The House of Representatives has urged the Central Bank of Nigeria (CBN) to address the issue of under-financing in the agricultural sector by providing the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) with an additional $3 billion.
This decision followed a motion presented during the House plenary by Hon. Uchenna Okonkwo.
In his presentation, Okonkwo pointed to Nigeria’s struggling economy, widespread poverty, and growing food insecurity as a result of reduced agricultural productivity.
He attributed these issues to the low levels of capital investment and insufficient funding in the agricultural sector, which have severely hindered its growth.
In response to these concerns, Hon. Okonkwo advocated for a significant increase in funding to the sector. “Convinced that to reverse the trend, there is a need to tackle the challenge of under-financing of agricultural value chains by providing NIRSAL with an additional $3 billion for lending to agricultural value chain actors in Nigeria,” he said.
“The severe impoverishment across the nation as well as an increase in hunger across the nation are directly linked to decreased agricultural productivity,” said Okonkwo, stressing that a lack of sufficient funding had crippled the sector’s ability to meet its potential.
Boosting agribusiness
Hon. Okonkwo recalled that in 2011, the CBN launched and incorporated NIRSAL as a public-private initiative designed to address the issue of agribusiness credit risk.
Initially valued at $500 million, NIRSAL’s primary objective was to improve the agricultural and financial value chains by promoting sound practices in agricultural financing, loan utilization, and repayment. This initiative was meant to reduce the risk for financial institutions and encourage more lending to the agricultural sector.
“The objective of NIRSAL is to enhance both agricultural and financial value chains by promoting good practices in agricultural financing, loan utilisation, and repayment,” explained Okonkwo
He expressed concern that the agricultural sector, despite its enormous potential, had experienced slower growth due to a lack of financial support saying “Despite the sector’s importance, contributing 40% to Nigeria’s Gross Domestic Product (GDP) and providing over 60% of the country’s employment” Okonkwo lamented that it had been underperforming in recent years.
“There is a pressing need to tackle the challenge of under-financing in agricultural value chains,” Okonkwo stated. “Providing NIRSAL with an additional $3 billion for lending to agricultural value chain actors is essential to reversing this trend.”
Key recommendations
The House, therefore, resolved to:
- “Urge the CBN to increase agricultural lending by banks from the current 1.4% to 7% of total lending within the next five years.
- Ensure that 50% of agricultural lending is directed to Small Holder Farmers (SHF) through Microfinance Institutions (MFIs), farmer cooperatives, and value chain commodity associations. These loans are to be offered at interest rates between 7.5% and 10.5%, making them more accessible to small-scale farmers.”
The House also mandated that the Committees on Banking Regulations, Agricultural Production and Services, Nutrition and Food Security, and Finance monitor compliance with these directives. These committees are expected to report back to the House within four weeks for further legislative action.
The Central Bank of Nigeria is yet to respond to the House’s resolution on the additional funding for NIRSAL.
