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Growing Africa's Agriculture

AGRA and Central Bank of Nigeria Partner to Develop Financing Mechanism;

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M.M. Abdullahi: +234 9 462 36011/mmabdullahi@cenbank.org.
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AGRA and Central Bank of Nigeria Partner to Develop Financing Mechanism;
Foresee Financing to Spark a Green Revolution in Nigeria
 
ABUJA, NIGERIA (9 August 2010)--The Alliance for a Green Revolution in Africa (AGRA) and the Central Bank of Nigeria (CBN) today signed a landmark agreement to develop a new innovative mechanism for helping to unlock billions of Naira of financing to serve the needs of all farmers, especially smallholder farmers, agro-processors, agribusinesses and input suppliers in the agricultural value chain.
 
During the initial design phase of the new Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), AGRA and CBN will work with commercial banks in Nigeria to develop an innovative financing mechanism aimed at providing farmers with affordable financial products, while reducing the risk of loans to farmers under other financing programmes offered by the financial institutions. The initiative will build capacities of banks to expand lending to agriculture, deploy risk sharing instruments to lower risks of lending and develop a bank rating scheme to rate banks based on their lending to the agricultural sector.
 
“The Central Bank of Nigeria has embarked on major reforms of the financial sector to bring it in line with our priorities for sustainable economic growth. The key sector is agriculture. Financing agriculture is central to Nigeria’s economic future. NIRSAL is our home grown instrument for achieving this transformation,” said Sanusi Lamido Sanusi, Governor of the CBN. “A productive and efficient agricultural sector is the foundation for the food and economic security of our nation.”
 
In Nigeria, agriculture accounts for 40 percent of GDP, yet it receives only one percent of total commercial bank loans. Unlocking access to bank financing for agriculture and developing risk-sharing approaches is critical for stimulating innovations in agricultural lending and increasing food production, Sanusi said.
 
“Agriculture is no different from any other businesses,” said Namanga Ngongi, AGRA’s president. “Agriculture is a business not a way of life. The key to success is to provide farmers with access to improved farming technologies with financial resources and market linkages. They also need financial literacy to help them use financing better. The Central Bank of Nigeria is clearly showing that it can spur new opportunities in agriculture through leveraging commercial finance for agricultural value chains. This is the kind of example that, if successful, can set the tone for the rest of Africa.”
 
“Innovations are making a difference,” Ngongi added. “Farmers are using credit to invest in their production. As a result, they are making more money. They are buying more and better seeds, fertilizers, cows and other inputs. Innovative financing is the key to sparking a Green Revolution.”
 
As in most of the nations of sub-Saharan Africa, Nigeria’s farmers are held back from reaching their full production potential by the poor functioning of value chains in both the financial and agricultural markets. One of Africa’s richest countries in terms of natural resources, Nigeria has 39.6m hectares of arable land, of which 60 percent is under cultivation. But only 5 percent of its farmers use improved seeds. Fertilizer use is low, averaging less than 10 kg per hectare. Majority of the farmers lack access to affordable financing, which limits their ability to respond and take advantage of new market opportunities offered by the global food crisis.
“Nigeria has potential to be a major player in global food and agriculture markets, but you cannot eat potential. The key to turning this potential into wealth is putting sound financial incentives and policies in place that can accelerate the growth and performance of agricultural value chains,” said Akinwumi Adesina, Vice President for Policy and Partnerships at AGRA.
 
AGRA and CBN will also work together on developing innovative insurance products that are affordable to farmers, to complement the support to be provided for banks and other financial institutions, in order to further reduce the risk of lending.
 
The initiative whose design phase was announced today in Abuja is part of a larger effort initiated by AGRA and partners to leverage billions of dollars in support of smallholder agriculture across the continent.
 
Building on its experiences in the region, AGRA is continuing to develop innovative mechanisms for encouraging agricultural lending, in particular through risk sharing arrangements, while also providing technical assistance to farmers, businesses, and financial institutions.
 
“AGRA welcomes and applauds this initiative. Once designed, it will provide practical ways for African governments to support agriculture in their countries through innovative financing,” said Strive Masiyiwa, a member of AGRA’s board.
 
“We know that farmers’ and agribusinesses’ need access to credit, coupled with proper financial literacy, market access, and insurance. We need the ‘total package’. When fully designed, CBN will launch NIRSAL to deploy $500 million to leverage $3 billion from commercial banks into agriculture. We will design it rigorously and make it work to lift millions of our people out of poverty” said Sanusi Lamido, Governor of the Central Bank of Nigeria.
 
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Alliance for a Green Revolution in Africa (AGRA)
AGRA is an Africa based organization working in partnership with governments, agricultural research organizations, farmers, private sector, civil society and other rural development stakeholders to significantly and sustainably improve the productivity and incomes of resource poor farmers in Africa. AGRA’s programmes in the areas of seeds, soil health, market viability, supportive policies and innovative finance work to bring about transformational change across the agricultural value chain.  Funded initially by the Rockefeller Foundation and the Bill and Melinda Gates Foundation, AGRA is chaired by Kofi Annan and has offices in Nairobi, Kenya and Accra, Ghana. www.agra-alliance.org.

Central Bank of Nigeria (CBN)
Established by the Central Bank of Nigeria (CBN) Actof 1958, the principal objects of the Bank, as contained in the new CBN Act, 2007, are to: ensure monetary and price stability; issue legal tender currency in Nigeria; maintain external reserves to safeguard the international value of the legal tender currency; promote a sound financial system in Nigeria; and act as banker and provide economic and financial advice to the Federal Government of Nigeria. http://www.cenbank.org/

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About the Alliance for a Green Revolution in Africa (AGRA)
AGRA is a dynamic partnership working across the African continent to help millions of small-scale farmers and their families lift themselves out of poverty and hunger. AGRA programmes develop practical solutions to significantly boost farm productivity and incomes for the poor while safeguarding the environment. AGRA advocates for policies that support its work across all key aspects of the African agricultural value chain ­from seeds, soil health and water to markets and agricultural education.

AGRA's Board of Directors is chaired by Kofi A Annan, former Secretary-General of the United Nations. Dr Namanga Ngongi, former Deputy Executive Director of the World Food Programme, is AGRA's president. With support from The Rockefeller Foundation, the Bill & Melinda Gates Foundation, the UK's Department for International Development and other donors, AGRA works across sub-Saharan Africa and maintains offices in Nairobi, Kenya, and Accra, Ghana.