The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) is providing a-50 per cent Credit Risk Guarantee (CRG) for N2billion working capital facility to a cocoa processing and export company in Ondo State.
As part of the plan, the Nigerian Export-Import Bank (NEXIM) and 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 CRG, also supports thousands of smallholder cocoa farmers who supply AgroTraders with a guaranteed offtake market for their produce every year.
A statement from the organisation reads: “NIRSAL’s 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 such as this in the agricultural value chain. By this transaction, NIRSAL “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 said it “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 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 nine per cent interest rate, together with NIRSAL’s 50 per cent CRG cover, presents an even more attractive financing proposition for the cocoa beans processing company.”
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 20per cent increase in capacity utilisation, 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.
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. He acknowledged that NIRSAL has made sourcing finance for agribusiness easier and at more competitive interest rates. He recommended NIRSAL’s products to similar firms looking to boost their operations.