Poor credit access drags Nigeria’s food productivity

Lack of access to single-digit financing for farmers in Nigeria remains a significant barrier to farm productivity.

Agripreneurs looking to scale their businesses remain limited due largely to the lack of access to affordable, single-digit financing options.

“Funding is the biggest problem we have in Nigeria’s agriculture, and we need it to put all the factors of production together to boost productivity,” said Abiodun Olorundenro, managing partner at Prasinos Farms.

Nigeria’s monetary policy rate (MPR) at 27.5 percent is among the highest in Africa, leading to higher borrowing costs from money deposit banks.

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At the moment, commercial banks charge rates between 30 and 38 percent, according to BusinessDay checks.

“The interest rate on agricultural loans from money deposit banks in the country is unsustainable, and no agribusiness can survive with it,” he said.

Nigeria’s agricultural fundamentals are robust. There are estimated to be 84 million hectares of arable land, out of which only 40 percent are cultivated and 10 percent are cultivated optimally.

But with adequate financing, the country can put its 84 million hectares of arable land to productive use and produce more for its fast-rising population, experts say.

Farmers need the right finance to unlock their productivity, said Jude Obi, president of the Association of Organic Agriculture Practitioners of Nigeria (NOAN).

“We cannot survive on the current double-digit interest rate. There must be a single-digit financing model for farmers that is accessible to all players,” Obi said.

He called for a specific financing model to meet the needs of farmers, noting that cash crops and food crops cannot operate under the same guidelines.

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A 2022 National Agricultural Sample Census report by the National Bureau of Statistics (NBS) shows that only seven percent of farming communities in the country have received micro-credits from banks.

Elimination of corruption in farm subsidies

Nigeria’s agricultural subsidy programmes have long been plagued by corruption and inefficiencies.

Farmers who are beneficiaries of the subsidy interventions often face delays, misallocations and fraud, while intermediaries exploit gaps in the system.

Many genuine farmers remain excluded due to flawed verification processes, while funds sometimes end up in the hands of non-existent beneficiaries or politically connected individuals.

Many farmers who obtained loans under the federal government subsidy intervention often believe that such loans are their share of the national cake and, as such, never pay back.

Experts say Nigeria can boost its food production, fully take advantage of its agricultural value chain opportunities, and create jobs for its young population when it eliminates corruption in its intervention programmes.

To address this, experts noted that without stronger policy enforcement, better institutional coordination, and a stable financing structure, corruption and fraud will continue to persist in agricultural subsidy programmes.

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“We must eliminate corruption in farm subsidy programmes,” Obi said, calling for intervention programmes to be transparent, properly implemented, and institutionalised in the Bank of Agriculture (BoA) to ensure that real farmers are the beneficiaries and drive impact.

“Nigeria has been giving subsidies on fertiliser all through its lifespan, yet they have amounted to nothing. This is principally because the government has failed to take action,” Obi, who is also a professor at the Department of Soil Science, University of Uyo, said.