Agriculture loans in Nigeria are loans meant for a wide range of agricultural and farming purposes. Farmers are supposed to apply for loans to buy supplies for the cultivation of food grain crops along with other purposes such as horticulture, animal husbandry, aquaculture, and floriculture and sericulture businesses.
Others purchases for which agricultural loans can be taken include construction of bio-gas plants and irrigation systems along with agricultural land through special types of agricultural finance. In 2016 the Central Bank of Nigeria in partnership with the bank of agriculture pledged N200 billion to finance the input of farmers in Nigeria.
Agriculture is still the principal source of livelihood for more than half the population or is related to agriculture as most of the Nigerian rural inhabitants still dependent on agriculture as a profession. Nigeria has the potential to rise to world class in agriculture if constraints to growth in the sector are eliminated and skills are built through market development programs. Credit is a critical factor in development of agriculture, the rural areas, and small business in general. This is because it drives capital formation and technology upgrade.
While the majority of Nigeria’s population lives in rural areas and depends on agricultural production, the supply of financial services to the sector is inadequate, with, on average, a mere 5% of domestic resources being allocated to the agricultural sector.
There is an issue of moral hazard with Nigerians in the farming sector who act purely in self-interest which has seen the loan default amount exceed N20bn. Although it could be argued the BOA could improve the credit decision process and make use of new developments such as the collateral registry to reduce default rates.
Agriculture Loans in Nigeria
- Agricultural Credit Support Scheme (ACSS)
The ACSS is an initiative of the Federal Government and the Central Bank of Nigeria with the active support and participation of the Bankers Committee. The Scheme has a prescribed fund of N50.0billion. ACSS was introduced to enable farmers exploit the untapped potentials of Nigeria’s agricultural sector, reduce inflation, lower the cost of agricultural production (i. e. food items), generate surplus for export, increase Nigeria’s foreign earnings as well as diversify its revenue base. At national level, the scheme operates through a Central Implementation Committee (CIC) while at the Federal Capital Territory (FCT) and State levels, the Scheme operates through State Implementation Committees (SICs) instituted to ensure that the objectives of the scheme is realized without hindrance.
- Commercial Agriculture Credit Scheme (CACS)
As part of its developmental role, the Central Bank of Nigeria (CBN) in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) established the Commercial Agriculture Credit Scheme (CACS) in 2009 to provide finance for the country’s agricultural value chain (production, processing, storage and marketing). Increased production arising from the intervention would moderate inflationary pressures and assist the Bank to achieve its goal of price stability in the country.
- Agricultural Credit Guarantee Scheme Fund (ACGSF)
The ACGSF was established by Decree No. 20 of 1977, and started operations in April, 1978. Its original share capital and paid-up capital were N100 million and N85.6 million, respectively. The Federal Government holds 60% and the Central Bank of Nigeria, 40% of the shares. The capital base of the Scheme was increased to N3 billion in March, 2001. The Fund guarantees credit facilities extended to farmers by banks up to 75% of the amount in default net of any security realized. The Fund is managed by the Central Bank of Nigeria, which handles the day-to-day operations of the Scheme.
Providers of Agriculture Loans in Nigeria
- First Bank
- Stanbic IBTC
- Access bank
- Bank of Agriculture