The Nigeria Incentive-Based Risk-Sharing System For Agricultural Lending (NIRSAL)


The Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL) – a new innovative mechanism targeted at de-risking lending to the agricultural sector, is designed to provide the singular transformational and one bullet solution to break the seeming jinx in Nigeria’s agricultural lending and development.

The Central Bank of Nigeria (CBN) in August 2010, engaged the Alliance for Green Revolution in Africa (AGRA) to develop the NIRSAL.

NIRSAL is an approach that tackles both the agricultural value chains and the agricultural financing valuechain.

The goal is to trigger an agricultural industrialization process through increased production and processing of the greater part of what is produced to boost economic earnings across the value chain.


The Nigeria Incentive-Based Risk Sharing system for Agricultural Lending (NIRSAL) was launched in 2011 and incorporated in 2013 by the Central Bank of Nigeria (CBN) as a dynamic, holistic USD500 Million public-private initiative to define, measure, price and share agribusiness related credit risk.

NIRSAL is designed with the objective of enabling the flow of affordable financing to all players along entire agricultural value chains. It reduces the risks of financing institutions while granting agricultural loans by building the capacities of both banks and value chain actors on good practices in agricultural financing, loans utilization and repayment.
NIRSAL operated as a project implementation office in Development Finance Department of the CBN until the appointment of its executive management team by the CBN on 23rd December 2015.

NIRSAL seeks to address the causes of low funding levels in the agriculture sector, including lack of understanding of the sector, perceived high risks, complex credit assessment processes/procedures, and high transaction costs.

Its approach goes beyond the use of Credit Risk Guarantee to:

  1. Fixing the agricultural value chain, so that banks can lend to the sector with confidence; and
  2. Encouraging banks to lend to the agricultural value chain by offering strong incentives and technical assistance.

To achieve this, NIRSAL has five pillars that are designed to ‘de-risk’ the agricultural financing value chain, build long term capabilities and institutionalize agricultural lending using its seed capital of USD 500 Million (USD0.5Billion).

The funds are allocated across NIRSAL’s five pillars as follows:

  1. Risk-sharing Facility (USD300 Million). NIRSAL uses this facility to address banks’ perception of high-risks in the sector by sharing losses on agricultural loans.
  2. Insurance Facility (USD30 Million). 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.
  3. Technical Assistance Facility (USD60 Million). 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.
  4. Holistic Bank Rating Mechanism (USD10 Million). 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.
  5. Bank Incentives Mechanism (USD100 Million). This mechanism offers winning banks in Pillar four, additional incentives to build their long-term capabilities to lend to agriculture. It will be in terms of cash awards.


Five key objectives that it hopes to achieve using its dynamic and holistic approach to tackling the challenges in the agricultural and financial value chains. They are:

  1. To fix agricultural value chains in order to provide a reliable platform for de-risking agricultural lending
  2. To mobilize financing for Nigerian agribusiness by using credit guarantees to address the risk of default
  3. To provide technical assistance through capacity building across the value chains
  4. To reduce the cost of borrowing by agricultural producers from commercial banks
  5. To provide technical advice to agribusinesses

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Insurance Facility

The primary goal of the insurance facility is to expand insurance products for agricultural lending from the current coverage of 0.5 million to 3.8 million agricultural primary producers to help reduce credit risks and increase lending across the entire value chain.

This will be both by expanding coverage of existing products provided by the Nigerian Agricultural Insurance Corporation (NAIC) and by piloting and scaling new products, such as weather index insurance, new variants of pest and disease insurance, life insurance, yield based and price index insurance.

The Insurance facility is aimed at reducing risk costs and improving lending by providing farmers with a substitute for collateral.

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