The Central Bank of Nigeria(CBN) has directed a key agricultural finance board to break down long-standing barriers that prevent farmers from getting loans. The goal is to ensure that neither a lack of property for collateral nor a remote farm location stops a hardworking farmer from accessing credit .
CBN Governor Olayemi Cardoso gave this instruction in Abuja. He spoke at the ceremony to inaugurate the new Board of the Agricultural Credit Guarantee Scheme Fund (ACGSF) . Governor Cardoso described the 48-year-old ACGSF as a critical tool for the nation's economic journey. He said the fund must now evolve to meet the needs of modern farming .
The governor pointed out a major problem in Nigeria's economy. The agricultural sector contributes more than one-fifth of the nation's total economic output. It also employs nearly two-thirds of the working population. Yet, this vital sector gets less than five percent of all loans provided by formal banks . Cardoso called this a structural issue the country can no longer accept. He stressed that small-scale farmers, who produce most of Nigeria's food, often face the biggest hurdles .
The newly inaugurated board is now tasked with a clear mission. It must make the ACGSF a reliable and enabling partner for every farmer with a viable project . This effort aligns with the federal government's wider goals. The aim is to build a farming economy that is strong, uses new technology, and includes everyone .
The CBN Governor inaugurated the new board with a mandate to modernize and expand credit access for Nigeria's agricultural sector. [Getty Images]
The Agricultural Credit Guarantee Scheme Fund is not a new idea.It was created by law in 1977 and began full operations in April 1978 . The federal government owns sixty percent of the fund. The Central Bank of Nigeria owns the remaining forty percent and also manages its daily operations .
The core function of the ACGSF is to reduce risk for banks. It encourages them to lend money to farmers and agricultural businesses. The fund does this by promising to cover up to seventy-five percent of a loan if the farmer cannot pay it back. This safety net has been crucial for getting banks to lend to farmers they might otherwise see as too risky .
Over the years, the scheme has supported many farmers. From its start until May 2022, it guaranteed over 1.2 million loans. The total value of these loans was about 130.9 billion naira . In the year 2021 alone, the CBN guaranteed 31,666 loans through the scheme. These loans were worth 5.92 billion naira .
The rules governing the fund were updated in 2019 to make it more effective. The changes were significant. The maximum amount for a loan without collateral was raised from 20,000 naira to 100,000 naira. The limit for a loan with collateral jumped from 10 million naira to 50 million naira . Perhaps more importantly, the updated rules now allow financing for the entire agricultural value chain. This means loans can support not just planting crops, but also activities like processing, storage, and transportation .
The fund's capital base was also strengthened. It was increased from 3 billion naira to 50 billion naira. This gives the scheme much more financial power to back loans . The law now also requires that a representative of Nigerian farmers sits on the board. Officials say this inclusion is strategic. It ensures the voices of farmers help guide the fund's activities .
Despite the fund's long history,major challenges block its full potential. Governor Cardoso stated that modern agriculture is complex. It involves long value chains, new technologies, climate risks, and security issues. The sector includes everyone from small farmer cooperatives to technology new companies .
For banks, lending to agriculture is often seen as unattractive. Farming requires long-term investment, while banks often prefer short-term loans with quick returns. Many small-scale farmers also lack formal accounting records or property for collateral. These factors make banks cautious . Reports indicate that banks have traditionally directed most loans to sectors like oil and gas .
Farmers themselves face a difficult landscape. One major national cooperative group has called for more government support. They seek better access to credit, land, and vehicles to boost food production . Farmers currently face a squeeze. The prices they get for their food crops are falling. At the same time, the cost of their supplies and other essential goods keeps rising .
A critical issue beyond finance is insecurity. In recent years, armed herders have terrorized farmers in many regions. Some analysts argue that no amount of credit can solve the food production crisis if safety on farms is not addressed first. They urge the government to treat security as a top priority for agricultural policy .
Smallholder farmers, who form the backbone of food production, often lack the collateral required by traditional banks. [Reuters]
The CBN Governor laid out several key tasks for the new ACGSF Board.A major focus is on tracking results. Cardoso stressed that the time for giving out funds without checking the outcome is over. He said the board must create a system to track how guaranteed loans affect farm productivity and farmer welfare .
Technology will be central to this new approach. The governor advised using tools like satellite images to watch crop growth. Digital dashboards should monitor loan disbursements. This data-driven method aims to bring more transparency and accountability. Regular checks will help ensure loans are used for their intended purpose and yield positive results .
The board is also expected to focus on financial inclusion for groups often left behind. Governor Cardoso specifically mentioned rural women and young people. He noted that rural women are key players in agriculture. Yet, they often have even less access to credit and technology than male farmers. He pointed out that nearly sixty percent of rural women do not use mobile internet .
To reach these groups, the ACGSF will need to collaborate. The governor said the fund should work with microfinance banks, farmer cooperatives, and financial technology companies. They can design suitable loan products using methods like group lending and agent banking .
The board's chairman has acknowledged past repayment successes. Stephen Okon stated that the scheme has seen repayment rates between eighty-five and ninety percent from farmers. He credited the CBN's credit register and risk-reducing guarantees for this success .
The inauguration of the board signals a renewed effort to bridge Nigeria's agricultural financing gap.Governor Cardoso called this gap a constraint on the potential of millions of farmers. He described the board's start as the beginning of a bold new chapter for agricultural finance .
The ACGSF is one part of a larger ecosystem. Another major player is the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL). Created by the CBN, NIRSAL also acts as a guarantor to boost bank lending to agriculture. It shares the risk of agricultural loans with banks by up to seventy-five percent .
Since its start, NIRSAL's work has facilitated over 152 billion naira in credit guarantees. Reports state this has generated an estimated 2.5 billion dollars in economic activity. It also created 360,000 direct jobs . The existence of both ACGSF and NIRSAL shows the government's multi-pronged approach to solving the agricultural credit problem.
The final measure of success will be clear evidence. Governor Cardoso stated that sound proof is needed. This includes proof of increased farm output, higher incomes for farmers, and better food security for the nation. This evidence will guide future policy decisions to strengthen the fund .
The CBN has pledged its full support to the new board. The goal is for the ACGSF to become the cornerstone of Nigeria's agricultural transformation. This will require innovation, integrity, and strong dedication from all involved .