Banks shun agric lending despite credit guarantee scheme

The President of the All Farmers Association of Nigeria, Mohammed Magaji, has raised concerns over limited access to agricultural financing, blaming commercial banks for their reluctance to support farmers despite the existence of the Agricultural Credit Guarantee Scheme Fund.

Speaking on the issue, Magaji told Saturday PidomNigeria that the scheme does not directly disburse funds to farmers. “ACGSF is not the one giving the money; they are only guaranteeing. That’s why they call it the Agricultural Credit Guarantee Scheme Fund. So the commercial banks are not willing.”

He lamented that a vast majority of commercial banks are unwilling to lend to the agricultural sector. “About 90 per cent of the commercial banks don’t want to lend to agriculture. At all, they don’t want to go into agriculture. So they are saying they don’t want to invest, they don’t want to go into agriculture.”

Magaji further noted that the stringent lending conditions imposed by banks have made it nearly impossible for smallholder farmers to access credit. “The conditions, the collateral, and what have you, it’s not something that small-scale farmers or those who want to go into farming can fulfil. Because it’s not easy for the farmers to fulfil all the conditions, the collateral.”

He explained that the collateral requirements were often excessive and time-consuming to meet. “They ask you for a very big collateral, which will take another, say four, five months for you to fulfil.”

Magaji also questioned the viability of repaying agricultural loans given current market realities. “Secondly, if you collect N100m today, or just N5m and invest in agriculture, how much are you going to sell your products to get your money back and pay the loan? So, it’s not easy.”

According to him, low prices of farm produce further discourage farmers from taking loans. “The prices of food items are very low now. It’s not sellable. So what can you sell to go for this loan? It’s not easy, honestly.”

He reiterated that banks remain largely unwilling to support farmers. “And the banks are not willing. They are not willing at all.”

Magaji concluded by stressing that most farmers cannot meet the strict requirements set by lenders. “We cannot meet up with the collateral. The stringent conditions that the commercial banks are putting in place, I don’t think it’s easy to come by. It’s not easy to be fulfilled by Nigerian farmers.”

Efforts to get a response from the President of the Association of Corporate Affairs Managers of Banks, Rasheed Bolarinwa, on the concerns raised by farmers were unsuccessful. He could not provide a response to the claims made by the farmers until this report was filed.

The Governor of the Central Bank of Nigeria, Olayemi Cardoso, had recently said agriculture must get its “rightful place in our financial system and national priorities,” as the sector continues to receive less than five per cent of total bank lending in the country. He spoke in Abuja during the inauguration of the newly constituted board of the Agricultural Credit Guarantee Scheme Fund.

Cardoso noted that despite agriculture contributing more than one-fifth of Nigeria’s Gross Domestic Product and employing a large share of the population, the sector remains chronically underfunded.

According to him, the ACGSF, which guarantees up to 75 per cent of the value of agricultural loans, was created to encourage banks to lend to farmers, including those often considered unbankable, while the 2019 amendment expanded its share capital from N3bn to N50bn to deepen access to credit.

He also stressed that smallholder farmers, who make up about 80 per cent of Nigeria’s farmers and account for roughly 90 per cent of the nation’s food production, still face major barriers such as a lack of collateral and credit history.