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Nigerian agricultural sector to benefit from USAID financing

Nigeria USAID agriculture loan dealUSAID chief Rajiv Shah has said that close to 70 per cent of small-scale farmers in Nigeria lack access to financing. (Image source: World Bank Photo Collection)The USA and Nigeria have joined forces in a US$3bn agriculture financing deal aimed at boosting lending by commercial banks with an initial guarantee of US$100mn from the US Agency for International Development (USAID)

Upon signing a Memorandum of Understanding (MoU) in Abuja with minister of agriculture and rural development, Adeshina Akinwunmi, and Central Bank governor Mallam Sanusi Lamido Sanusi, USAID chief Rajiv Shah said the deal formed part of a campaign to improve lending to farmers and agricultural entrepreneurs by using risk-sharing instruments to leverage excess commercial liquidity.

USAID chief Rajiv Shah said, "It's not a partnership for partnerships' sake. These are true market linkages that will drive growth, deliver profits, and expand opportunities for poorer and marginalized communities around the country.

"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," he added.

President Goodluck Jonathan said that Nigeria was undergoing an agricultural transformation that would create more than three million new jobs and add 20 million metric tonnes of food to the domestic market by 2015, reversing the productivity decline that followed the discovery of oil and making the country a major net exporter of food.

"Such a shift will not only reduce the billions in dollars we spend importing basic food items, but will also create millions of jobs, especially for our youth," President Jonathan noted.

"This shift will also drive agricultural industrialisation as more agro-allied enterprises are established to process and add value to local foods for domestic and international markets."

That Agricultural Transformation Agenda includes Staple Crop Processing Zones to attract private sector investment into areas of high food production, as well as "the need to accelerate investments in research and development and take advantage of modern technologies including bio-technologies that will expand possibilities for our farmers," President Jonathan remarked.

The new USAID agreement would provide technical assistance, explore new financial products and establish a staff exchange programme to encourage the growth of Nigerian agriculture.

Akinwunmi commented, "It's an endorsement of the fact that the Central Bank and the banking community recognize that there is a revolution on the way in Nigerian agriculture, and they are ready to put significant financing behind it."

The minister said the managing directors of Nigerian banks were "thrilled" that there was a zero per cent default rate on the US$19mn of loans last year to seeds and fertiliser companies.

The Nigerian incentive-based Risk Sharing System for Agricultural Lending has been providing risk mitigation, financing, trading, and other strategic assistance to agribusinesses with a capital base of US$500mn.

Sanusi said NIRSAL began at the peak of Nigeria's banking sector crisis and was meant to boost agricultural lending as part of the Central Bank's Development Finance Department in cooperation with USAID’s Development Credit Authority.

"The tentative steps taken have started [to encourage] banks to give credit to this sector without securing losses," Sanusi asserted. "Four years ago, the agricultural sector accounted for less than one per cent of the portfolio of banks. Last year, it was four per cent. We have over N300bn (US$19mn) already in agriculture, but we can do more."

Doing more in Nigeria is central to continuing what African Union Commissioner for Rural Economy and Agriculture Rhoda Peace Tumusiime called commendable, unprecedented progress in advancing food security and nutrition across the continent.

"There has been a notable increase in the incomes of many agricultural households," Tumusiime stated.

Tumusiime said national and multinational policy makers have continued to emphasise the role of women and sustainable development "to ensure the efficient and effective harnessing and management of Africa’s natural resources and to be able to cope with the demands of the exponentially increasing population and the adverse impacts of climate change".

The Obama administration has also been working to improve African agriculture through USAID's
Expanded Access to Services for Agricultural Enterprises to boost business management skills and access to credit.

The programme addresses basic bookkeeping and business planning skills to help farmers and agricultural processors maximise production and earning potential. In Nigeria, it has been increasing profitability for 5,000 small agricultural enterprises in three northern states and has been disbursing about US$800,000 in loans to 11,000 borrowers, mostly women, to boost earnings from maize and cassava.

The government in Abuja has also been moving to provide 10 million phones to farmers in 2013, of which half will go to women.

Akinwunmi said it was part of a drive to end financial exclusion.

"The backbone of any agricultural sector is the farmers' access to modern technologies," Akinwunmi commented, adding that the Jonathan administration was pushing to restructure the Bank of Agriculture to provide a single-digit interest rate to help farmers feed more than 160 million Nigerians.

"This large market represents high demand for agricultural products," Akinwunmi said. "Nigeria has the capacity to meet the demand, but we have failed to harness the importance of agriculture."


Scott Stearns

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