Agriculture loans in Nigeria are loans meant for a wide range of agricultural and farming purposes. Farmers are supposed to apply for loans to buy supplies for the cultivation of food grain crops along with other purposes such as horticulture, animal husbandry, aquaculture, and floriculture and sericulture businesses.
Others purchases for which agricultural loans can be taken include construction of biogas plants and irrigation systems along with agricultural land through special types of agricultural finance. In 2016 the Central Bank of Nigeria in partnership with the bank of agriculture pledged N200 billion to finance the input of farmers in Nigeria.
Why Are Agriculture Loans in Nigeria Important
Agriculture is still the principal source of livelihood for more than half the population or are related to agriculture as most of the Nigerian rural inhabitants still dependent on agriculture as a profession.
Nigeria has the potential to rise to world class in agriculture if constraint to growth in the sector are eliminated and skills are built through market development programmes. Credit is a critical factor in development of agriculture, the rural areas, and small business in general. This is because it drives capital formation and technology upgrade.
While the majority of Nigeria’s population lives in rural areas and depends on agricultural production, the supply of financial services to the sector is inadequate, with, on average, a mere 5% of domestic resources being allocated to the agricultural sector.
Issues with Loans in the sector
There is an issue of moral hazard with Nigerians in the farming sector who act purely in self-interest which has seen the loan default amount exceed N20bn. Although it could be argued the BOA could improve the credit decision process and make use of new developments such as the collateral registry to reduce default rates.
StartCredits recommends you search for a lender focused primarily on agriculture to get the best loan interest rates.