HEADLINE: CBN Says Structural Gaps, Not Capital Alone, Are Holding Back Agricultural Lending in Nigeria

By Simpson Global Media News Desk

Finance Gap Goes Beyond Availability of Money

Nigeria’s agricultural sector is facing a financing problem that extends beyond the amount of money available to farmers, according to a Central Bank of Nigeria official who has called for deeper attention to infrastructure, agricultural research, production conditions and the design of credit products.

Dr Michael Ononugbo, Deputy Director and Special Assistant in the Office of the CBN Deputy Governor, Economic Policy Directorate, said the country’s agricultural finance gap was rooted in structural weaknesses that make conventional lending difficult for many smallholder farmers and rural enterprises.

Ononugbo spoke in Abuja 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.

The eight-year programme, financed by Germany’s Federal Ministry for Economic Cooperation and Development and implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit, or GIZ, reached 101,449 farmers and agribusinesses across 10 Nigerian states.

The development places agricultural finance at the centre of a wider question facing Nigeria’s food system: how can farmers obtain credit that arrives at the right time, matches the realities of agricultural production and can be repaid from farm income?

Why Conventional Bank Lending Can Be Difficult for Farmers

According to Ononugbo, smallholder farmers frequently operate with fragmented landholdings, limited access to technology, weak infrastructure and inadequate storage facilities.

Farmers also face climate-related risks and fluctuations in commodity prices. At the financial level, many agricultural enterprises have limited formal records, insufficient collateral and information gaps between producers and financial institutions.

These conditions can make traditional lending models difficult to apply.

A farmer may have productive land and an established market for crops but still struggle to satisfy conventional requirements designed around businesses with formal accounting systems, fixed assets, predictable cash flows and conventional collateral.

Agricultural production also has a different cash-flow pattern from many other businesses. Money is spent before planting or stocking, while revenue may not arrive until months later. A loan that reaches a farmer after the planting window may therefore have considerably less value than the same loan delivered before land preparation and input purchases.

Crop cycles can also expose farmers to risks that are outside their immediate control. Poor rainfall distribution, flooding, pests, disease outbreaks, insecurity, transport problems and sudden changes in commodity prices can affect the ability of a farmer to generate enough revenue to service a loan.

Ononugbo said this meant that increasing the volume of credit alone would not necessarily solve the underlying problem.

He argued that attention must also be paid to whether agricultural financing is appropriately structured, affordable, sustainable and connected to the production realities of farmers.

The Warning About Poorly Structured Credit

The CBN official’s comments highlight an important distinction between access to money and access to useful finance.

Agricultural credit can support farmers when it is properly timed and matched to the requirements of production. But financing that is expensive, poorly structured or delivered at the wrong point in the agricultural cycle can leave borrowers under pressure without necessarily improving productivity.

For a crop farmer, for example, working capital may be required for land preparation, improved seed, fertiliser, crop protection, labour and harvesting. For a poultry farmer, financing needs may include feed, chicks, vaccines, equipment and operating expenses. An aquaculture enterprise may have different requirements, including fingerlings, feed, water management and equipment.

A financing model that treats all of these businesses in exactly the same way may fail to reflect their different production cycles and risk profiles.

That is one reason agricultural finance programmes have increasingly focused on developing products designed around particular value chains rather than relying exclusively on generic commercial loans.

GP AgFin’s experience provides a recent example of that approach.

Eight Years of Agricultural Finance Intervention

The GP AgFin Nigeria programme operated from 2018 to 2026 and worked across 10 states and six agricultural value chains: maize, rice, cassava, Irish potato, poultry and aquaculture.

The programme was designed to connect farmers and agribusinesses with financial institutions while helping lenders understand the requirements of agricultural enterprises.

During its implementation period, more than 101,449 farmers and agribusinesses accessed adapted financial products and services.

Partner financial institutions recorded about 150,300 financial transactions, while €53.9 million—reported at approximately N61 billion—was disbursed to farmers and agribusinesses without guarantees or warranties from GP AgFin itself.

The programme also developed and piloted 22 agricultural financial products. Nineteen of those products were subsequently integrated permanently into the portfolios of partner financial institutions without continued GIZ or AgFin funding.

Nineteen of the products also incorporated digital delivery mechanisms.

Those figures offer an indication of the programme’s attempt to move beyond one-off lending into the development of financial products that can remain available through normal financial institutions.

From 1,260 Users to More Than 101,000

One of the changes recorded by the programme was the growth in the number of financial-service users.

According to GIZ, the number increased from 1,260 in 2020 to more than 101,000 by the second quarter of 2026.

Loan disbursements also increased substantially, rising from €776,000 in 2021 to €53.9 million in 2026.

Partner microfinance banks recorded repayment rates above 90 per cent, according to programme figures reported at the close-out discussions.

The figures are significant because agricultural lending has often been treated as particularly difficult by formal financial institutions.

The experience reported by GP AgFin suggests that product design, financial education, relationships between lenders and agricultural enterprises and better understanding of value chains can influence how financial institutions serve farmers.

It does not, however, mean that the broader agricultural-finance problem has been solved. The programme itself is scheduled to formally conclude in October 2026, raising the question of how its methods and financial products will continue after the intervention ends.

What Happens After GP AgFin?

Sustainability has therefore become one of the central issues surrounding the programme’s close-out.

GIZ officials have called for lessons from the intervention to be incorporated into mainstream government policy and the operations of financial institutions.

The tools and partnerships developed through GP AgFin are expected to transition into the Value Chains for Agribusiness, Climate and Employment project, known as VACE, which is implemented by GIZ and co-funded by the European Union and Germany’s BMZ under the Transformation of Agri-food Systems framework.

The objective is to ensure that useful mechanisms developed during the eight-year intervention do not disappear when the project formally ends.

At the close-out conference, stakeholders emphasised the need to integrate appropriate financial products into the ordinary business operations of financial institutions rather than maintaining them only as temporary donor-supported interventions.

That transition is important because a programme can demonstrate that a financing model works while still leaving a question about scale.

If farmers depend on a project for access to a specialised financial product, the long-term test is whether commercial banks, microfinance banks, development-finance institutions and public agricultural funds can continue providing comparable products after the project closes.

Women and Young Farmers

The financing challenge also has a strong inclusion dimension.

GP AgFin reported that women represented 53 per cent of participants in its financial-literacy training. The programme also identified women and young people among groups that remain underserved by formal credit.

Financial access is particularly important for agricultural enterprises operated by people who may have limited conventional collateral or formal business records.

Women are active across several agricultural value chains, including crop production, processing, trading and value addition. In many cases, their financing requirements may extend beyond primary production to small-scale processing, packaging, storage and market access.

The programme also used market-access training to focus on processing, value addition and other agricultural enterprises in which women play significant roles. About 80 to 85 per cent of participants in that training were women, according to programme figures.

Financial literacy was another component. More than 21,000 participants completed financial-literacy training, comprising 16,006 farmers and 5,122 agribusiness managers.

Such training addresses a part of the financing problem that cannot be solved simply by increasing loan volumes. Farmers and agribusiness operators need to understand repayment schedules, interest costs, record keeping, cash-flow planning and the financial implications of different forms of credit.

Financial institutions, in turn, need reliable information about agricultural enterprises if they are to assess risk and design products that correspond to actual production cycles.

Infrastructure Is Part of the Credit Problem

The CBN warning also places physical infrastructure within the agricultural-finance debate.

Poor roads, inadequate storage, unreliable electricity, limited irrigation and weak logistics can affect a farmer’s ability to turn production into income.

A farmer may obtain credit and produce a good harvest but still face financial difficulty if crops cannot reach markets efficiently or if a lack of storage forces produce to be sold immediately when prices are low.

For perishable commodities, the consequences can be more immediate. Poultry, fish, vegetables and other products require appropriate handling, transport and market arrangements.

Infrastructure therefore affects not only production but also the repayment capacity of agricultural borrowers.

When roads are poor or storage facilities are unavailable, transaction costs rise and post-harvest losses can reduce the value of agricultural output.

This helps explain why Ononugbo argued that agricultural finance should not be viewed separately from the wider agricultural production system.

Credit is one component of a chain that includes land, seed, fertiliser, machinery, water, extension services, storage, processing, transport, markets and insurance.

Agricultural Research Also Matters

Another part of the CBN message concerned agricultural research.

Ononugbo said insufficient investment in agricultural research was limiting innovation and productivity and called for greater attention to research and innovation within agricultural financing and policy.

Research affects agriculture in ways that may not be immediately visible in a loan transaction.

Improved crop varieties, better soil-management methods, pest and disease control, climate-adapted production techniques and improved livestock systems can affect farm productivity over time.

Nigeria’s agricultural research institutions already work across several areas of crop, livestock and farming-system development, but translating research findings into widespread farm-level adoption requires financing, extension systems, quality inputs and functioning markets.

The Institute for Agricultural Research in Samaru, for example, has recently highlighted the importance of developing improved varieties while also ensuring that quality seed reaches farmers in sufficient quantities, at the right time and at affordable prices.

That illustrates why research funding and agricultural finance cannot be treated as completely separate questions.

New technology or improved seed has limited effect if farmers cannot afford it or cannot obtain it when needed.

Conversely, credit may have limited productivity impact if farmers lack access to suitable technologies, quality inputs or technical advice.

Nigeria Already Has Agricultural Credit Mechanisms

The financing challenge is not occurring in a system without agricultural-credit institutions.

The CBN operates or has historically supported several mechanisms intended to encourage lending to agriculture.

Its Agricultural Credit Guarantee Scheme Fund, for instance, was established to reduce the risks faced by banks when lending to farmers. The scheme provides guarantee coverage intended to encourage financial institutions to extend agricultural credit.

Nigeria’s National e-Agriculture portal also lists several agricultural-credit mechanisms, including guaranteed funds, agricultural-produce finance, commercial agriculture credit and other facilities intended to support farmers and agricultural businesses.

The portal notes that institutional credit can help address challenges associated with small farm sizes, low output and low income, while also supporting the adoption of improved technologies.

The existence of these programmes means the current debate is less about creating agricultural finance from nothing and more about improving the way existing financing reaches productive enterprises.

The Role of the National Agricultural Development Fund

Another institution involved in the financing landscape is the National Agricultural Development Fund.

NADF describes its mandate as supporting growth in Nigeria’s agricultural sector by facilitating access to finance and driving transformative growth. Its activities include agricultural funding, loan-related products, research support, capacity building and market-information initiatives.

The organisation was established under the National Agricultural Development Fund (Establishment) Act 2022 to address constraints affecting agricultural finance and strengthen the country’s food systems.

NADF has also been developing approaches intended to bring more private capital into agriculture.

In June 2026, the fund announced a blended-finance initiative designed to reduce investment risks and attract private-sector capital into agricultural businesses.

The concept involves combining public or development-oriented finance with commercial capital and risk-sharing structures.

Such approaches reflect the broader challenge identified by the CBN: agriculture requires finance, but finance providers also need mechanisms that allow them to manage agricultural risks.

Why Risk Remains a Central Issue

Agricultural lending carries risks that can be difficult to manage through conventional banking methods.

Weather can affect yields. Commodity prices can change between planting and harvest. Disease can damage livestock or crops. Market disruptions can reduce revenue. Security challenges can prevent farmers from reaching their fields.

These risks are not necessarily signs that agriculture cannot be financed. Instead, they mean financial products may need to account for the specific risks associated with different value chains and locations.

Insurance can play a role in that process.

The Nigerian Agricultural Insurance Corporation provides insurance solutions covering crops, livestock, assets and agribusinesses, with the stated objective of protecting agricultural enterprises against specified risks.

When credit and insurance are appropriately connected, a financial institution may have greater protection against certain production shocks, while farmers have a mechanism for managing some risks that could otherwise undermine repayment.

The effectiveness of such arrangements depends on the terms, coverage, affordability and ability of farmers to access them when losses occur.

Credit Must Match the Agricultural Calendar

Timing remains another important part of the financing equation.

Agricultural businesses cannot always use money immediately in the same way as a conventional retail or service business.

Crop farmers may need financing before planting, then additional resources during cultivation and harvesting. Repayment may need to correspond to the period when crops are sold.

Similar considerations apply to livestock, poultry, fisheries and processing enterprises.

A loan product with repayment terms that ignore the production cycle can place unnecessary pressure on borrowers.

The CBN’s emphasis on appropriate and sustainable financing therefore points toward a system in which lenders understand the business cycle of each value chain.

That approach was reflected in GP AgFin’s development of 22 tailored financial products for agricultural enterprises, 19 of which were subsequently integrated into partner financial institutions’ portfolios.

Digital Finance Offers Another Route

Digital delivery was incorporated into 19 of the 22 agricultural-finance products developed through GP AgFin.

Digital tools can potentially reduce some of the costs involved in reaching rural customers, improve record keeping and facilitate communication between farmers and financial institutions.

Digital systems may also make it easier to document transactions and build financial histories over time.

But technology does not automatically solve every rural-finance problem.

Connectivity, digital literacy, identity verification, device access and trust in financial services remain relevant considerations.

A digital agricultural-finance system therefore still depends on physical and institutional infrastructure.

The Broader Food-Security Connection

The agricultural-finance debate matters beyond individual farmers and lenders.

Nigeria’s ability to produce food depends partly on whether farmers can obtain the inputs and productive assets needed to operate efficiently.

The Food and Agriculture Organization’s September 2026 country brief noted that Nigeria’s 2026 cereal-production prospects remained uncertain in some areas. It reported that harvesting of the main-season maize crop was nearing completion in southern and central bimodal-rainfall areas, while second-season maize planting was continuing toward the end of September. The agency also identified localised production concerns in parts of several states following dry spells.

These conditions reinforce the importance of financing systems that account for agricultural and climatic realities.

When weather patterns change, farmers may need to invest in irrigation, water management, improved seeds, soil management or other adaptation measures.

Such investments require capital, but they also require appropriate financial terms and technical support.

Moving From Projects to Systems

One of the most important questions raised by the GP AgFin close-out is what happens when a successful intervention ends.

Project-based finance can test new approaches, build institutional capacity and demonstrate demand. But agriculture requires financing year after year.

Farmers need access to working capital across successive production cycles. Agribusinesses need investment for storage, processing and logistics. Financial institutions need sustainable products that can remain commercially viable.

This is why the transition from GP AgFin into other programmes and institutional structures will be closely watched.

The CBN has indicated that its approach to development finance has increasingly focused on strengthening institutions and systems rather than relying only on direct interventions.

At the GP AgFin close-out conference, CBN Governor Olayemi Cardoso said the experience demonstrated the need to build stronger systems capable of sustaining agricultural credit after individual development programmes have ended.

The practical implication is that the lessons from an eight-year programme need to become part of ordinary agricultural-finance operations.

What Farmers and Lenders Need Next

For farmers, the immediate issue is access to financing that is affordable, timely and suited to the actual cost and duration of production.

For lenders, the challenge is obtaining sufficient information to understand agricultural businesses and manage risks without excluding productive smallholders simply because they lack conventional collateral.

For government agencies, the task includes improving the wider conditions that determine whether credit can translate into agricultural output.

Those conditions include roads, irrigation, storage, electricity, extension services, agricultural research, reliable input supply, market information and security.

For development partners, the question is how tested models can be transferred into national systems without creating permanent dependence on donor-funded projects.

And for financial institutions, the experience of GP AgFin offers a pool of products and operational lessons that can potentially inform future agricultural lending.

A Financing System Linked to Production

The CBN’s latest intervention in the debate therefore shifts attention from a simple question—how much money is available for agriculture—to a broader one: how effectively does the financial system connect money with productive agricultural activity?

The distinction is important.

More credit does not automatically mean more production. The outcome depends on how the money is used, when it arrives, the cost of borrowing, the availability of inputs, the productivity of the farm, the reliability of markets and the risks affecting the enterprise.

The experience of GP AgFin provides a recent case in which tailored products, financial literacy, digital delivery and relationships between lenders and agricultural enterprises were combined to expand access.

The programme reached more than 101,000 farmers and agribusinesses, facilitated approximately N61 billion in lending, supported the development of 22 agricultural financial products and helped integrate 19 of them permanently into partner financial institutions.

The next phase will depend on whether those mechanisms can continue operating at scale after the programme’s formal close-out in October.

The Road Ahead

Nigeria’s agricultural financing challenge is ultimately connected to the structure of the country’s food economy.

Farmers require capital, but they also require productive land, quality inputs, technology, research, storage, transportation, markets and protection against manageable risks.

Banks and other lenders require viable borrowers, reliable information and mechanisms for managing the uncertainties associated with agricultural production.

Government institutions need to create conditions in which agricultural finance can support production without relying indefinitely on temporary intervention programmes.

The recent GP AgFin experience shows that there is demand for agricultural financial services and that tailored approaches can reach large numbers of farmers and businesses.

The CBN’s latest warning, however, indicates that the wider financing gap cannot be addressed by capital alone.

As GP AgFin approaches its October 2026 conclusion, the central question is how its tested approaches will be absorbed into the country’s permanent agricultural-finance architecture.

If agricultural credit is to contribute consistently to higher productivity and stronger rural businesses, financing will have to remain connected to the realities of farming—from the timing of planting and harvesting to storage, markets, infrastructure, technology, climate risks and the ability of farmers to maintain reliable financial records.

The discussion now moves from demonstrating that agricultural finance can reach farmers to determining how such access can be sustained, expanded and integrated into Nigeria’s broader agricultural economy.