By Tony Obiechina, ABUJA
The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) is providing a Cocoa processing and export company in Ondo State – with 50% Credit Risk Guarantee for N2Billion working capital facility.
The Nigerian Export-Import Bank (NEXIM) and United Bank for Africa (UBA) are financing the purchase, storage, processing and export of 22,000 metric tons of cocoa beans.
The business between these three financial institutions and AgroTraders Limited,beneficiaries of the credit Risk Guarantee, also supports thousands of smallholder cocoa farmers who supply Agro Traders with a guaranteed offtake market for their produce every year.
A statement signed by Ann Ihugba said “NIRSAL’s Credit Risk Guarantee (CRG), draws from its Risk Sharing Pillar – a mechanism that gives comfort to banks and other providers of finance to increase their lending to agriculture and agribusiness.
“This is in line with the global trend where governments – through their central banks – use blended finance to drive the development of slow but crucial sectors of the economy.”
A year ago, NIRSAL signed a Master Agreement with NEXIM Bank for opportunities like this in the Agricultural Value Chain.
She said by this transaction, NIRSA “will continue to facilitate the flow of finance and investments into fixed Agricultural Value Chains, empowering smallholder farmers, and building long term capacities amongst value chain actors, while NEXIM is fulfilling its objective of boosting exports.”
NIRSAL, Ihugba further stated, “is wooing all commercial banks to open up their balance sheets to agriculture. The call is made with the assurance that the NIRSAL CRG would secure substantial parts of bank loans to agriculture and that its comprehensive risk management framework would forestall defaults.”
In his address, NIRSAL’s Managing Director/CEO, Mr. Aliyu Abdulhameed said that NIRSAL also covered Agro Traders’ N1Billion facility granted by UBA in 2017 for a period of 12 months.
“Due to the company’s diligence in loan repayment, it was issued an Interest Drawback totaling N8.9Million which went a long way in reducing the cost of the fund. This time around, NEXIM’s 9% interest rate, together with NIRSAL’s 50% CRG cover, presents an even more attractive financing proposition for the cocoa beans processing company” he said.
According to the MD, “we are happy to use Agro Traders Ltd as an example to other Agro-allied companies on how they can grow their agribusinesses with NIRSAL’s support.”
Mr Abdulhameed highlighted the socio-economic impact of the partnership between, NIRSAL, NEXIM, UBA and Agrotraders to include:
*Earnings for the financier and increased confidence to lend to the agriculture sector;
*increased supply of raw materials leading to about 20% increase in capacity utilization, productivity and exports by the Processor;
*Offtake market and sustained livelihoods for 17,000 smallholder Cocoa farmers with about 85,000 lives positively impacted by extension, not to mention the number of full time and part time workers engaged and retained by AgroTraders and the Cocoa community in Ondo and neighbouring States and the State Government are no doubt better off.
Also speaking, the Managing Director of AgroTraders Ltd, Mr. Kunle Ayoade commended NIRSAL for its unique role in supporting serious-minded business firms whose operations are contributing to Nigeria’s quest for economic recovery, growth, and diversification.
He pledged to continue to deal fairly with the smallholder farmers who supply his inventory which is highly sought after across Europe, especially in Germany and the Netherlands.
Acknowledging that NIRSAL has made sourcing finance for agribusiness easier and at more competitive interest rates, the Ayoade recommended NIRSAL’s products to similar firms eager to boost their operations.