The Federal Government and United States Agency for International Development (USAID) yesterday agreed on a $3bn agriculture financing. The agreement was for USAID to extend its financing role to the agricultural sector, in order to boost the activities of the sector.
During the agreement, the Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, and Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina, signed on behalf of the Federal Government, while the USAID Administrator, Dr. Rajiv Shah, signed for the Agency.
The signed agreement is expected to encourage the growth of Agriculture in the country, which will be occasioned by combined training and workshops for local banks and agriculture related enterprises.
During the event, the USAID Administrator, Dr. Rajiv Shah said, the US would stand for a $100m commercial lending to Nigerian banks, adding that the development would promote private financing to the sector.
He said, “We are very proud of this partnership agreement because we know that in all of the promise and success that the future holds for Nigeria; agriculture nearly 70 per cent of small scale farmers lack access to financing.
“Because of this partnership, hundreds of millions of dollars will be made available so that farmers can access and improve their production system and their processing operations.”
Adesina, however said the guarantee provided by US would help curtail some issues affecting lending in the sector, issues like, risk of default, high interest rates among others.
The minister said, “What this facility is going to do, and I really commend the Central Bank Governor, is to reduce the risk of lending by banks. We had a meeting last week with the CBN governor and the managing directors of banks, and they were thrilled at the level of activities in the sector.
“They were thrilled at the $8bn investment commitment into this sector in one year and they were also thrilled by the fact that of the N3bn that was lent last year to seeds and fertilizer companies, the default rate was zero per cent.
“So, on this facility, the central bank will put out risk sharing instruments, which will leverage the excess liquidity from the commercial banks. The total amount that we are looking at is $3bn overtime.”
Adesina named the four components that have facilitated the Nigerian Incentive-based Risk Sharing and Agriculture lending as improved value chain in the agricultural sector, insurance cover, risk reduction and technical assistance.