18 January 2013

Nigeria Seals U.S.$3 Billion Agric Facility Deal With USAID

Abuja — The Federal Ministry of Agriculture and Rural Development, yesterday, signed a $3 billion agricultural facility agreement with the United States Agency for International Development, USAID.

The deal is aimed at increasing private financing for Nigeria's agricultural sector.

The partnership cemented at the headquarters of the Central Bank of Nigeria, through a memorandum of understanding, MoU, will enable the parties to use co-guarantees, joint technical assistance, combined training and workshops for local banks and agricultural related enterprises and other interventions to encourage the growth of the agriculture sector in the country.

By this partnership, the parties in the first phase, are expected to leverage up to US$100 million in commercial lending.

Speaking on the occasion, Minister of Agriculture, Dr. Akinwumi Adesina, said the ground-breaking partnership, apart from opening up access for farmers to obtain loan at very low interest rate, will also reduce the risk of lending by banks.

He said the facility was considered critical in the agricultural transformation agenda of the present administration due to the constraints usually posed financial access.

As part of a strategy to guarantee the safety of the loans, the minister also said the CBN had been mandated to set up a risk management team to leverage the excess liquidity in the banks during the transaction period.

He said: "What this partnership is going to do is that it will reduce the risk of lending by banks. We have realised that access to finance is one of the three major issues in the agricultural sector.

"That is the interest rate, which is quite high, quantum of lending and long terms of lending. Our strategy is that the CBN will put up a risk management instrument which will leverage the excess liquidity in the commercial banks.

"As banks are lending, the facility will cover all the risk involved, it will also provide technical assistance to banks. CBN has directed all the banks to set up agricultural lending desk.

"That will provide technical support from banks to understand the sector and to be able to lend reasonably well and also effectively open up the sector."

According to the minister, the facility will also grade banks based on the quantum of lending , part of the value chain they are lending to small and large scale farmers and look into the developmental impact on the part of farmers. He said there will also be an insurance facility that will ensure the safety of the facilities.

"We have been able to leverage $8b investment commitments in the agricultural sector. Today, we are looking at $3b over time but the facility has four components. The N3b that was lend last year for seed, fertilizer and agro dealers had a zero trade percent. For me, it is an endorsement to the fact that Nigerian banks have recognised there is a revolution going on the agricultural sector," the minister added.

Also speaking, the USAID Administrator, Dr. Rajiv Shah said the collaboration was in line with the vision of strengthening Nigerian agricultural sector in order for farmers to access fund and improve production, food processing, storage facilities and to empower retailers to build capacity.

For them to do this, he said "they need access for finance and we know that access is lacking.

"What United States is coming to do is in line with what the Central bank has put forward, is to offer credit guarantee and technical assistance to banks. $100m can be provided at a lower interest rate for Nigerian agricultural farmers. And we believe it is the first step in achieving minister's vision of $3b additional finance for the agricultural sector for small scale producers, he added. On value addition, Dr. Shah said the facility is aiming at enhancing the growth of Nigerian agricultural sector and make the country a major player in the global market.

"We are proud to offer support and assistance to agriculture, we believe there is a prosperous future in Nigeria. Nigeria can be great in agriculture through this facility and this can be achieved automatically if this vision is achieved.

"To realise this vision, we provide support to banks and for agriculture to thrive, it needs banks and banks also can benefit when the agricultural sector becomes productive. The support we provide is in the form of technical and credit guarantees to make loan access easier at a low interest rate to farmer.

We will guarantee the loan and that the business will pay it. From experience, we know that agriculture is a good place for banks to give loan and get paid bank on time and for us, this is the way to get the system move forward," he added.

Meanwhile, the Central bank Governor, Sanusi Lamido Sanusi also yesterday at the 28th meeting of the Committee of Governors of the West African Monitory Zone, WAMZ emerged as the new Chairman of the body.

He is to take over from Dr. Mills Jones, the Governor of the Central bank of Liberia and Chairman of the committee of the governors.

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