Sonigitu Ekpe-AjiMinitry of International Development CooperationNigeria
Compliments of the season!
& 2. How NIRSAL fixes the agricultural value chain and the strong incentives it offers.
There are five pillars to be addressed by an estimated USD 500 million of CBN money that will be invested as follows:
Risk-sharing Facility (USD 300 million). This component would address banks’ perception of high-risks in the sector by sharing losses on agricultural loans.
Insurance Facility (USD 30 million). The facility’s primary goal is to expand insurance products for agricultural lending from the current coverage to new products, such as weather index insurance, new variants of pest and disease insurance etc.
Technical Assistance Facility (USD 60 million). This would equip banks to lend sustainably to agriculture, producers to borrow and use loans more effectively and increase output of better quality agricultural products.
Holistic Bank Rating Mechanism (USD 10 million). This mechanism rates banks based on two factors, the effectiveness of their agricultural lending and the social impact and makes them available for the public.
Bank Incentives Mechanism (USD 100 million). This mechanism offers winning banks in Pillar four, additional incentives to build their long-term capabilities to lend to agriculture. It will be in terms of cash awards.
CROP VALUE CHAINS AS PILOTS
In the first instance, six pilot crop value chains have been identified based on existing crop production levels and potentials in six high-potential breadbasket areas. The crops are: Tomatoes, Cotton, Maize, Soya beans, Rice, and Cassava.
3. NIRSAL IMPLEMENTATION
NIRSAL and its five pillars will be administered by a Non-Banking Financial Institution (NBFI.) At the national level, the NBFI will administer the five NIRSAL pillars. It will report to a Board of Directors chaired by the CBN and memberships from AGRA, the Ministries of Agriculture, Finance, and Commerce and Industry. The Board will have ultimate decision-making and strategy-setting responsibility for the Fund. The CEO of the NBFI will be responsible for NIRSAL’s overall implementation and for maintaining relationships with key stakeholders. At the regional levels, Regional Transformation Engines will administer NIRSAL, through Portfolio Investment Managers and a Technical Assistance Representatives.
CRITICAL SUCCESS FACTORS TO COMPLEMENT THE GOVERNMENT OWNED AGRICULTURAL BANK
Financial support from the Ministry of Finance, state governments and donors to fund the insurance and technical assistance facilities.
Policy reforms such as:
Deregulation of the agricultural insurance industry to open access to private insurance companies and pave the way for innovation.
Shift the fertiliser subsidy from a focus on consumption subsidies to production subsidies and private sector-led fertiliser import system.
Increased liberalization and competition in foundation seed production and marketing.
Establishment of staple crop-processing zones to drive import substitution, buoyed by tax breaks stoppage of imposition of import tariffs for agricultural equipment.
Functional, effective and efficient implementation arrangements and institutions.
There are five pillars to be addressed by an estimated USD 500 million of CBN money that will be invested as follows:
CROP VALUE CHAINS AS PILOTS