FIELDS OF POSSIBILITIES, HARVESTS OF BENEFITS

One of the most common questions that I get asked is: “How is agriculture in Nigeria really doing?” This is often followed by another question: “Is agriculture now a good area for investment or to pursue a career?”
Perhaps the best answer to the first question can be found in some appropriate metaphors. Nigerian agriculture is currently an exciting field of great possibilities and awesome potential. There are many shoots of promise and flowers of hope. Best of all, there is also an increasing number of significant harvests in many areas. Yet, like in any farming enterprise, progress is hampered by stubborn weeds of many varieties that continue to cling on despite the efforts to eradicate them. But we can safely say that the sector is no longer defined by the weeds but by a growing number of harvests.

I can say this with confidence because my three years at the helm of the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) have brought me up close and personal with Nigerian agriculture. I have inspected agricultural projects around the country, engaged with the financial sector at different levels, participated in brainstorming sessions within and outside Nigeria and interacted extensively with many players across agricultural value chains – from big investors to smallholder farmers. There is no doubt that agriculture and agribusiness have entered a significant stage which may turn out to be an inflection point but many challenges remain. I have no hesitation in giving a strong affirmative answer to the second question: from a business or career perspective, agribusiness is a great area to invest in or make a career out of.

The progress of the work that we are doing at NIRSAL provides a good perch to observe and calibrate the historic gains being made in this critical sector in the midst of significant challenges. Established in 2011 by the Central Bank of Nigeria as a non-bank financial institution designed to appropriately define, price and share agribusiness-related credit risk, NIRSAL has the mandate to increase the flow of finance and investment to all actors across commercially viable agricultural commodity value chains by de-risking and fixing the value chains and incentivizing the actors to good performance measures, agricultural and financial.

It is important to clarify that NIRSAL is not a lending institution. Rather, our job is to stimulate the flow of finance and investment into fixed and de-risked agricultural value chains, build long-term capacity and institutionalize incentives for agricultural lending leveraging our five strategic pillars: Risk Sharing, Innovative Insurance Product Development, Technical Assistance, Incentives and Rating. Thus, NIRSAL serves as a catalyst that enables providers of finance and investment to lend and invest in agribusinesses leveraging on its Credit Risk Guarantees and other Risk Management Products, Tools, Techniques, Methodologies and Strategic Partnerships.

NIRSAL’s core mandate is thus an urgent one because a critical challenge facing the sector is the reluctance of banks and other institutions in the financial sector to lend to agriculture. The gap in financing is a central issue because without the necessary resources, Nigerian agriculture cannot make the transition from subsistence farming to agriculture as a business.

The financial challenges that the sector continues to face are underscored by a 2018 National Bureau of Statistics (NBS) report which found that the oil and gas sector received N3.55 trillion – the highest allocation of private sector credit from the banks – which translates to 23.45% of the total. Manufacturing was second with 14.74%. Other sectors got less than 10%. Agriculture which employs about 70% of working Nigerians and is responsible for a quarter (25.13%) of Nigeria’s GDP received 4.03%
These dismal statistics won’t change overnight. The conditions that make short term, high return investments more attractive to the banks are not likely to disappear anytime soon. Neither will the historic challenges of subsistence farming such as farmland fragmentation and the low capacity of impoverished rural farmers to keep the kind of records that can inspire the confidence of sophisticated bankers. The difficulty of NIRSAL’s mission of creating a handshake between the financial and agricultural sectors can be better appreciated against this background.

Yet there is a strong basis for optimism. The progress that we have made over the past three years despite challenges is a metaphor for the overall progress achieved in the sector. Over the span of its existence thus far, NIRSAL has facilitated a total of over N86.03 billion into the sector. This was achieved by catalyzing funding into various value chains from the private sector – deposit money banks, the capital market, other categories of financial institutions, vendor financiers and other value chain actors.

The breakdown of the total amount leveraged by NIRSAL Credit Risk Guarantees and other Agricultural Risk Management Tools and Products into Value Chain activities tells the story better:
· a total of N46.2 billion in the pre-upstream segment of the agricultural value chain primarily to mechanization and agricultural inputs such as fertilizer, seeds and agrochemicals required before primary production.

· over N17.2 billion into the upstream which is mainly the primary production of maize, cassava, soybeans, rice, cotton, poultry among other commodities.
· N22.6 billion midstream segment of the agricultural value chain used predominantly in the processing of cassava, rice milling, cotton, oil palm, and cocoa.

It is also noteworthy that in line with the rigorous prudence that animates NIRSAL’s operations, these funds were facilitated with less than 1% risk crystallization or claims payout on NIRSAL’s core transactions.
NIRSAL’s track record reflects the upward trend in investments into the agriculture sector that has been gaining momentum recently. According to another NBS finding, foreign investment into the sector rose from $159 million (N57 billion) in 2017 to $289 million (N104 billion) in 2018.

As important as the funds that we have helped to direct into agriculture is, the fact that NIRSAL has created over 400,000 jobs through its various interventions in the various value chains is worth noting. And we are working harder to improve on that figure. Just like the taste of the pudding is in the eating, in NIRSAL we believe that making measurable positive impact in the lives of benefitting individuals and communities is the best return on investment.