By Simpson Global Media News Desk
Nigeria’s agricultural financing challenge cannot be solved simply by increasing the amount of money available to farmers, a Central Bank of Nigeria official has said, pointing instead to weak infrastructure, inadequate agricultural research funding and other structural problems that make farming and agribusiness difficult to finance.
The CBN Deputy Director and Special Assistant in the Office of the Deputy Governor, Economic Policy Directorate, Dr Michael Ononugbo, made the assessment at the National Close-Out Conference of the Global Project for the Promotion of Agricultural Finance for Agri-based Enterprises in Rural Areas, known as GP AgFin Nigeria, in Abuja.
Ononugbo said increasing agricultural credit without addressing the conditions under which farmers produce, store, transport and sell their commodities would leave a substantial part of the financing problem unresolved. His remarks placed infrastructure, research, market conditions and the design of financial products alongside access to capital as central issues in the effort to expand agricultural production.
The intervention comes as Nigeria’s agricultural sector is recording stronger headline growth while continuing to face major constraints at farm level.
Figures from the National Bureau of Statistics show that agriculture grew by 4.39 per cent year-on-year in real terms in the second quarter of 2026, compared with 2.82 per cent in the corresponding quarter of 2025. Agriculture accounted for 26.15 per cent of real GDP during the quarter.
The latest CBN assessment therefore raises a broader question for policymakers and financial institutions: how can Nigeria convert improved agricultural output into a sustained expansion of productive investment, stronger farm incomes and more reliable food supplies?
Beyond the question of credit
For years, limited access to finance has been identified as one of the obstacles facing Nigerian farmers, particularly smallholders and rural businesses.
Loans are needed for seeds, fertiliser, machinery, irrigation systems, livestock, storage, transportation, processing equipment and other productive activities. But the CBN official's argument is that the availability of loans alone does not remove the risks associated with agriculture.
Ononugbo identified inadequate infrastructure and poor funding for agricultural research among the factors making it difficult for farmers and agribusinesses to access finance. Reports of his presentation also identified fragmented landholdings, limited access to technology, inadequate storage, climate-related vulnerabilities and volatile commodity prices as part of the wider operating environment.
That distinction is significant because agricultural lending is different from many forms of conventional business finance.
A farmer can receive a loan and still be unable to achieve the expected production if irrigation fails, roads prevent inputs from reaching the farm, electricity or fuel costs make processing too expensive, storage is unavailable or weather conditions damage the crop.
Similarly, a farmer may produce a good harvest but struggle to repay a loan if market prices fall sharply, if produce cannot reach buyers in time or if post-harvest losses reduce the quantity that can actually be sold.
The CBN position consequently points towards a financing model in which agricultural credit is supported by improvements in the physical and institutional environment surrounding production.
Eight years of lessons from GP AgFin
The discussion came at the close of an eight-year agricultural-finance programme implemented in Nigeria by the Deutsche Gesellschaft für Internationale Zusammenarbeit, or GIZ, on behalf of Germany’s Federal Ministry for Economic Cooperation and Development.
GP AgFin Nigeria operated from 2018 to 2026 and was designed to improve the ability of smallholder farmers and agricultural enterprises to obtain appropriate financial services.
At an earlier programme close-out event, GIZ and its partners reported that more than 99,000 smallholder farmers and agri-based enterprises had gained access to financial services. More recent reporting on the national close-out conference put the number of farmers and agribusinesses reached at 101,449 across 10 states.
The programme also facilitated substantial financial flows into agriculture. The PUNCH reported that GP AgFin had facilitated the disbursement of €53.9 million, equivalent to about ₦61 billion at the exchange rate used in the report, to more than 101,000 farmers and agribusinesses over eight years.
The intervention covered value chains including maize, rice, cassava, Irish potato, poultry and aquaculture.
Its experience illustrates why agricultural finance is not simply a question of persuading banks to lend more.
GIZ previously explained that the project worked on both sides of the financial relationship: strengthening financial institutions while helping agricultural value-chain participants become better prepared to use financial services. The approach included training, business-model development and efforts to align financial products with agricultural production cycles.
Designing loans around farming realities
One of the recurring problems in agricultural finance is the mismatch between conventional banking products and the timing of agricultural production.
A factory or trading company may generate revenue throughout the year. A crop farmer may invest heavily for several months before receiving income at harvest.
Livestock and aquaculture businesses have different cycles again.
If repayment schedules are designed without taking those realities into account, even a viable agricultural business can face unnecessary pressure.
The GP AgFin experience included efforts to address that problem through tailored agricultural finance products and capacity building.
A GIZ case study on Light Microfinance Bank in Plateau State, for example, described how the institution developed specialised products for agricultural value chains, including an Irish potato loan tailored to different climatic zones and production cycles. Between 2021 and 2025, the bank’s agricultural loan portfolio increased from ₦600 million to more than ₦1.7 billion, while agriculture came to represent more than half of its total lending, according to GIZ.
GIZ said the bank also incorporated its Farmer Financial Cycle methodology into its agricultural lending policy.
The case illustrates one possible route for increasing agricultural lending: rather than treating agriculture as a single high-risk category, financial institutions can build products around specific commodities, production cycles and business models.
But the approach still depends on conditions outside the bank.
A well-designed loan cannot compensate for an impassable rural road. It cannot create water where irrigation infrastructure is absent. It cannot replace a functioning storage system or prevent a drought from reducing yields.
That is the structural issue highlighted by the CBN.
Infrastructure as a financial issue
Agricultural infrastructure is often discussed as a production concern, but it is also a financial concern.
When roads are poor, transportation costs rise and farmers can lose access to profitable markets.
When storage is inadequate, farmers may be forced to sell immediately after harvest, when supply is high and prices can be weaker.
When electricity is unreliable, processors may depend on costly alternative energy sources.
When irrigation infrastructure is unavailable, production can become heavily dependent on rainfall.
Each of those factors affects the ability of a farmer or agribusiness to generate predictable cash flow.
For a financial institution, predictable cash flow is an important consideration when assessing repayment capacity.
This means that public investment in rural roads, irrigation, storage, power, market facilities and agricultural logistics can have implications beyond physical productivity. It can also reduce some of the risks that discourage formal lending.
The CBN official's argument consequently connects agricultural policy with financial-sector policy.
Research funding and productivity
Research is another part of the equation.
Agricultural research supports the development and dissemination of improved crop varieties, livestock technologies, pest-management approaches, soil-management practices and production systems adapted to local conditions.
If farmers lack access to technologies that can raise productivity or withstand climate pressures, financing additional production may not generate the expected returns.
The CBN's emphasis on research funding therefore reflects the need to improve the productive capacity behind agricultural credit.
This is particularly relevant as Nigerian farmers contend with changing rainfall patterns, flooding, dry spells, rising temperatures, pests and other climate-related risks.
The Food and Agriculture Organization’s latest country brief on Nigeria says production prospects for 2026 cereals remain uncertain in some areas. It reported that dry spells affected crops in parts of the Middle Belt and several northern states, while conflict continued to restrict access to farmland in parts of Benue, Borno, Kaduna, Katsina, Niger, Plateau, Sokoto and Zamfara. The FAO also pointed to rising input costs, including increases in fertiliser prices, as another constraint on production.
In such circumstances, financial institutions face risks that cannot be managed through interest rates or repayment schedules alone.
Improved seeds, irrigation, extension services, crop insurance, storage and market information can all contribute to reducing those risks.
Agriculture is growing, but pressure remains
Nigeria’s recent GDP figures provide a mixed picture of the agricultural economy.
The sector’s 4.39 per cent real growth in the second quarter of 2026 was significantly higher than the 2.82 per cent recorded in the same quarter of 2025. Agriculture also accounted for more than a quarter of real GDP during the period.
Crop production remained the largest component of agricultural activity.
A breakdown of the NBS figures reported by Vanguard showed crop production at about ₦9.44 trillion in Q2 2026, compared with ₦9.11 trillion in Q2 2025, while livestock rose to about ₦3.23 trillion from ₦3.02 trillion. Forestry also recorded growth during the period.
The improvement is occurring against a backdrop of continued food-security pressure.
The FAO reported that about 36.3 million people were estimated to face severe acute food insecurity during Nigeria’s June-to-August 2026 lean season, including approximately 2.1 million people in the Emergency phase and around 10,300 in the Catastrophe phase under the Cadre Harmonisé classification.
That contrast is important.
Agricultural GDP growth does not automatically mean that every farming household is becoming more prosperous or that food is becoming affordable to every consumer.
Production can rise while input costs, transportation expenses, insecurity, climate shocks and inflation continue to place pressure on households.
A larger financing framework is emerging
The CBN’s comments come at a time when Nigeria is also attempting to mobilise substantially more capital into the agricultural sector.
On September 28, the International Fund for Agricultural Development announced that it had joined the Federal Ministry of Agriculture and Food Security, the World Bank Group and other development partners in launching the Nigeria AgriConnect Compact.
The initiative aims to mobilise an estimated US$5 billion over five years from government, development partners and the private sector. It is designed to strengthen smallholder productivity, advance policy reforms and improve access to credit, insurance and blended finance.
The compact has targets that include improving food and nutrition security for nearly three million people and creating 2.56 million jobs by 2031.
It also sets indicative productivity targets, including a 30 per cent increase in average yields for rice, maize and wheat and a 35 per cent increase for cassava, alongside productivity improvements in livestock.
The programme's scale makes the CBN's warning particularly relevant.
If billions of dollars are mobilised without resolving the infrastructure and productivity constraints identified by agricultural-finance stakeholders, the financial resources could face the same structural obstacles that have affected earlier lending efforts.
Conversely, if financing is combined with infrastructure, technology, market access, insurance and research, the potential impact on agricultural value chains could be broader.
The challenge of reaching smallholders
Nigeria's agricultural economy includes commercial farms, processors and large agribusinesses, but millions of smallholder farmers remain central to food production.
Reaching those farmers through formal finance presents several difficulties.
Many operate on small plots. Some lack formal records, collateral or detailed financial statements. Others operate in rural areas with limited banking infrastructure.
There can also be gaps in financial literacy and business planning.
GP AgFin sought to address part of that challenge through its Farmer Financial Cycle training. GIZ described the training as covering areas such as personal financial management, farm financial management, savings, insurance, investment, borrowing and determining appropriate financing needs.
The importance of such programmes extends beyond an individual loan.
A farmer who understands cash flow, production costs and repayment obligations is better placed to determine how much credit is appropriate and how it should be used.
A bank that understands the farmer’s production cycle is likewise better placed to structure a suitable financial product.
The two sides need each other.
Land, records and formalisation
Formal financial access is also linked to the broader formalisation of agriculture.
The Federal Ministry of Agriculture and Food Security has previously emphasised the need for a credible national farmer registry so that legitimate farmers and agribusiness operators can be identified for agricultural credit and government interventions.
The ministry said in July that it was working with the Agricultural Credit Guarantee Scheme Fund to expand access to agricultural credit and improve collaboration between agricultural and financial institutions. The ACGSF provides guarantees for loans granted by banks for agricultural purposes.
Such mechanisms can help reduce some of the risks faced by lenders.
But formalisation has to be accompanied by practical access.
A farmer can be registered but still lack a road, irrigation, storage, market or reliable extension service.
The central policy challenge is therefore to ensure that administrative reforms translate into improved economic conditions on farms.
Climate is becoming a financial variable
Climate risk is increasingly difficult to separate from agricultural finance.
Farmers depend on weather conditions for crop development, while extreme events can destroy the productive assets that support repayment.
Flooding can wash away crops and damage farm infrastructure. Drought can reduce yields. Irregular rainfall can disrupt planting schedules.
For financial institutions, this creates uncertainty over expected agricultural cash flows.
The FAO’s September country assessment said rainfall prospects for September and October 2026 were expected to be average to above average across much of central and northern Nigeria, which could support crop development but also increase the risk of localised flooding. It also reported more difficult conditions in some southern areas for the establishment of second-season maize.
This is one reason agricultural insurance and climate-smart investment are becoming increasingly important components of agricultural-finance policy.
AgriConnect specifically includes insurance and blended finance in its proposed financing architecture.
The objective is not to eliminate agricultural risk, which is impossible, but to distribute and manage it more effectively.
What the financing gap means for food prices
The implications extend beyond farmers and banks.
Agricultural financing affects the amount farmers can invest in production. Production affects supply. Supply influences prices, although food prices are also shaped by transportation, exchange rates, energy costs, insecurity, imports, market structure and household demand.
The FAO reported that Nigeria’s annual food inflation rate reached 20.3 per cent in July 2026, although that remained below the 26.2 per cent recorded a year earlier. It attributed pressure to factors including transportation costs, market supply and household demand.
Reducing the cost and risk of agricultural production could therefore contribute to more stable food supply over time.
But financing should not be presented as a single solution.
If production rises without corresponding investment in storage, processing and transportation, post-harvest losses and market bottlenecks can limit the benefits.
If farmers receive credit but cannot reach markets, their repayment capacity remains vulnerable.
If production expands while climate risks intensify, insurance and resilient technologies become increasingly important.
From credit access to productive investment
The CBN intervention shifts the conversation from the question of how much money should be lent to the question of what conditions are required for borrowed money to generate sustainable returns.
That is a more complex policy challenge.
It requires cooperation among financial institutions, government ministries, research institutions, development agencies, insurers, farmers’ organisations and private agribusinesses.
Banks need better information about agricultural value chains.
Farmers need financial products suited to production cycles.
Government needs to address infrastructure and regulatory constraints.
Research institutions need funding and stronger links with farmers.
Development partners can provide technical assistance, guarantees and blended-finance mechanisms.
Processors and off-takers can create more predictable markets.
No single institution controls all of those elements.
Agricultural laws are also being reviewed
The Federal Government is simultaneously reviewing Nigeria’s agricultural laws.
The Federal Ministry of Agriculture and Food Security said on September 24 that the second phase of a review of 18 agricultural laws had begun after an initial diagnostic exercise identified obsolete provisions, overlapping mandates and regulatory gaps.
The ministry said the review was intended to take account of issues including climate change, mechanisation, agricultural technology, private investment and food-system transformation.
The process is relevant to agricultural finance because investors and lenders operate within the wider regulatory environment.
Clear rules over land, agricultural businesses, standards, technology, value chains and government responsibilities can influence investment decisions.
The ministry said the second phase was intended to validate findings and draft reform proposals before the harmonised version is submitted for legal drafting.
The outcome of that process will therefore be watched by both agricultural producers and businesses seeking to invest in the sector.
The next test is implementation
Nigeria now has several parallel initiatives aimed at agriculture: increased attention to financing, the AgriConnect Compact, agricultural-law reform, farmer registration efforts, value-chain programmes and investments in processing.
The challenge is converting those initiatives into measurable changes at farm level.
For farmers, the most tangible indicators are likely to be access to affordable finance, reliable inputs, functioning roads, irrigation, storage, electricity, extension services, insurance and markets.
For lenders, the key indicators will include repayment performance, portfolio quality, productivity and the ability of agricultural businesses to generate predictable cash flow.
For government, the broader test will involve food availability, rural incomes, employment and resilience to climate and security shocks.
A financing system tied to the farm economy
The central message from the CBN official is that agricultural finance cannot be separated from the agricultural economy itself.
Money can help a farmer buy seed, but seed must be planted on productive land.
Credit can finance a pump, but the pump requires water, fuel or electricity and maintenance.
A loan can purchase machinery, but roads and markets must allow the resulting output to reach consumers.
Finance can support a processor, but reliable supplies of agricultural raw materials must be available.
This interdependence means that agricultural lending works best when financial intervention is combined with improvements in the systems surrounding production.
Nigeria’s stronger Q2 agricultural growth provides evidence of increased activity, while the continuing food-security and financing challenges demonstrate the distance still to be covered.
The emerging policy direction therefore appears to be moving toward a broader agricultural-finance architecture—one that combines credit with guarantees, insurance, infrastructure, research, market access, digital tools, farmer organisation and private investment.
The success of that approach will ultimately depend on implementation.
The latest CBN assessment makes clear that increasing the volume of agricultural credit is only one part of the equation. For financing to translate into sustained increases in production and rural incomes, the physical and institutional conditions around Nigerian farmers must also improve.
As new capital begins to move through initiatives such as AgriConnect and as agricultural laws and financing mechanisms are reviewed, the effectiveness of those reforms will be measured not only in naira or dollars committed, but in what happens on farms: how much farmers can produce, how reliably they can sell it, how much of their harvest reaches consumers, and whether agricultural businesses can generate the income needed to repay and reinvest.
For Nigeria’s food system, that transition—from access to finance to productive and resilient investment—may prove to be the more consequential measure of agricultural-finance reform.
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