Frequently asked questions about NIRSAL, what NIRSAL does, what agric value chain is, how NIRSAL de-risks agric value chains, and tools employed to de-risk agric value chains etc.


What is NIRSAL?

The acronym NIRSAL stands for Nigeria Incentive-Based Risk Sharing system for Agricultural Lending (NIRSAL).

What does NIRSAL do?

NIRSAL’s core responsibility is to de-risk the agric value chain so that banks can lend to the agric sector with confidence.

How does NIRSAL de-risk the agric value chain?

NIRSAL is able to de-risk the agric value chain by putting in place transparent mechanisms that enable it to identify, define, measure, price and share agribusiness credit risk with banks by providing guarantees for agric loans to finance projects that are verified to be feasible, viable and potentially impactful.

What is an agric value chain?

An agric value chain refers to the set of linked activities that add value to an agric product. This includes the development and dissemination of plant and animal material, input supply, farmer organization, farm production, post-harvest handling, processing, provision of technologies of production and handling, grading criteria and facilities, cooling and packing technologies, post-harvest local processing, industrial processing, storage, transport, finance, and feedback from markets.

NIRSAL's job is to ensure that it facilitates finance to all the elements that comprise the agric value chain to ensure they work optimally for economic growth.

What tools does NIRSAL use to de-risk the agric value chain?

NIRSAL has five tools with which it uses to de-risk the agric value chain. They include:

  • Risk-sharing Facility. NIRSAL uses this facility to address the financial sector's perception of high-risks in the sector by sharing the risks with banks on agric loans. It does this by providing guarantees for the loans.
  • Insurance Facility. The facility's primary goal is to expand insurance products for agricultural lending from the current coverage to new products, such as weather index insurance, new variants of pest and disease insurance etc.
  • Technical Assistance Facility. NIRSAL uses this facility to equip banks to lend sustainably to agriculture, producers to borrow and use loans more effectively and increase output of better quality agricultural products.
  • Holistic Bank Rating Mechanism. This mechanism is used by NIRSAL to rate banks based on two factors, the effectiveness of their agricultural lending and the social impact and makes them available for the public.
  • Bank Incentives Mechanism. This mechanism offers high agric lending banks additional incentives to build their long-term capabilities to lend to agriculture. It will be in terms of cash awards.

How long has NIRSAL been in existence?

NIRSAL has been in existence for about five years now.

It was launched in 2011 and incorporated in 2013 as an initiative of the Central Bank of Nigeria (CBN), the Bankers Committee and the Federal Ministry of Agriculture & Rural Development (FM&RD).

Who are the owners of NIRSAL?

NIRSAL though an independent public liability company is 100% owned by the Central Bank of Nigeria (CBN). The Central Bank Governor is the Chairman of its board, while other members comprise the Minister of Agriculture and Rural Development and some leading figures from the banking sector.

What has NIRSAL achieved so far?

Between 2012 and 2015, while operating as a Project Implementation Office within the Development Finance Department of the CBN, NIRSAL was able to achieve the following:

  • Provision of Credit Guarantees for over 454 Agricultural projects valued at N61.161 billion
  • Pay out of over N753.36 million as interest rebate to borrowers who paid back their loans in good time.
  • Training of over 112,000 farmers across the country on best practice farming techniques and business management.

Since the appointment of its Executive Management Team by the CBN in December 2015, NIRSAL has in line with its mandate to de-risk the agric value chain carried out the following impactful projects.

Mechanization Scheme

Under this scheme NIRSAL facilitated the purchase of 1,000 tractors worth billions of naira for lease to smallholder and large scale farmers at affordable rates.

NIRSAL was able to do this by defining an end-to-end tractor financing model that was addressed the risk concerns of banks and attractive to tractor manufacturing companies.

The scheme has recorded success with zero defaults on payment and anincrease in mechanized farming.

Farm to Market Scheme

The NIRSAL Farm to Market Scheme is designed to fix the challenges like high cost, loss of produce in transit, death etc agric producers face in moving their produce from their farms to markets. The focus is on livestock, processed meat, grains, milk and other perishables.

Under this scheme NIRSAL is facilitating bank financing targeted at fixing relevant aspects of the transport logistic chain like trucking of produce from farm gate to aggregation centers, storage, cold chain, long haul transport via rail, last mile transport to markets.

The Livestock Transport Component of the scheme commenced in August with the historic movement of 500 cattle by rail from Gusau to Lagos. The second train conveyed another batch of 500 cattle from Nguru to Lagos.

In the next phase, NIRSAL will facilitate finance for the establishment of state of the art abattoirs, refrigerated wagons for the transport of processed meat from the north to the south.

Who is eligible to apply for a NIRSAL Credit Risk Guarantee?

All the players within the agric value chain who have relevant parameters are eligible to apply for a NIRSAL credit risk guarantees. They include:

  • Input suppliers
  • Smallholder Farmers & Farmer Groups
  • Large Scale Primary Producers
  • Agric Processors
  • Integrated Farms
  • Agric Logistics Providers
  • Agro-dealers, Input and Equipment Suppliers

Can individuals approach NIRSAL for Credit Risk Guarantees?

No. NIRSAL does not deal with individual farmers. The smallest unit of engagement for NIRSAL are Agric Cooperatives.

Where can a prospective borrower apply for a NIRSAL Credit Guarantee?

Prospective borrowers can apply for a NIRSAL credit guarantee through the agric desk of their banks or through the NIRSAL office.

What are NIRSAL’s core targets?

NIRSAL has four concrete and transparent measures of success for the financial value chain:

  • Leveraging of NIRSAL fund to US$3 billion to increase bank lending within ten years in order to increase bank’s total lending to agriculture from the current 1.4 to 7 percent.
  • Increased lending to the “pooled” small farmer segment to 50 percent of total lending to agriculture. Typically, banks do not reach producers individually but through “pools” such as MFIs and cooperatives).
  • Increased lending to agricultural producers by 3.8 million in 2020 through pooling mechanisms such as value chains, MFIs and cooperatives.
  • Reduction of bank’s break-even interest rate to borrowers from 14 to 7.5–10.5 percent.

How does NIRSAL benefit the Nigerian economy?

Strengthening the financial sector

NIRSAL will strengthen the Nigerian financial sector because it presents an opportunity for the banks to capture latent profits in agricultural lending, maintain long term human, institutional and cultural capacity for value chain financing capacity and enjoy lower loan origination and distribution costs.

Boosting agricultural production

NIRSAL’s interventions will benefit Agricultural producers via increased access to credit, enhanced adoption of better cultural and agronomic practices, use of improved inputs like seeds and fertilizers, increased productivity and profit, income, standards of living, job creation and poverty reduction.

Enhancing food security and facilitating higher productivity

NIRSAL’s interventions will lead to a stronger agricultural sector with six showcase value chains, enhanced food security, fewer imports, and higher productivity.

Fundamentally transforming the Nigerian economy

NIRSAL will help to realize a stronger, more diversified, post-oil economy with additional agricultural GDP growth, higher employment, reduced expenditure on food imports, higher tax revenue from the agricultural sector, competitive exports and a more diversified economy.