Union Bank of Nigeria plc has signed a N10 billion pact with the Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) to implement an Agriculture Finance Scheme geared towards increasing commercial bank lending to agriculture.
The pact aims to de-risk the sector, making it a viable, profitable investment destination for the private sector.
Emeka Emuwa, Chief Executive Officer, Union Bank and Managing Director of NIRSAL, Aliyu Abdulhameed, at the weekend signed the Memorandum of Understanding (MoU) to kickstart the scheme in Abuja.
Under the terms of the partnership, Union Bank has set aside N10billion from its balance sheet to lend specifically to viable and bankable agricultural projects that are promoted by NIRSAL.
The categories of the qualifying agricultural projects that would benefit include primary production, Agro processing, mechanization, inputs supply, logistics/haulage, storage and post-harvest handling, and preselected value chains.
NIRSAL on its part will provide credit guarantees for the loans provided by Union Bank on the back of our $300 million risk-sharing facility.
The credit guarantees will range between 30-75 percent of the loan value, depending on the dynamics of the project in the agricultural value chain.
To ensure proper use of the loans and success of the projects, NIRSAL will leverage its Project Monitoring and Remediation Offices (PMRO) located across the 36 states in the country. The PMROs will ensure close project supervision to ensure proper use of the loans by beneficiaries.
Emuwa explained that Union Bank’s move in this direction is to support the economic recovery and growth plan of the Federal Government of Nigeria and specifically to achieve the macro-economic multiplier effect of job creation and increase in GDP.
“Union Bank remains committed to supporting the Nigerian agricultural sector. This deep – rooted support stems from a clear understanding that we must contribute actively to the empowerment of small farmers and agricultural stakeholders across the country in order to unlock the growth potential of the sector,” Emuwa stated at the event.
“We are confident that the N10 billion credit facility which we have launched today will go a long way to boost agricultural productivity in the country particularly at this time when the Federal Government seeks to steer the economy away from its heavy reliance on the oil and gas sector,” he added.
The N10 billion agricultural fund will be accessible to players operating at various stages of the agricultural value chain including smallholder farmers, cooperatives and farmer groups, large scale primary producers, integrated farmers, processors, agro-dealers as well as input and equipment suppliers.
“We at Union Bank are pleased to be partnering with the team at NIRSAL through this N10 billion agricultural finance scheme. This is part of our contribution to the growth of the agricultural sector and by extension, to the diversification of the economy focused on sustainable development, job creation, value addition to our agricultural produce, food self-sufficiency and import substitution to conserve foreign exchange,” Emuwa also stressed.
Speaking at the event, NIRSAL MD, Abdulhameed said the launch marks another major step by NIRSAL to increase commercial bank lending to agriculture. “We had set a target this year of getting commercial banks to commit N60billion of their balance sheet to agriculture. I am happy that we are making good progress in this regard,” he stated.
Last two months, NIRSAL signed a 10billion Agriculture Finance MoU with STANBIC IBTC that could be expanded to about N50billion and according to Abdulhameed, the coming on board of Union Bank has edged NIRSAL a lot closer to its our target. “We are hoping to convince more banks to join the train of banks that are committing more of their balance sheets to agriculture,” he stated.
Abdulhameed recalled that over the past couple of years, NIRSAL has implemented an effective risk management framework for handling investments in agriculture.
He said that NIRSAL has deployed project monitoring offices nationwide, set up technology driven field monitoring systems, institutionalized a technical capacity support framework to ensure good agricultural practices and created links and collaborations with research institutions to increase the chances of success of agricultural projects that are helping to minimize investment risk in agriculture. According to him, this is now giving banks comfort to lend to the sector.
NIRSAL has developed an innovative system of direct payment to service providers to minimize the likelihood of loan diversion by beneficiaries. For instance, in primary production, beneficiaries will be provided with inputs such as improved seedlings, fertilizer, pesticides etc. They will also be linked with tractor providers and other providers of services required for the project that will be paid directly.
The NIRSAL MD stated that there are several Agricultural Value Chain activities into which this N10 Billion financing scheme may be utilized for. Examples of the impact of this collaboration (assuming 100% utilization) on some selected value chain activities, including Farm Mechanization: 830 brand new tractors, 3,320 direct jobs, 298,000 Hectares of additional land cultivated and about 1,500,000 lives will be impacted.
Under Fertilizer Financing, a total of 66,666MT of various blends of fertilizer will be distributed, 166,668 hectares of arable land will be cultivated, 833,340 direct jobs created and 4,166,700 lives impacted.
A total of 178,570 hectares of arable land will be cultivated, creation of 892,850 direct jobs and an impact in 3,571,400 lives under Seeds Financing, according to NIRSAL.
Under feed Finishing (Bull Fattening) NIRSAL projects a total of 160,000 bulls will be fattened, annually, providing 16,000 direct jobs in the process and 80,000 lives impacted.
NIRSAL MD, thanked the Managing Director of Union Bank Emeka Emuwa for his unshakeable faith in the viability of agribusiness and for believing in NIRSAL’s institutional capacity to protect their investments.
“The coming on board of Union Bank has edged us a lot closer to our target. I must commend the Management of the Bank for taking a bold step in the right direction by partnering with us on this vision aimed at reshaping the financing landscape of Nigeria’s agricultural economy,” he further noted.
Onyinye Nwachukwu, Abuja