Lawmakers Urge CBN to expand Agricultural Lending by $3bn
In a bold move aimed at supporting small-scale farmers and stimulating agricultural productivity, the House of Representatives has urged the Central Bank of Nigeria to allocate an additional $3 billion in funding to the Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL) program. This proposed financial infusion would provide much-needed capital to farmers across the country, potentially revolutionizing the agricultural sector and driving economic growth.
During Tuesday’s plenary session, the House of Representatives took a significant step in addressing the underperformance of the agricultural sector in Nigeria, considering a motion aimed at bolstering the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL). The motion, moved by Uchenna Okonkwo, member from the Idemili North/South Federal Constituency in Anambra State, highlighted the urgent need to reposition NIRSAL to better support smallholder farmers and de-risk agribusiness in the country
Okonkwo recalled the program’s auspicious beginning in 2011, when the CBN launched this groundbreaking initiative to reshape the way risk in agribusiness is managed and shared between private and public entities. With an initial funding of $500 million, NIRSAL set out to transform the agricultural sector, but its potential has yet to be fully realized – a point that Okonkwo was keen to emphasize in his impassioned speech.
The primary focus of NIRSAL is to enhance the efficiency and effectiveness of the agricultural sector by addressing key issues in agricultural financing, utilization, and repayment.
Despite the laudable aims of NIRSAL, the honorable member from the Labour Party pointed to a concerning trend in the agricultural sector. Despite its significant contribution to the economy, accounting for a staggering 40% of GDP and providing employment for 60% of the population, this vital sector has been experiencing a decline in growth. This underperformance, Okonkwo emphasized, is occurring despite the vast potential of the agricultural sector, which could and should be a major driver of the Nigerian economy.
In addition to advocating for an increase in NIRSAL funding, Okonkwo also proposed a reduction in the break-even interest rate for agricultural value chain borrowers. By lowering the interest rate to a range of 7.5 to 10.5%, he argued, banks would be incentivized to lend to this vital sector of the economy, thereby increasing access to credit for farmers and agribusinesses.
In response to Okonkwo’s compelling argument, the House of Representatives unanimously adopted his motion, calling for a dramatic increase in agricultural lending by banks. Specifically, the House urged the CBN to raise agricultural lending from 1.4 to 7% of total lending over the next five years, with half of the funding channeled to small holder farmers via microfinance institutions, farmer cooperatives, and value chain commodity associations.
The motion also mandated three key committees – Banking Regulations, Agricultural Production and Services, and Nutrition and Food Security – to closely monitor compliance and report back with any progress or issues within a four-week period.
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