Financing a farm business in Nigeria
In Nigeria, farmers can borrow from the Bank of Agriculture, microfinance banks or commercial banks whose risk is shared by NIRSAL, which guarantees up to 75% of loans, often through a cooperative or an aggregator.
A huge farm sector with little financing
Nigeria is the world's largest cassava producer and Africa's leading yam producer, and farming employs a large share of the population. Yet the share of bank lending directed to agriculture remains small compared with the sector's weight.
NIRSAL and credit guarantees
Set up on the initiative of the CBN, NIRSAL shares the risk of farm loans with the banks by guaranteeing up to 75% of the amount. It also supports projects through technical monitoring in the field and risk assessment.
The Bank of Agriculture, the long-standing public lender
The Bank of Agriculture, a federal development institution, finances growers, processors and cooperatives through its branch network. Its resources remain limited compared with the needs of the thirty-six states, and processing times can be long.
The ACGSF guarantee fund
The Agricultural Credit Guarantee Scheme Fund, managed by the CBN since the late 1970s, guarantees part of the bank loans granted to farmers. It is mainly of interest to smallholders who have no land title to offer as security.
Lessons from the Anchor Borrowers' Programme
Launched by the CBN in 2015, the Anchor Borrowers' Programme lent inputs to rice farmers in Kebbi and other states, to be repaid in harvested produce. High default rates led to a rethink of this model of direct lending by the central bank.
Cooperatives and aggregators
Banks lend more readily to a cooperative or an aggregator that buys the harvest than to an individual farmer. The offtake contract guarantees a market and allows the loan to be repaid directly from the proceeds of the sale.
Warehouse receipts and commodity exchanges
Platforms such as AFEX store maize, soybeans or sesame in certified warehouses and issue receipts. Farmers can use them to obtain financing rather than selling at the lowest price right after the harvest comes in.
Farm insurance with the NAIC
The Nigerian Agricultural Insurance Corporation insures crops and livestock against drought, flooding and animal disease. Lenders often require it, because floods on the Benue and Niger regularly destroy entire harvests, as during the 2022 floods.
Insecurity and risk in the North and Middle Belt
In parts of the North-West and the Middle Belt, conflict and insecurity prevent access to the fields. Lenders price this risk in, which makes financing scarcer and more expensive for the farmers who work in those areas.
Smallholders and microfinance
For a few bags of fertiliser or seed, a rural microfinance bank remains the most accessible option, as explained on the microcredit in Nigeria page, within the broader picture of credit in Nigeria and its many lenders.
Export chains: cocoa, sesame and ginger
Cocoa from Ondo, sesame from the North and ginger from southern Kaduna attract exporters who sometimes pre-finance growers. These advances should be set down in writing, with the agreed price and the expected quality clearly stated.
Farm credit in neighbouring Niger
In Niger, rain-fed farming and transhumant herding rely heavily on the Banque agricole du Niger and the decentralised financial systems of the BCEAO zone, with modest amounts. Conditions are set out on the farmer loans in Niger page.
Getting farm finance in Nigeria
- Join a registered cooperative or an aggregator programme in your value chain.
- Draw up a season budget costed in naira, from inputs through to marketing.
- Apply to a NIRSAL partner bank, the Bank of Agriculture or a rural microfinance bank.
- Take out the farm insurance required with the NAIC or a licensed insurer.
- Repay at harvest time or through the sale to the buyer named in the contract.
Costs of a seasonal farm loan in Nigeria
| Item | What makes it vary | Note |
|---|---|---|
| Interest rate | Lender and whether a guarantee exists | Lower when risk is shared |
| NIRSAL guarantee | Project and value chain | Up to 75% of the loan, indicative |
| Farm insurance | Crop, acreage, area | Often compulsory |
| Storage fees | Time and volume in the warehouse | Relevant with warehouse receipts |
Documents for a Nigerian farm loan
- BVN, NIN and ID document
- Certificate of cooperative membership
- Proof of access to land or a letter from the traditional ruler
- Season budget or business plan
- Offtake contract with an aggregator
- Farm insurance policy
What jeopardises a farm loan in Nigeria
- Selling the harvest to a buyer other than the agreed aggregator, which cuts off the repayment channel.
- Leaving a plot uninsured in a flood-prone area along the Benue or the Niger.
- Believing an intermediary who promises a NIRSAL loan or presidential funding in return for a registration fee.
- Using the financed inputs on another plot or reselling them instead of farming with them.
Lenders to contact
- Accion Microfinance Bank: Nigerian microfinance bank lending to micro-entrepreneurs and small businesses, also offering personal loan products such as BrightA MyOwn Loan Plus.
- Jaiz Bank: Nigerian Islamic bank offering Sharia-compliant home finance as well as personal financing for household appliances and equipment.
- Federal Mortgage Bank of Nigeria (FMBN): Federal mortgage bank of Nigeria granting National Housing Fund home loans to contributors for buying or building a house.
- Jaiz Bank: Nigeria's first non-interest bank, publicly listed, offering Shariah-compliant accounts and financing to individuals and businesses.
Farm credit in Nigeria: growers' questions
Does NIRSAL lend directly to farmers?
NIRSAL acts mainly as a guarantor and facilitator between lenders and agribusinesses. A microfinance subsidiary, NIRSAL Microfinance Bank, has however distributed loans under public programmes. The credit itself usually comes from a partner bank.
Do you need a land title for a farm loan in Nigeria?
Not always. ACGSF or NIRSAL guarantees, cooperative membership and offtake contracts make it possible to lend to farmers without a Certificate of Occupancy, especially for short-term seasonal credit.
Which Nigerian value chains attract the most lenders?
Rice, maize, cassava, soybeans, sesame and cocoa attract the most financing, because they have industrial or export buyers. Food crops sold in local markets find it harder to attract lenders.
Can livestock farming be financed?
Yes, poultry, fish farming and small ruminant rearing are financed by microfinance banks and sometimes by the Bank of Agriculture, provided the farmer presents a costed project and suitable facilities.