Farmers Still Struggle to Access Credit Despite Bank Lending Rising 26% in 2025

Questions answered in this article:

-Why are Nigerian farmers still struggling despite increased bank lending to agriculture?

- What challenges are limiting agricultural productivity and financing access in Nigeria?

Nigeria’s deposit money banks increased lending to the agriculture sector by more than 26% between 2024 and 2025, according to the latest data from the Central Bank of Nigeria (CBN).

The sector received higher funding than the public sector (government) for the first time since at least 2021 and accounted for the sixth-largest share of total bank lending in 2025. Compared to 2021 levels, bank credit to agriculture has increased by approximately 2.5 times, representing a 157.43% rise.

However, sectors such as oil & gas and finance, insurance, and capital market continue to dominate bank lending, jointly accounting for about 42% of total credit allocation.

In actual value, the agriculture sector received ₦38.10 trillion (approximately $25.03 billion) in bank credit in 2025. By comparison, the oil and gas industry received ₦147.50 trillion, finance, insurance, and capital market attracted ₦99.80 trillion, manufacturing got ₦88.80 trillion, oil and gas services received ₦59.30 trillion, while trade and general commerce accounted for ₦50.80 trillion.

High Lending Rates Remain a Major Barrier

Despite the rise in lending figures, many farmers remain effectively excluded from accessing commercial bank loans because of high interest rates and financing conditions.

“There is no business venture in agriculture you can do when you have interest rates as high as 23–25%. It is just not possible,” Special Adviser to the Minister of Livestock Development, Eustace Iyayi, said during a recent address.

Agriculture financing experts argue that most smallholder farmers, who account for nearly 90% of Nigeria’s food production, cannot operate sustainably at the current prime lending rate of 19.54%. While manufacturers may absorb such borrowing costs through processing and value addition, farmers at the early stages of the value chain often cannot.

This mismatch between available bank loans and accessible farmer financing continues to widen the gap between current agricultural production levels and the sector’s actual potential.

Poor Input Access Continues to Hurt Productivity

According to the CEO of AFEX, Ayodeji Balogun, Nigeria’s low agricultural productivity is closely tied to poor access to farm inputs.

Drawing from a survey of about 50,000 farmers conducted by AFEX, he noted that 62% of farmers used inputs in 2025, down from 81% in the previous year. This includes reduced fertiliser application and lower adoption of improved seeds. Over time, this gradual decline compounds into structural reductions in output.

He explained that the productivity gap between Nigerian farmers and their counterparts in countries like Kenya is largely driven by access to quality inputs. According to him, Nigerian maize farmers, for instance, may require a hectare of land to produce four tons of maize, while Kenyan farmers can achieve similar yields on less than half that size because of better seed quality and farm support systems.

Quality seeds remain expensive and difficult for many smallholder farmers to access. Fertiliser usage is also declining despite Nigeria producing more than four million metric tons of urea annually. Domestic consumption remains below 250,000 metric tons, partly because many farmers cannot afford fertiliser or lack adequate knowledge of its usage. As a result, producers often export to foreign markets instead.

Admittedly, Nigeria’s agricultural challenges are deeply structural and extend beyond financing alone. Geopolitical instability, infrastructure gaps, insecurity, and policy inconsistencies all contribute to low productivity. Still, improved access to affordable finance remains one of the most immediate levers for change.

Government and Development Finance Interventions

The government and development finance institutions continue to shoulder much of the responsibility for agricultural financing in Nigeria.

For instance, Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) disclosed that it approved more than ₦100 billion in credit guarantees, loans, and investments for agriculture and agribusiness by the end of 2025.

Other major interventions include:

— A ₦1.5 trillion recapitalisation of the Bank of Agriculture (BOA), alongside a $1 billion intervention partnership with African Export-Import Bank (Afreximbank), aimed at improving credit access and capacity development for youth and women.

— A ₦250 billion facility targeted at boosting smallholder farmer productivity nationwide.

— A ₦30 billion disbursement from the African Development Bank (AfDB) to support agro-dealers and seasonal farming programmes.

— More than ₦636 billion in agribusiness and agricultural processing loans through the Bank of Industry (BOI).

— Multi-billion-naira grants for federal universities of agriculture to expand farming and agricultural research.

Lessons From Past Agricultural Lending Failures

Analysts say agricultural financing must be structured as a blended and commercially sustainable model to avoid repeating past failures.

Several previous intervention programmes struggled with widespread loan defaults and weak recovery mechanisms. Out of more than ₦1.12 trillion reportedly disbursed under schemes such as the CBN’s Anchor Borrowers programme, several billion remain unrecovered.

In many cases, beneficiaries treated agricultural loans as government grants or political patronage rather than repayable facilities. Recovery efforts later required collaboration between the CBN, commodity associations, and security agencies such as the Economic and Financial Crimes Commission (EFCC) and the Department of State Services (DSS).

There were also allegations of elite capture and fund diversion. Some wealthy individuals allegedly registered as “portfolio farmers” or anchors, collected agricultural inputs and financing, and redirected the funds into unrelated businesses.

Investigations also questioned the authenticity of highly publicised “rice pyramids,” with allegations that imported rice and paddy purchased from smaller local farmers were used to exaggerate domestic production achievements.

The Need for Single-Digit Interest Agricultural Loans

Iyayi argues that financial institutions must create lending platforms specifically designed for agriculture, with single-digit interest rates and stronger risk-sharing systems.

“One of the messages we would like to take out of here is, can we have our financial institutions create platforms that will enable farmers to have access to finance that will attract single-digit interest rates?” he asked.

He also advocated blended finance models that combine government or donor funding with private-sector capital, alongside stronger agricultural insurance and credit-guarantee systems.

While institutions such as NIRSAL were established to de-risk agricultural lending, analysts note that the scale of their guarantees still falls far below the trillions of naira already being issued as agricultural credit by commercial banks.