Nigeria, a country with a dynamic and growing economy, is paying special attention to its agricultural sector to boost its growth and promote food self-sufficiency. In this regard, the House of Representatives recently called on the Central Bank of Nigeria to allocate an additional $3 billion to smallholder farmers through the Nigeria Incentive-Based Risk Sharing for Agricultural Lending.
This move follows the adoption of a motion titled “Repositioning Nigeria Incentive-Based Risk Sharing System for Agricultural Lending and de-risking of Agribusiness in Nigeria” during the plenary session on Tuesday. The initiative, led by the Member of Parliament representing Idemili North/Idemili South Federal Constituency, Anambra State, Rep. Uchenna Okonkwo, is aimed at strengthening the agricultural lending system and de-risking investments in the agricultural sector.
It is essential to emphasize that the agricultural sector is a pillar of the Nigerian economy, contributing 40% of the Gross Domestic Product and providing over 60% of employment in the country. Despite its enormous potential, the agricultural sector has shown slow growth in recent years, highlighting the need for targeted action to reverse this trend.
To address this challenge and boost the agricultural value chain, it is crucial to increase agricultural financing through the Nigeria Incentive-Based Risk Sharing for Agricultural Lending and lower interest rates for agricultural value chain actors. By allocating an additional $3 billion to NIRSAL and incentivizing banks to increase their agricultural lending from 1.4% to 7% of total loans over the next five years, Nigeria is affirming its commitment to the sustainable development of its agricultural sector.
Furthermore, the adopted motion advocates for an increase in the share of financing provided to smallholder farmers, through microfinance institutions, agricultural cooperatives and value chain associations, at a competitive interest rate of between 7.5 and 10.5 per cent. This approach is aimed at ensuring equitable distribution of funds and encouraging the participation of key actors in the agricultural value chain.
The implementation of these recommendations requires close collaboration between the financial sector, government and civil society stakeholders to ensure optimal transparency and accountability in the allocation of funds to the agricultural sector. By monitoring compliance with the proposed measures and regularly reporting on progress, Nigeria will progress towards a stronger, more inclusive and resilient agricultural economy..
In conclusion, the allocation of an additional $3 billion to smallholder farmers by the Central Bank of Nigeria is a crucial step towards building a thriving and sustainable agricultural sector. By investing in the agricultural value chain and reducing lending risks, Nigeria is strengthening its position as an emerging agricultural power in Africa, ready to address the challenges of food security and economic growth.