FARM TO FORK, FARM TO FASHION – INVESTING IN NIGERIA’S AGRICULTURAL VALUE CHAINS, SELF SUFFICIENCY IN FOOD PRODUCTION RAW MATERIALS FOR INDUSTRY

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FARM TO FORK, FARM TO FASHION INVESTING IN
NIGERIAS 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

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PRESENTATION OUTLINE

• Overview of Nigerias Agricultural Landscape
• Agricultural Value Chain, Chain Actors Value
  Chain Models
• NIRSAL Concept, Pillars, Policy Fixes and update
• Conclusion

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OVERVIEW OF AGRICULTURE IN NIGERIA

• The agriculture sector is central to Nigerias
  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.
• 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.
• 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.
• Nigerias 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 Nigerias
  unused arable land of 36.9m ha and shift 20 of
  production to higher value crops.
• 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.

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PRESENTATION OUTLINE

• Overview of Nigerias Agricultural Landscape
• Agricultural Value Chain, Chain Actors Value
  Chain Models
• NIRSAL Concept, Pillars, Policy Fixes and Update
• Update

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AGRIC VALUE CHAIN
Consumption
Retailing
Trading
Processing
Research
Trading
Communication
Post-harvest handling
Transportation
Government Policies and Regulations
Production
Input supply
Input supply
Technical and business training services
Financial Services
Market Information and Intelligence
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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

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PRESENTATION OUTLINE

• Overview of Nigerias Agricultural Landscape
• Agricultural Value Chain, Chain Actors Value
  Chain Models
• NIRSAL Concept, Pillars, Policy Fixes and Update
• Conclusion

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• 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.

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NIRSAL creates access to finance by integrating
end-to-end agriculture value chains with
financing value chains . . .
Agricultural value chain
1 Includes working capital loans fixed asset
finance trade finance
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NIRSAL is driven by Five Pillars - particularly
the Risk Sharing and Technical Assistance pillars
. . .
NIRSAL (500m assets to stimulate lending
financial institutions)
1
5
1
2
3
4
5
Risk sharing Facility (300m)
Insurance Facility (30m)
Technical assistance facility (60m)
Bank incentive mechanism (10m)
Agricultural bank rating scheme (100m)
Goal

• Link insurance products to the loan provided by
  the banks to loan beneficiaries

• Build the capacity of banks, micro-finance
  institutions
• Build capacity of agricultural value chains
• Expand financial inclusion

• Targeted incentives that move banks to a long
  term, strategic position and commitment to
  agricultural lending

• Rate banks according to their effectiveness of
  lending to agriculture.

• Shares lending risks with banks (e.g. 50 loss
  incurred)

Expand bank lending in agricultural value chains
Build long-term capacity
Institutionalise incentives for agriculture
lending
NIRSAL Objective
De-risk agriculture finance value chain
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NIRSAL Current Status

• NIRSALs key lending Guidelines were approved by
  the CBNs 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

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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

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PRESENTATION OUTLINE

• Overview of Nigerias Agricultural Landscape
• Agricultural Value Chain, Chain Actors Value
  Chain Models
• NIRSAL Concept, Pillars, Policy Fixes and Update
• Conclusion

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CONCLUSION

• CBNs 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

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CBNs Other Major Agricultural Finance Programmes
at a Glance
(a) Exchange Rate USD1.00 N150.00 Nigerian
Naira (b) Population of Nigeria 167m (c )
Nigerian Farming Population (58 of Nigerias
population) 96.8 m