FARM TO FORK, FARM TO FASHION – INVESTING IN
NIGERIA’S AGRICULTURAL VALUE CHAINS, SELF
SUFFICIENCY IN FOOD PRODUCTION RAW MATERIALS
FOR INDUSTRY
SANUSI, LAMIDO SANUSI, CON
GOVERNOR, CENTRAL BANK OF NIGERIA
Presentation to the Investment Summit on Nigeria
1st August, 2012
PRESENTATION OUTLINE
• Overview of Nigeria’s Agricultural Landscape
• Agricultural Value Chain, Chain Actors & Value Chain Models
• NIRSAL: Concept, Pillars, Policy Fixes and update
• Conclusion
2
OVERVIEW OF AGRICULTURE IN NIGERIA
1. The agriculture sector is central to Nigeria’s economy, accounting for 40 per cent of GDP and providing
60 per cent of employment. Agriculture is a major source of employment growth: Between 2001-2007
alone, it accounted for 51 per cent of job creation in Nigeria.
2. Since the 1960s, Nigeria has lost a dominant position in exports of key crops such as cocoa,
groundnuts, ground nut oil and palm oil. In the 1960s, Nigeria had over 60% of global palm oil exports,
30% of global ground nut exports, 20-30% of global ground nut oil exports, and 15 % of global cocoa
exports. By the 2000s, Nigeria global share of exports of each of these crops was 5% or less.
3. Today, Nigeria is a net importer of agricultural produce, with imports totalling $4.2 bn. Large food
products import include wheat ($1.1bn), fish ($0.7b), rice ($500m), and sugar ($400m). Total food
import bill of USD 4.2 billion annually.
4. Nigeria’s agriculture sector has enormous potential – with an opportunity to grow output by 160%,
from USD 99 billion today to USD 256 billion by 2030. This growth potential comes from increasing
yields to 80-100% of benchmark countries; increase acreage by 14 m ha new agricultural land,
approximately 38% of Nigeria’s unused arable land of 36.9m ha; and shift 20% of production to higher
value crops.
5. Nigeria faces a large and growing global agricultural market – Rising commodity prices, growing
demand for food, and opportunities in bio-fuel all present significant opportunities for Nigeria. For
example, global cereal demand will grow by between 31% and 150% by 2050 depending on the region,
and global commodity prices are in their second major spike in three years. Agriculture can become the
main driver for more equitable income growth, compared to oil and gas sector.
3
PRESENTATION OUTLINE
• Overview of Nigeria’s Agricultural Landscape
• Agricultural Value Chain, Chain Actors & Value Chain Models
• NIRSAL: Concept, Pillars, Policy Fixes and Update
• Update
4
AGRIC VALUE CHAIN
Consumption
Retailing
Trading
Research
Processing
Communication
Trading
Post-harvest
handling
Production
Input supply
Transportation
Government Policies and Regulations
Input supply
Technical and business training services
Financial Services
Market Information and Intelligence
Source: Adopted from Ferris (2007)
VALUE CHAIN ACTORS AND MODELS
• The value chain includes all activities required to bring a product to
the market, including horizontal linkages to suppliers of goods and
services
• Actors in the value chain – service providers, farmers, processors,
traders & wholesalers and retailers
• Dynamics of actors in the value chain – actors exist to maximize
profits, information flow is asymmetrical and actors who are value
chain drivers tend to intimidate other actors in the value chain
6
PRESENTATION OUTLINE
• Overview of Nigeria’s Agricultural Landscape
• Agricultural Value Chain, Chain Actors & Value Chain Models
• NIRSAL: Concept, Pillars, Policy Fixes and Update
• Conclusion
7
NIRSAL is an initiative designed to appropriately define, price and share
agribusiness related credit risk
NIRSAL has the following partners:





Central Bank of Nigeria (CBN)
The Bankers’ Committee (CEOs of deposit money banks, specialized
banks, discount houses), insurance companies.
The Federal Ministry of Agriculture & Rural Development (FMA & RD)
Federal Ministry of Finance
Federal Ministry of Trade & Investment
NIRSAL seeks to achieve the following:



Mobilize financing for Nigerian agribusiness using credit guarantees to
address the risk of default
Create markets
Act as Investment Advisor
NIRSAL is a flexible financing tool designed to change the behavior of financial
institutions


Covers all crops and livestock activities in Nigeria, while improving
investment outcomes and creating jobs.
Builds on a legacy of previous CBN interventions in agriculture.
8
NIRSAL creates access to finance by integrating end-to-end agriculture value chains
with financing value chains . . .
Agricultural value chain
Input
producers
Farmers
Agro
Dealers /
Storage
Agro
processors
Industrial
Distribution
manuand exports
facturers
Agricultural financing value chain
Loan
Product
Dev. 1
Credit
Distribution
Loan
Credit
origination Assessment
Managing
and pricing
for risk
Loan
Disbursement
9
Enablers
Infrastructure
Credit bureau
Policies
1 Includes working capital loans; fixed asset finance; trade finance
Extension services
Price stability boards
NIRSAL is driven by Five Pillars - particularly the Risk Sharing and Technical Assistance
pillars . . .
NIRSAL ($500m assets to stimulate lending financial institutions)
1
Risk
sharing
Facility
($300m)
 Shares
lending
risks with
banks
(e.g. 50%
loss
incurred)
2
Insurance
Facility
($30m)
 Link
insurance
products
to the
loan
provided
by the
banks to
loan
beneficiari
es
3
4 Agricultural
Technical
assistance
bank rating
facility
scheme
($60m)
($100m)
 Build the
 Rate banks
capacity of
according
banks,
to their
microeffectivene
finance
ss of
institution
lending to
s
agriculture
.
 Build
capacity of
agricultura
l value
chains
 Expand
financial
inclusion
5
Bank
incentive
mechanism
($10m)
 Targeted
incentives
that move
banks to a
long term,
strategic
position
and
commitme
nt to
agricultural
lending
Goal
Expand bank
lending in
agricultural
value chains
10
NIRSAL
Objective
De-risk agriculture
finance value chain
Build longterm
capacity
Institutionalise incentives
for agriculture lending
NIRSAL – Current Status
• NIRSAL’s key lending Guidelines were approved by the CBN’s Committee of
Governors in April 2012
• NIRSAL is now open for business and accepting applications for Credit Risk
Guarantees (CRGs)
•
Two applications have so far been received:
 N250million credit facility for the supply of sorghum to Guinness Nigeria Plc. The Bank
is requesting for 50% Guarantee cover.
 N75million credit facility for the supply of cassava chips to China with the Bank
requesting for a 75% Guarantee cover
• Under the insurance pillar, plans are underway to expand the insurance landscape
and enable private sector participation. Two insurance companies have recently
been granted approval by NAICOM to offer insurance products for agri-businesses
11
NIRSAL – Current Status
• NIRSAL has engaged 26 (70%) State Governments in Nigeria and held focal
meetings with strategic Stakeholder groups focusing on the major crops rice,
tomato, cotton and aquaculture
• NIRSAL is currently working with financial institutions to improve competitiveness
of loan pricing, increase accessibility and use of mobile phone channels and
encourage insurance companies to introduce market-based innovations that align
with customer needs
• Presently awaiting the approval from the President to commence the legal
formation of the NIRSAL Plc. i.e. stand as a non-bank financial institution
12
PRESENTATION OUTLINE
• Overview of Nigeria’s Agricultural Landscape
• Agricultural Value Chain, Chain Actors & Value Chain Models
• NIRSAL: Concept, Pillars, Policy Fixes and Update
• Conclusion
13
CONCLUSION

CBN‘s agricultural interventions have over time, led to increased access to
finance by farmers and other stakeholders

These initiatives have promoted the growth of the agricultural sector, facilitated
employment and income generation in the rural areas

We will work closely with the Federal ministries to field joint teams especially
around our priority value chains

We anticipate that these engagements will yield insights about what additional
activities our institutions need to prioritize e.g.
– insurance sector reform, trade policy changes

Our objective is to ensure that the ideas at the heart of NIRSAL become
institutionalized and rolled out into the market place quickly
14
CBN’s Other Major Agricultural Finance Programmes at a Glance
CBN’s Agricultural
Financing Initiatives
Commencement
Year/Duration
1978
Guaranteed $358m to 760,636
farmers. $221.87m (73.3%)
recovered from 557,318 (62.0%)
farmers.
2003
Paid $6.67m as 40% interest
drawback to 159,367 eligible
farmers.
ACGSF
- Agricultural Credit Guarantee
Scheme Fund (ACGSF)
IDPF
- Interest Drawback
Programme Fund
Performance/
Outreach
ACSS
- Agricultural Credit Support
Scheme
CACS
- Commercial Agriculture
Credit Scheme
2006
2009
Paid $5.82m as 6% interest
rebate on 43 large projects.
Released $1.19bn to 227 agric.
value chain projects (198 private
promoters and 29 State
Governments) through18 banks
(a) Exchange Rate = USD1.00 = N150.00 Nigerian Naira (b) Population of Nigeria :167m (c ) Nigerian Farming Population (58% of Nigeria’s
population): 96.8 m
15