Despite employing about 70% of the country’s population, Nigeria’s agriculture sector accounts for a mere 3.95% of the total bank credit to the private sector as of September 2024. Although contributing nearly one-quarter of the country’s Gross Domestic Product, the sector remains a major pillar of Nigeria’s economy. Data from the National Bureau of Statistics showed that by the third quarter of 2024, the sector contributed 28.65% of the GDP, growing by 1.14%. However, the sector still faces the challenge of poor access to credit.
The State of Agricultural Financing in Nigeria
In the 2025 budget, the federal government allocated ₦826.5 billion to agriculture, a significant increase from the previous two years. This figure is 127.72% higher than the ₦362.94 billion allocated in 2024 and 261.87% higher than the ₦228.4 billion allocated in 2023.
While this increase may seem significant, the budgetary allocation for agriculture in 2025 is only about 1.5% of the total approved budget for this year. This percentage falls short of the prescribed standard set by the Maputo Declaration on Agriculture and Food Security. In July 2003, the African Union agreed to allocate at least 10% of its member countries’ annual national budget to agriculture in Maputo, Mozambique. However, Nigeria has never met this target. There is still hope, as about ₦ 1.6 trillion has been approved for the recapitalisation of the Bank of Agriculture this year, which may eventually lead to more financing for the sector.
Although accounting for less than 4% of total bank credit to the private sector, the agricultural sector has recorded an increase of 86.73% in its total debt to deposit money banks as of September 2025. It holds about ₦2.31 trillion in debt, which is relatively smaller than that of the manufacturing sector (₦8.67 trillion), oil and gas sector (₦18.23 trillion), and trade sector (₦4.23 trillion).
The Central Bank of Nigeria’s decision to stop development financing further hurts access to funds in this sector. Data from the CBN showed that as of September 2023, about ₦2.07 trillion has been disbursed to beneficiaries in the agricultural sector across eight intervention programmes. The programmes included Accelerated Agricultural Development Scheme, Anchor Borrowers’ Program, Commercial Agriculture Credit Scheme, Maize Aggregation Scheme, National Food Security Program, Paddy Aggregation Scheme, Private Sector-Led Accelerated Agricultural Development Scheme, and Rice Distribution Facility. While about ₦1.51 trillion, which was 55.56% of the total loan, was repaid, there remained an outstanding principal balance of ₦737.33 billion, with the total due and unpaid principal and interest up to ₦380.97 billion.
The World Bank noted that these inventions by the CBN prevented a severe credit crunch in the private sector. However, there were concerns about adverse borrower selection, funds diversion, low recovery rates, poor programme design, programme sustainability, market distortions due to increasing money supply, negative real interest rates, high inflation, and the promotion of a repressive financial environment. These issues, among others, made the CBN, under the leadership of Olayemi Cardoso, halt intervention programmes.
About 10% of all Sub-Saharan SMEs are considered agri-SMEs, and 83% lack sufficient access to finance, with a financing gap of $74 billion per annum. With limited employment opportunities, agribusiness has become crucial to the Nigerian economy, providing jobs and national income. Agriculture, including agribusiness, is projected to become a $1 trillion industry in Sub-Saharan Africa by 2030. This sector has the potential to drive industrialisation and economic diversification in Nigeria. However, Nigeria’s agribusiness sector remains underdeveloped and is facing significant challenges, especially when getting significant financial support, among other issues. The existing challenges are worsened by historical neglect and an obsession with subsistence farming amid rising food insecurity. Successful agribusiness investments are needed to stimulate agricultural growth in Nigeria.
Challenges in Financing Agricultural SMEs in Nigeria
- Limited Access to Formal Financial Institutions
Nigerian farmers have little access to formal credit sources, including funding from commercial banks, microfinance enterprises, and credit unions. A 2021 research showed that over 60% of rural communities surveyed had no bank branch, agent or automated teller machine. As earlier stated, the agriculture sector received less than 4% of total bank credit, which is lower than the percentages in the past three years. World Bank research shows that most Nigerian farmers rely on informal money lenders, who often offer credit at a higher cost, with interests ranging from 10% to 100%.
- Absence of Acceptable Collateral/Security
The lack of traditional collateral, such as land titles or assets, required by formal credit institutions has made getting loans harder for many small-scale farmers and agribusinesses.
- Perceived High Risk in Agriculture
Financial institutions are generally risk-averse. Therefore, it is not surprising that they are reluctant to fund agribusinesses. They often perceive agriculture as a high-risk sector due to issues like unpredictable weather conditions, pest infestations, and persistent insecurity.
- High Interest Rates
Throughout 2024, CBN Governor Olayemi Cardoso and members of the Monetary Policy Committee intensified efforts to combat Nigeria’s inflation. In 2024 alone, the monetary policy rate was raised by a cumulative 875 basis points, making it one of the steepest tightening cycles in recent years. This makes borrowing from banks more expensive for agribusinesses.
Opportunities for Overcoming Financing Barriers
- Developing Tailored Financial Products/Services
The government, the Bank of Agriculture and financial institutions can develop products and initiatives specifically to meet the needs of agricultural SMEs. Such products can feature flexible collateral requirements, longer repayment periods based on crop cycles, and relatively cheaper interest rates. Such products can also be incorporated with digital financial services, which may reduce transaction costs and expand the reach of financial institutions into rural areas.
- Enhanced Public-Private Partnerships
More collaborations between the government and private sector are needed to create specialised agricultural financing schemes. Such partnerships are critical to pooling resources to offer credit guarantees, subsidised interest rates, and technical assistance to agricultural SMEs. They can also lead to the creation and promotion of training programmes to improve the financial literacy of agricultural entrepreneurs. The programmes will enhance the entrepreneurs' ability to manage loans effectively and present viable business proposals to lenders.
- The Need for Relevant Government Policy Reforms
The government is always responsible for creating a business-friendly environment to help agribusinesses thrive. Therefore, it is important that the government implement policy reforms to create an enabling environment for agricultural financing. It is high time we addressed the financing barriers faced by agricultural SMEs in Nigeria, as doing this is crucial for unlocking the sector’s potential and driving economic growth. By leveraging digital financial services, fostering public-private partnerships, and implementing policy reforms, Nigeria can enhance access to credit for agricultural SMEs.
