Last year, over forty-five companies committed to invest money into Africa’s agricultural sector. This decision was reached with the aim of furthering the prospect of economic development, as well as ensuring improvements to food and nutrition security. These contributions seem to have come to fruition, as, on Thursday, Nigeria announced that it has just signed a $3 billion agriculture financing deal with the United States Agency for International Development (USAID). The deal is called a Memorandum of Understanding, MoU, and it is to facilitate increased lending by banks to the agricultural sector of the economy.
The financing deal, which was signed by the Minister of Agriculture and Rural Development, Akinwumi Adesina, and the Governor of the Central Bank of Nigeria, CBN, Lamido Sanusi, on behalf of the Federal Government; and Rajiv Shah, for USAID, is expected to help reduce the unwillingness of banks to lend to farmers and innovators in the agricultural system. The United States is expected to make available a guarantee of $100 million immediately for the easy implementation of this project.
Speaking on this occasion, USAID’s Shah, said “We are very proud of this partnership agreement because we know that in all of the promise and success that the future holds for Nigeria agriculture; 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.”
“What United States is coming to do is in line with what the Central bank has put forward, which is to offer credit guarantee and technical assistance to banks. $100 million can be provided at a lower interest rate for Nigerian agricultural farmers. And we believe it is the first step in achieving the minister’s vision of $3 billion additional finance for the agricultural sector for small scale producers.”
He continued, “To realise this vision, we provide support to banks and for agriculture to thrive. The support we provide is in the form of technical and credit guarantees to make loan access easier at a low interest rate to farmer.”
The Nigeria’s Minister of Agriculture, Akinwumi Adesina, added that, “What this facility is going to do, and I really commend the Central Bank governor, is to reduce the risk of lending by banks. We had a meeting last week with the CBN governor and the managing directors of banks, and they were thrilled at the level of activities in the sector. They were thrilled at the $8bn investment commitment into this sector in one year and they were also thrilled by the fact that of the N3bn that was lent last year to seeds and fertilizer companies, the default rate was zero per cent.”
“The central bank will put out risk sharing instruments, which will leverage the excess liquidity from the commercial banks. The total amount that we are looking at is $3 billion overtime.”