Professional Evaluation of the Effectiveness of NIRSAL Credit Guarantees in Agricultural Finance

NIRSAL's credit risk guarantee instrument is intended to de-risk agricultural lending by commercial banks, and professionally evaluating its effectiveness provides evidence for improving Nigeria's flagship agricultural finance instrument. This study professionally evaluated the effectiveness of NIRSAL credit guarantees in facilitating agricultural lending by commercial banks in Oyo, Kaduna, and Enugu States between 2017 and 2022. A mixed evaluation methodology combined NIRSAL administrative data analysis, structured interviews with 15 commercial bank agricultural credit officers and 20 NIRSAL programme managers, and a beneficiary survey of 150 agricultural enterprises that received NIRSAL-guaranteed loans. Evaluation dimensions covered guarantee uptake, loan-to-guarantee ratios, default rates compared to non-guaranteed agricultural loans, additionality (whether guaranteed loans were additional to what banks would have lent anyway), and development outcomes. Results showed that agricultural lending in banks with active NIRSAL partnerships increased by 34 percent above pre-partnership levels. Default rates on guaranteed loans were 8.3 percent, significantly below the 22 percent industry average for agricultural loans. However, additionality was only demonstrated in 58 percent of cases, with the remainder being guaranteed loans that banks reported they would have extended without guarantees. Recommendations include refocusing guarantees on underserved segments, strengthening NIRSAL-bank capacity-building partnerships, and introducing tiered premium pricing linked to borrower risk profiles.

Keywords: NIRSAL, credit guarantee, agricultural finance, additionality, programme evaluation