Agriculture is a major contributor to Nigeria’s GDP, and smallholder farmers play a dominant role in this contribution; they produce over 90% of the food consumed in Nigeria. Across low-income and developing countries, Smallholder farmers produce most of the food and form the backbone of the country’s food supply.
In an effort to stabilise food prices and support the agricultural sector, the Nigerian government introduced a 150-day duty-free window in July, 2024 . This initiative, part of the Presidential Accelerated Stabilisation Advancement Plan, was aimed at facilitating the food imports, including maize, husked brown rice, and wheat. This policy was introduced to alleviate pressure on food prices by replenishing national grain reserves and supporting small-scale processors facing high costs and limited supplies.
However, limited access to agricultural credit in Nigeria hinders the productivity and growth of smallholder farmers, which would go a long way toward aiding the adequate local production of crops and an unlimited food supply across the nation.
Agricultural credit in Nigeria refers to the financial resources that encompass loans, input-for-credit schemes, and guarantees that enable farmers to finance production costs, made available to farmers and businesses to support agricultural production, processing, storage, and marketing. Agricultural credit is necessary as it enables smallholder farmers within Nigeria to adopt improved technologies, increasing productivity.
Access to agricultural credit is crucial for smallholder farmers to adopt modern techniques, enhance productivity, and expand their operations. Dr Babafemi Oyewole of the Pan-African Farmers’ Organisation, speaking at the March 2025 AfDB–PAFO summit, noted that tailored financial structures, particularly cooperative and risk-sharing models, can lower lending barriers and make smallholders more attractive to institutional financiers.
Below are highlighted benefits of agricultural credit, as well as the need for credit systems;
With adequate financing, farmers can afford improved seeds, mechanised equipment, irrigation systems, and precision agriculture tools. These modern techniques lead to more efficient farming and higher productivity.
Agricultural credit enables farmers to purchase adequate quantities of essential inputs such as fertilisers, pesticides, and herbicides. This directly contributes to healthier crops and improved yields.
Credit empowers smallholder farmers to cultivate larger plots of land or diversify their crops. As demand grows, especially in light of government restrictions on agricultural imports, scaling operations helps local farmers meet market needs profitably.
When farmers can invest in better technologies and quality inputs, yields rise. With increased output comes higher income, which supports both reinvestment into the farm and improved livelihoods.
Better farm performance translates into more food availability at the household level. This reduces hunger and malnutrition, especially in rural communities dependent on subsistence farming.
Expanded agricultural enterprises often require additional labour. As farmers upscale, they generate employment opportunities for local youth and women, contributing to economic development.
Access to credit allows farmers to build sustainable businesses rather than survive season to season. Over time, this financial empowerment helps break the cycle of rural poverty.
Rural areas often lack sufficient formal financial institutions, making it difficult for smallholder farmers to access credit and banking services. This insufficiency results in poor infrastructure and dispersed settlements, which increase banks’ operational costs and reduce their willingness to serve rural areas. Consequently, many smallholder farmers rely on informal credit sources with much higher interest rates, limiting their ability to invest in improved farming inputs, technologies, and official agricultural credit.
Smallholder farmers frequently encounter high interest rates and stringent collateral demands when seeking loans. Many of these farmers do not possess formal land titles or other acceptable assets to secure loans, which banks typically require. High interest rates, sometimes as high as 47% and collateral constraints significantly reduce farmers’ access to credit, curtailing their capacity to expand or improve production.
Financial literacy among smallholder farmers, as well as their ability to understand, access, and effectively use financial products, also hinders access to agricultural credit in Nigeria. Many farmers have low numeracy and literacy skills and are unaware of available financial services or how to navigate application processes. Social and cultural factors, including gender norms and mistrust of formal institutions, further restrict their engagement with financial services.
Policies aimed at supporting smallholder farmers often suffer from inconsistencies and poor implementation. For example, government initiatives to promote rural banking and agricultural credit are undermined by inadequate public education, lack of tailored financial products, and legal challenges related to collateralisation. These gaps in policy consistency and implementation prevent effective facilitation of credit access and economic inclusion, leaving many farmers without the support needed to overcome structural barriers.
The Ministry of Agriculture and Food Security emphasised that the temporary food import initiative was introduced to reduce the pressure on food prices by temporarily allowing the importation of 250,000 metric tonnes of wheat and maize and permitting private sector participation. The measure was critical for restocking the national grain reserves and supporting small-scale processors and millers struggling with supplies and high costs.
The import restrictions have not yielded the much aimed results as there is still a high level of inflation, which is the whole essence of it.
Implementing these measures will expand agricultural credit in Nigeria, empowering smallholder farmers to boost yields, stabilise market supply, and contribute meaningfully to national food security and economic growth.
Improving access to agricultural credit in Nigeria is vital for translating import-substitution policies into tangible gains for smallholder farmers, consumers, and the economy and a collaborative push from government, financiers, and development partners is needed to finance productivity, secure food supplies, and drive rural development.
