Agriculture is the mainstay of the Nigerian economy and the country is blessed with an abundance of arable land. To further develop the sector and increase production, the government has put in place some initiatives and schemes to provide financial assistance to farmers.
There are so many different types of agricultural loans available and it can be difficult to know which one is right for you. So, we’re going to take a look at the five most popular agricultural loans in Nigeria and break them down for you.
Here’s a list of the top 5 agricultural loans in Nigeria, we hope this will help make your decision a little bit easier:
- Bank of Agriculture
- Agricultural Credit Support Scheme (ACSS)
- Commercial Agricultural Credit Scheme (CACS)
- Agricultural Credit Guarantee Scheme Fund (ACGSF)
- The Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL)
1. Bank of Agriculture
The Bank of Agriculture is a leading provider of agricultural loans in Nigeria. As a Nigerian-sponsored bank, the Bank of Agriculture is committed to financing the agricultural sector of the Nigerian economy. The Bank of Agriculture offers a variety of loan products that are designed to meet the specific needs of farmers and agricultural businesses.
This Bank also offers other services such as training and technical support, that can be very beneficial for those looking to get into the agricultural business. Overall, the Bank of Agriculture is a great resource for anyone looking for agricultural loans in Nigeria.
To ensure that it is providing the best possible service to its clients, it partners with various organizations. These include the Federal Ministry of Agriculture, the Central Bank of Nigeria, and the Bank of Industry.
Types of Loans and Funding the Bank of Agriculture Offers:
- Input Procurement credit
- Crop production and storage
- Export Finance Facility
- Agro-processing Facility
- Haulage credit
- Inventory Credit Facility
- Sugar Revival Credit
- Direct Credit Product
- Youth Agricultural Revolution in Nigeria
- Equipment Leasing Products, etc.
To apply for any loan under the Bank of Agriculture, you can visit any of the bank’s branches nationwide or apply online on the bank’s website.
2. Agricultural Credit Support Scheme (ACSS)
The Agricultural Credit Support Scheme (ACSS) was introduced by the Federal Government of Nigeria to help farmers exploit the agricultural sector by reducing the cost of food production, and producing an excess to export. It’s also supposed to reduce inflation and increase the country’s foreign net profit which will, in turn, expand the sources of its revenue.
However, this loan is accessible to both farmers and entrepreneurs in the agricultural industry and it offers a single-digit interest rate of 8.0%. Banks will offer loans to qualified candidates at a 14.0% interest rate at the start of the project support. And farmers will only be required to pay an effective interest rate of 8.0% if applicants repay their facilities on time and receive a refund of 6.0%.
So, to apply for this loan, applicants should visit their banks through the appropriate state chapters of agricultural groups and State Implementation Committees.
3. Commercial Agricultural Credit Scheme (CACS)
The main aim of the CACS is to support the growth and development of the agricultural sector by providing accessible and affordable credit to farmers and agro-based enterprises.
The CACS is a partnership between the Federal Ministry of Agriculture and Rural Development (FMARD), the Central Bank of Nigeria (CBN), and eligible commercial banks in Nigeria.
The objectives of the scheme include:
- Improve national food security by expanding the food supply and lowering the cost of agricultural goods and products, to help keep food inflation low.
- To accelerate the development of the agricultural sector of the Nigerian economy by offering lending facilities to commercial agricultural firms at a single-digit interest rate.
- Reduce the cost of loans for farmers so they can take advantage of the sector’s potential.
- To Increase general output, create jobs, broaden the source of income, enhance the country’s earnings in foreign exchange, and sustainably supply the industrial sector with input.
The scheme covers agricultural commodities and value chains like:
- Poultry
- Livestock
- Fisheries
- Cereals and legumes
- Vegetables and fruits
- Tree crops
- Processing
- Storage
- Marketing
- Supplies of agricultural machinery and equipment, etc.
To participate in the scheme, agricultural enterprises and farmers are to approach any of the 21 participating banks and obtain the required forms.
4. Agricultural Credit Guarantee Scheme Fund (ACGSF)
The Agricultural Credit Guarantee Scheme Fund (ACGSF) was established in 1978 to serve as a financial safety net for banks and other financial institutions that lend to the agricultural sector. The scheme is managed by the Agricultural Credit Guarantee Scheme Fund (ACGSF) Department of the Central Bank of Nigeria (CBN).
This fund guarantees 75% of loans advanced by financial institutions to eligible agricultural projects and enterprises. The objectives of the fund are to:
- Encourage commercial banks and other financial institutions to lend to the agricultural sector by sharing the risk involved in such lending.
- Make funds available to agriculture at a reasonable cost.
- Promote the development of viable agricultural projects.
To reverse the downward trend, the government had to introduce several products and developments. These products are interest drawback, the self group linkage banking, and trust fund model. So, to access the fund, applicants are to meet with the management of any of the Primary Mortgage Institutions (PMIs), Development Finance Institutions (DFIs), or commercial banks participating in the scheme.
5. The Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL)
The Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) was established by the Central Bank of Nigeria (CBN). And the aim was to de-risk lending to the agricultural sector and make it more attractive to banks and other financial institutions.
The NIRSAL is a risk-sharing mechanism that provides guarantees to financial institutions that lend to the agricultural sector. The objective of the scheme is to encourage banks and other financial institutions to lend to the agricultural sector by sharing the risk involved in such lending.
Under the scheme, NIRSAL will provide guarantees of up to 75% of loans advanced by financial institutions to eligible agricultural projects and enterprises. To access the fund, applicants are to approach any of the participating banks and financial institutions.
Conclusion
With these five agricultural loans in Nigeria, farmers and agricultural enterprises will be able to access the required funds to improve their operations and increase production. These loans come with a number of benefits such as interest rate discounts, risk sharing, and collateral-free lending.
With the right documentation and planning, these loans can go a long way in helping to develop the agricultural sector in Nigeria.