Agriculture is a major contributor to Nigeria’s economy, supporting employment and food security across the country. However, farmers struggle to access the financial resources necessary for them to expand their operations, invest in equipment, and manage the risks associated with farming. Addressing these barriers is important  as it helps to boost productivity and ensure long-term sustainability in the sector.  

Agricultural loans in Nigeria have increased as a result of the need to support farmers who face difficulties accessing financial resources. These loans provide financial support to farmers, agribusiness owners, and cooperatives, helping them boost productivity and improve their livelihoods. 

Here’s what every Nigerian farmer should know about agricultural loan options, terms, eligibility, and application processes.

Agricultural Loans in Nigeria

Agricultural loans help Nigeria farmers expand their operations, increase productivity, and ensure food security. These loans provide the funds needed for everything from purchasing seeds and fertiliser to acquiring heavy machinery and developing infrastructure. Several institutions, including government banks, commercial banks, and microfinance institutions, offer these loans, each with its own set of terms and requirements.

Dr. Segun Fanimo, a renowned professor of Animal Nutrition and a former Deputy Vice-Chancellor at the University of Agriculture, Abeokuta, argues that agricultural loans are not a luxury but a fundamental necessity for Nigerian farmers to achieve food security and economic prosperity. He emphasises that farming in Nigeria is often a high-risk venture due to factors like climate change, pests, and volatile markets. Without access to affordable credit, farmers are trapped in a cycle of subsistence farming, unable to invest in the modern inputs and technologies needed to boost their yields and protect their livelihoods.

Types of Agricultural Loans in Nigeria

There are different types of loans tailored to suit the needs of farmers ranging from smallholder farmers to large-scale commercial agricultural enterprises, each requiring varying levels of financing, repayment terms, and support services. Below are some of them:

1. Short-Term Agricultural Loans

Short-term agricultural loans are designed to meet farmers’ immediate needs. They are typically for less than one year and are often used for seasonal expenses. The interest rates on short-term loans are generally higher than those on other agricultural loans. Examples of short-term loans include crop production loans and livestock loans. Sources of short-term loans in Nigeria are microfinance banks.

2. Medium-Term Agricultural Loans

Medium-term agricultural loans aim to cover farmers’ financial needs for one to five years. These loans are usually used to purchase agricultural machinery, equipment, and other fixed assets. They provide lower interest rates than short-term loans. Some examples of medium-term loans include tractor loans and loans for irrigation equipment.

3. Long-Term Agricultural Loans

Long-term agricultural loans address farmers’ long-term financial needs. These loans last more than five years and are often used for land purchase, infrastructure development, and agricultural projects. Long-term loans have lower interest rates than short and medium-term loans.

Agricultural Loan Providers in Nigeria

Agricultural loan options/providers within Nigeria serve the primary purpose of providing farmers with affordable and timely credit, which is an essential aid. These loans support farmers and help them boost productivity, adopt modern farming techniques, and expand their agribusinesses. By meeting these needs, there is an upgrade within the agricultural value chain, leading to food security and job creation; agriculture is key to Nigeria’s economic growth. 

Government agencies or banks provide some of these loan options, and they include:

1. Bank of Agriculture (BOA): The Bank of Agriculture (BOA) is a government-owned institution that focuses on rural and agricultural finance, with a mandate to provide agricultural credit facilities to support all agricultural value chain activities, offer non-agricultural microcredit, mobilise savings, and promote capacity development. They achieve this through the cooperative development of an agricultural information system and providing technical support and financial advisory services. 

2. Central Bank of Nigeria (CBN) Intervention Schemes

• Anchor Borrowers’ Programme (ABP): The Anchor Borrowers’ Programme (ABP), launched on November 17, 2015, was designed to build a demand-driven ecosystem that connects every stage of the commodity value chain, from input supply and production to processing and marketing. Provides loans through anchor companies to smallholder farmers.
• Agricultural Credit Guarantee Scheme Fund (ACGSF): The Agricultural Credit Guarantee Scheme Fund (ACGSF) was established by Decree No. 20 of 1977 and has been operational since April 1978. The Agricultural Credit Guarantee Scheme (ACGS) promotes bank lending to agriculture by providing guarantees. The Federal Government owns 60% and the Central Bank of Nigeria (CBN) 40% of the ₦50 billion capital. Managed by the Agricultural Credit Guarantee Scheme Fund Board, the CBN administers the scheme, which offers interest-free loans to young agripreneurs.

3. Commercial Banks

Several commercial banks in Nigeria offer agriculture-friendly credit packages tailored to support farmers and agribusinesses. These loan options often have flexible repayment terms but may require collateral or guarantors. Terms and conditions vary depending on the loan type, borrower profile, and the specific needs of the agricultural venture.

4. Microfinance Banks and Cooperatives

Microfinance Banks and Cooperatives play a crucial role in providing financial support to rural farmers who may not meet the stringent requirements of commercial banks. These institutions are more community-focused and understand the unique challenges local farmers face. They often offer smaller loan amounts with more flexible application processes, making them more accessible to smallholder farmers and informal agribusinesses. In many cases, farmers can access loans through cooperative societies without needing significant collateral, as trust and group guarantees often serve as security.

What are the Eligibility Criteria for Accessing Loans in Nigeria?

Before a farmer can access a loan, he needs to meet certain requirements. Here   are some of the criteria:

• Proper identification (e.g., National ID, international passport, BVN).
• Proof of farm ownership or lease
• Business plan or farm enterprise proposal
• Membership in a cooperative (sometimes required)
• For organisations: Certificate of registration and relevant legal documents.

Who Can Apply:

• Individual Nigerian citizens or legal residents who are practising farmers, fishers, or livestock producers.
• Registered agricultural cooperatives, associations, and agribusiness companies.

How to Apply for Agricultural Loans

• Identify the Right Suitable Loan or Scheme: Select between commercial banks, microfinance institutions, or government schemes based on your specific needs and eligibility requirements.
• Documentation: Complete the application form and provide the required identification, business plan, evidence of farm ownership, and guarantors, as applicable.
• Submit Application: Apply in person at the bank, through cooperatives, or via digital platforms where available.
• Loan Assessment: The lender reviews your application, farm records, and creditworthiness.
• Approval and Disbursement: Upon approval, funds are disbursed directly or through input suppliers/processors, depending on the scheme.
• Repayment: Repayments are structured around harvest cycles or agreed schedules.

It is also important to note that farmers would be required to: 

• Review the terms, interest rates, and repayment schedules before making any loan commitments.
• Ensure precise agricultural documentation and a coherent business strategy to enhance your likelihood of acceptance. 
• Leverage group applications through cooperatives to access better terms and larger loan amounts.
• Maintain detailed records of farm activities and income to present credibility and transparency.

Agricultural loans in Nigeria serve as a driving force in empowering farmers to make adequate contributions to society. Access to credit plays a crucial role in their effectiveness, as it  promotes food security and boosts the economy. 

To effectively utilise these financial resources, Nigerians farmers should be informed about the availability of loans, eligibility criteria, and the application processes involved. This knowledge can enable farmers, whether smallholders or commercial operators, to expand their agribusinesses and contribute to national development.