The stagnated state of the Liberian economy is said to be caused by the country’s heavy reliance on the extractive sector- iron ore and rubber which are often vulnerable to external shocks resulting from drop in global communities’ price. The government now believes that the surest way to beat this scourge is to diversify the economy through agriculture.
Hence, a Taskforce comprising the ministries of Agriculture, Commerce and Industry has been set up by President Ellen Johnson-Sirleaf to harness potentials of the agriculture sector. Following an assessment of the sector, the taskforce realized that access to finance remains a critical bottleneck to the viability of agriculture in Liberia. Also, lack of technical skills further compounds the situation. To this end, the government of Liberia through the agribusiness taskforce invited the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL) to enlighten stakeholders in the agribusiness sector on how to bridge the existing financing gap by using similar module adopted by the Nigerian government to boost food security in the West African nation. This is part of efforts aimed at moving the Liberia Agriculture Transformation Agenda (LATA) forward through GoL’s “Growth Enhancement Support (GES) scheme”. The GES supports cost-sharing arrangements to stimulate and ensure sustainable micro-economic stability based on the experience from other countries (including Nigeria). The subsidy can be gradually removed once farmers see the value of improved certified seeds and fertilizer, and have a functioning market to sell to. The GES can be linked to Electronic Wallet (E-Wallet) System, through which subsidized electronic vouchers for inputs are delivered directly to the farmers’ mobile phones and then the vouchers are used like cash to purchase the inputs directly from agro-dealers. The process bypasses the weak and broken system often results in the siphoning off of huge amounts of funds and a small percentage of farmers actually receiving the inputs.
Based on the success of Nigeria’s GES & E-Wallet system, other African countries (Kenya, Uganda, Malawi, etc. are collaborating with Nigeria in order to introduce the system into their respective countries and the AU is encouraging the use of the system throughout the rest of the continent. NIRSAL is a new innovative mechanism targeted at de-risking lending to the agriculture sector. It is designed to provide the singular transformational and one bullet solution to break the seeming jinx in Nigeria’s agricultural lending and development. NIRSAL is an approach that tackles both the agricultural value chains and the agricultural financing value chain. The goal of NIRSAL 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 two-member delegation is in the country to share with Liberian stakeholders their experience on how the innovative financing/risk-sharing system has been successful in Nigeria in promoting lending by commercial banks to the agriculture sector. They will also share with Liberia some of the challenges, so to allow better understanding of the agricultural challenges and decision-making that would fast-track the LATA. It provides guarantee in form of Credit Risk Guarantee (CRG) as a comfort for the Banks to lend and also incentivize the farmers through provision of Interest Drawback Program (IDP) to be paid quarterly based on the agricultural project. The Guarantee ranges from about 30-75% depending on the Agricultural value chain involved. IDP also ranges from 20-40% depending on the category. The Taskforce on agriculture is endeavoring to replicate the NIRSAL concept in Liberia that will see farmers having access to finance as well as technical skill training that would prepare them for the agribusiness industry. They have been holding series of meetings with stakeholders to explain the new concept. Deputy Commerce Minister for Trade, Steve Marvie, and Agriculture Minister, Dr. Moses Zinnah, are leading the stakeholders’ engagement. Making presentations at separate meetings, the head of NIRSAL team currently visiting the country, Mr. Aliyu A. Hameed said a NIRSAL kind of establishment serves as a collateral bridge between commercial banks and farmers since in fact the low capacity of those in the agricultural sector makes it risky for banks to lend depositors’ monies to farmers who usually do not know how to use the funds they receive to grow their businesses. Under this arrangement, he said farmers will be given intensive practical training with the requisite technologies essential to improving agriculture and food production. The visiting NIRSAL team leader added that it is advisable for the government of Liberia to encourage young people to get involved into agriculture not by using hoe and cutlass but technology. “If you tell young people to take hoe and cutlass to make farm, you will scare them away. I would like to recommend to the government of Liberia to support young people in agriculture since they are the emerging generation in this technological age,” Mr. Hameed added. Mr. Hameed emphasized that to achieve this objective, it is imperative for commercial banks and financial lending institutions to see the need to move away from the traditional collateral lending to cash flow lending. On the other hand, the Africa Exchange Holdings/Commodities Exchange Limited (AFEX Nigeria) was also part of the meeting to explore the possibility of a Public Private-Sector Partnership with the Ministry of Agriculture to establish a Warehouse Receipt System (WRS) and in the medium term a Commodities Exchange for Liberia. This will among other things: (1) Improve existing value chains by linking production to high value markets; (2) Increase farmers’ bargaining power and share of created value; (3) Ensure integrity and transparency of trade and reduce default risk; and (4) Increase liquidity in commodity markets and enhance price discovery. I will inform you as soon as the dates are confirmed. For his part, the President of the Liberia Bank for Development and Investment (LBDI), John B. S. Davies said the NIRSAL concept is great but there is a need for more discussions around asking banks to move away from collateral lending to cash flow lending. The LBDI boss is however optimistic that the sticky lingering issue regarding lending cannot be seen as an indelible bottleneck that would not be overcome with the right policy frameworks. He stressed that even if it means ensuring that those policies needed to make this happen be taken to the National Legislature for approval. “As Liberians, there is nothing we cannot do once we are willing. We are a resilient people. When we focused on football, we produced the World Best Player in Africa. During the Ebola outbreak in West Africa, Liberia, again, took the lead- thanks to the concerted efforts of everyone. This is not above those challenges we have overcome. At the level of the Liberia Bankers Association, we are prepared to lend our support to the initiative because this is something we have been looking forward to see,” Mr. Davies said. The delegation met with officials of the Ministry of Finance and Development Planning (MFDP); the Central Bank of Liberia (CBL) and members of the Liberia Bankers Association (LBA). All heads of commercial banks in Liberia including the Executive Governor of the CBL, Mr. Milton Weeks held meeting with the NIRSAL team. The African Development Bank (AfDB) supported the process.