The House of Representatives has urged the Central Bank of Nigeria (CBN) to provide additional $3 billion in funding to small-scale farmers through the Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL) to boost their productivity.
The resolution was sequel to a motion at Tuesday’s plenary session moved by the member representing Idemili North/Idemili South Federal Constituency, Anambra State, Mr Uchenna Okonkwo on “Repositioning the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending and De-risking Agribusiness in Nigeria.”
He recalled that in 2011, the CBN launched NIRSAL, “a dynamic, holistic $500 million public-private initiative to define, measure, price, and share agribusiness credit risk.”
According to Okonkwo, NIRSAL’s objectives are to enhance agricultural and financial value chains by promoting good practices in agricultural financing, loan utilisation, and repayment, thus reducing the risk of agricultural lending.
He, however, lamented that the agricultural sector, “which accounts for 40 per cent of the nation’s Gross Domestic Product and provides for over 60 per cent of employment, has experienced slower growth recently and is underperforming despite enormous potential.”
Okonkwo said to reverse the worrisome development, there is a need to address the challenge of underfinancing agricultural value chains by providing NIRSAL with an additional $3 billion for lending to agricultural value chain actors in Nigeria.
He further made a case for the reduction of banks’ break-even interest rate for agricultural value chain borrowers to between 7.5 and 10.5 per cent.
Following the adoption of the motion in a voice vote, the House urged the CBN to increase agricultural lending by banks from 1.4 to 7 per cent of total lending within the next five years, ensuring that 50 per cent of lending goes to smallholder farmers through micro-finance institutions, farmer cooperatives, and value chain commodity associations at an interest rate of 7.5 to 10.5 per cent.
It further mandated the Committees on Banking Regulations and Agricultural Production and Services, Nutrition and Food Security, and Finance to monitor compliance and report for further legislative action within four weeks.