We faced a lot of problems in getting access to our farmers and there are three main issues here. One is that the interest they face is quite high; the second is the quantum of lending and the third is the term of financing they get.
What this facility is going to do is to reduce the risk of lending by banks. Last week Saturday, I was with the CBN governor with all the bank managing directors in Lagos and we all discussed. They were thrilled with the reforms going on in the agriculture space. They were thrilled to know they had leveraged $8bn of 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.
I must say we are the first country anywhere in the world where you start a programme and the default rate is zero per cent in the first year.
So, on this facility, the central bank would put out risk sharing instruments, which will leverage the excess liquidity from the commercial banks. The total amount that we are looking at is $3bn overtime. But the Nigeria Incentive-Based Risk Sharing System for Agriculture Lending facility has about four components.
One is to reduce the risk faced by banks; so if the banks are lending, the facility will cover part of the risk if there is a loss.
The second is that it will provide technical assistance to the banks and already, the CBN governor has directed all banks to have agricultural lending desk; so, that will provide back and front end technical support to banks to understand the sector and to be able to lend reasonably well and also effectively too, to the sector.
Third is that the facility will also rate banks from the quantum of lending and the part of the value chain they are lending too from small farmers to large farmers.
And finally, it depends on the developmental impact that their lending is leading into. Part of the facilities is an insurance facility that would insure the farmers and the businesses.
So, all in all, it is an endorsement of the fact that the central bank and the banking community recognises that there is a revolution on the way in Nigeria in agriculture. And agric as a business is working and they are ready to put significant financing behind it.