Commercial banks have identified high risks, weak infrastructure and market uncertainties as major reasons limiting lending to Nigeria’s agricultural sector.
The position comes despite growing calls for increased financing to farmers and agribusiness operators across the country.
The President of the Association of Corporate Affairs Managers of Banks, Rasheed Bolarinwa, said banks recognise agriculture as critical to food security and economic growth.
However, he explained that lenders remain cautious because of the unique challenges facing the sector.
According to him, many banks are willing to support agriculture but remain worried about repayment risks, operational challenges and unstable market conditions.
Bolarinwa stated that agriculture remains one of the riskiest sectors for lenders because many of the problems faced by farmers are beyond their control.
He listed climate-related issues such as flooding and drought, pest attacks, commodity price fluctuations, insecurity in farming communities and poor storage and transport infrastructure as major concerns.
He noted that although intervention programmes like the Agricultural Credit Guarantee Scheme Fund help reduce lending risks, they do not completely protect banks from losses.
According to him, banks still bear part of the financial loss when loans fail, while the process of recovering guaranteed funds can be slow due to administrative bottlenecks.
He also pointed to the high operational and monitoring costs involved in lending to smallholder farmers scattered across rural communities.
On collateral requirements, Bolarinwa said banks must protect depositors’ funds by maintaining prudent lending practices.
He explained that traditional collateral remains important, especially in cases where farmers lack proper financial records or alternative credit assessment systems.
According to him, collateral also ensures borrowers remain committed to repaying loans.
Despite the challenges, Bolarinwa said financial institutions are gradually exploring alternative financing models for farmers without conventional collateral.
He identified value chain financing, warehouse receipt financing, aggregation-based lending and cash flow-driven lending as some of the emerging options within the industry.
However, he admitted that these models are still developing and have not fully replaced traditional collateral requirements.
The ACAMB president also said market volatility continues to affect banks’ willingness to lend to the sector.
He explained that fluctuations in commodity prices, foreign exchange pressures and inflation often make farming revenues unpredictable and weaken farmers’ repayment capacity.
Bolarinwa further blamed the low share of agriculture in total bank lending on deeper structural problems within the sector.
He cited weak data availability, fragmented agricultural value chains, low insurance penetration and inadequate infrastructure as major barriers to large-scale lending.
According to him, banks are increasingly adopting partnerships and digital initiatives to improve farmers’ access to finance.
These efforts include collaborations with development finance institutions, digital lending platforms, risk-sharing arrangements and tailored products for different agricultural value chains.
He also noted that banks are investing more in farmer education, financial planning and technology-driven loan monitoring systems.
Bolarinwa called for stronger government support to encourage more lending to agriculture.
He urged authorities to improve credit guarantee schemes, expand agricultural insurance coverage and provide better infrastructure and mechanised farming equipment.
He added that supportive government policies that reduce market and pricing uncertainties would help de-risk the sector and boost lender confidence.
Meanwhile, the Governor of the Central Bank of Nigeria, Olayemi Cardoso, recently said agriculture must take its rightful place in Nigeria’s financial system and national priorities.
Speaking during the inauguration of the newly reconstituted board of the Agricultural Credit Guarantee Scheme Fund in Abuja, Cardoso expressed concern that agriculture still accounts for less than five per cent of total bank lending in Nigeria.
He noted that although agriculture contributes more than one-fifth of Nigeria’s Gross Domestic Product and employs millions of people, the sector remains underfunded.
Cardoso explained that the Agricultural Credit Guarantee Scheme Fund guarantees up to 75 per cent of agricultural loans to encourage banks to finance farmers, including those often considered unbankable.
He added that the scheme’s share capital was increased from N3bn to N50bn in 2019 to improve access to agricultural financing.
The CBN governor also highlighted the struggles of smallholder farmers, who account for about 80 per cent of farmers in Nigeria and produce nearly 90 per cent of the country’s food supply.
According to him, many of these farmers still face challenges such as inadequate collateral and lack of credit history.
Reacting to the initiative, the President of the All Farmers Association of Nigeria, Mohammed Magaji, accused commercial banks of being unwilling to lend to farmers despite the availability of the Agricultural Credit Guarantee Scheme Fund.
