Reps urge CBN to increase agricultural lending by $3bn
The House of Representatives has called on the Central Bank of Nigeria (CBN) to increase agricultural funding by $3 billion through the Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL) initiative. This call comes as small-scale farmers, who form the backbone of Nigeria’s agricultural sector, face challenges due to limited access to credit. NIRSAL, a public-private partnership launched in 2011, was designed to de-risk agricultural lending and encourage financial institutions to extend more credit to agribusinesses. However, despite agriculture contributing over 40% to Nigeria’s GDP and employing more than 60% of the population, the sector continues to underperform.
To address this, the House is pushing for a significant boost in lending to smallholder farmers, proposing that 50% of agricultural loans be directed towards them through microfinance institutions, farmer cooperatives, and value chain associations at favorable interest rates of 7.5% to 10.5%. The motion also urges an increase in the share of bank lending for agriculture from the current 1.4% to 7% over the next five years. The committees on Banking Regulations, Agricultural Production, Nutrition and Food Security, and Finance have been tasked with ensuring compliance and reporting within four weeks.
Source: Punch
Expert Review for Agri-Food Stakeholders:
The House of Representatives’ motion to boost funding for small-scale farmers is a significant move toward addressing underperformance in Nigeria’s agricultural sector. With agriculture accounting for 40% of GDP and providing employment for over 60% of the population, smallholder farmers are the backbone of Nigeria’s food system. Despite this, they face significant barriers to accessing finance, limiting their productivity and potential.
NIRSAL’s initial $500 million investment was a promising step toward de-risking agricultural lending, but it’s clear that more is needed. The call for an additional $3 billion aligns with the pressing need to enhance financing across the agricultural value chain. Lowering interest rates to as low as 7.5% will make loans more accessible, particularly for small-scale farmers who are often priced out of credit markets. This move would stimulate investment in modern farming techniques, improve access to inputs, and ultimately enhance productivity.
Additionally, increasing agricultural lending from 1.4% to 7% of total bank lending, with 50% earmarked for smallholders, is an essential strategy for scaling inclusive growth. By focusing on micro-finance institutions and farmer cooperatives, the plan ensures that those at the grassroots—who play a pivotal role in feeding the nation—receive adequate support.
For Nigeria to tackle food insecurity and achieve its agricultural goals, such collaborations between the government, financial institutions, and smallholder farmers are crucial. By increasing access to affordable financing and reducing the risk of lending, this initiative can help reverse the sector’s current stagnation and unlock Nigeria’s agricultural potential.
