uche Usim, Abuja
In its quest to grow the agriculture sector and position it as a major revenue earner, the Nigerian Incentive-Based Risk Sharing System for Agriculture Lending (NIRSAL) says it has has guaranteed over N85.5 billion in agricultural loans along all segments of the agricultural value chain since its inception in 2011.
The breakdown shows pre-upstream segment at N45.6 billion, upstream segment at over N19 billion, and midstream segment at N20.9 billion, with activities in aforementioned segments covering mechanization, agricultural inputs, primary production, and processing.
The agency added that about N1.76 billion of the Credit Risk Guarantees (CRGs) issued were in mechanization.
The Managing Director of NIRSAL, Mr Abdulhameed Aliyu, made the revelation in a statement while reacting to what he described as recent inaccurate and distorted media report on NIRSAL’s mechanization programme, especially on its engagements with the Tractor Owners and Operators Association (TOOAN).
According to him, NIRSAL was approached by First City Monument Bank (FCMB) in July 2018 to provide CRG cover for a N500 million loan for the acquisition of tractors by the Oyo State chapter of TOOAN, which was approved by TOOAN’s national body via the Bank of Industry (BOI).
“Upon due consideration and based on several factors including NIRSAL’s negative experience with another state chapter of TOOAN, NIRSAL’s credit committee determined that the TOOAN Oyo State chapter’s application was “Outside of NIRSAL’s Risk Acceptance Criteria”.
“This was not a casual decision but was based on rigorous analysis of the application. NIRSAL follows a careful risk assessment process to decide loans that are eligible for its CRG cover and would never decline any application without a valid reason.
“The rejection of a particular application does not preclude accepting future applications that meet the relevant requirements.
“Contrary to the wrong statements attributed to an individual stakeholder whom NIRSAL has not had any official contact with, the agency remains committed to working with all serious partners on progressing impactful initiatives in the mechanization value chain as well as other value chains in the agricultural sector,” Aliyu explained.
The NIRSAL boss added that in addition to paying claims on CRGs that crystallized to financiers, NIRSAL has paid about N1billion as IDB to borrowers.
“Furthermore, through NIRSAL’s facilitation, over 373,752 direct jobs have been created and over 1.8million 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,” Aliyu explained.
He, however, explained that a fundamental criterion to get NIRSAL’s support is that every application must meet the terms of its credit risk guarantees.
“These are components of governance to ensure a level playing field and sustainability.
“NIRSAL is a catalyst that enables providers of finance and investment to lend to and invest in agribusinesses, leveraging on its Risk sharing Facility to deploy the NIRSAL CRG and risk management products, tools, techniques, methodologies and strategic partnerships.
“The CRG instrument is issued by NIRSAL to secure loans by up to 75% of losses over the life of an underlying credit contract in the form of agribusiness related term loans, and/or debt instruments such as short, medium, and long-term notes.
“The guarantee covers the credit risk of default on loan principal and the accrued interest and is purchased at 1% fee (upfront payment) of the loan value and subsequent outstanding balances of the loan annually.
“The purchase of a CRG also qualifies an underlying borrower, in principle, to access NIRSAL’s Interest Drawback (IDB)- an interest rate rebate scheme that NIRSAL offers to borrowers whose facilities are in good standing. The IDB serves as an incentive to reduce the burden of interest payment and encourage timely repayment of loans.
“NIRSAL’s CRG covers loans of players in all segments of the agricultural value chain ranging from pre-upstream operators all the way to the operators in the downstream segments of agricultural value chains,” he added.