farm loans in Nigeria

Farm loans help farmers run their farms more efficiently. It can be difficult to keep up with all of the costs associated with running a farm, so our farmers need low interest farm loans in Nigeria to help them stay afloat.

WHAT IS A FARM LOAN

It is usual for lending against farm produce to be specialized and relatively few banks staffs have therefore much experience of it. Consequently, many people are hesitant about tackling this type of lending.

The theory is that farm goods are pledged as security and are then deposited in a warehouse in the name of the bank, and the customer obtains a loan for an agreed amount. Then, in the majority of cases, when the customer has arranged a sale of the produce or part of the produce, he will need to have possession of the goods in order to deliver them to the purchaser. The bank will then appoint the customer as its agent to deal with the sale, and the customer, acting as its agent, will complete the sale and deliver to the bank the proceeds in order to repay the loan.

Should bankruptcy, a receivership, liquidation, or a warrant for execution fall upon the customer while he has possession of the farm goods as being pledged to it. Similarly, if the goods have been sold but not paid for, the bank will be able to claim as principle from the person to whom the goods have been sold.

The appointment of the customer as agent of the bank and the instructions to him to account for the proceeds of the sale are made by means of a trust letter, and these arrangements are known as trust facilities.

PROVIDERS OF FARM LOANS IN NIGERIA

1. Agricultural Credit Support Scheme (ACSS)

The ACSS is an initiative of the Federal Government and the Central Bank of Nigeria with the active support and participation of the Bankers Committee. The Scheme has a prescribed fund of N50.0billion. ACSS was introduced to enable farmers exploit the untapped potentials of Nigeria’s agricultural sector, reduce inflation, lower the cost of agricultural production (i. e. food items), generate surplus for export, increase Nigeria’s foreign earnings as well as diversify its revenue base. At national level, the scheme operates through a Central Implementation Committee (CIC) while at the Federal Capital Territory (FCT) and State levels, the Scheme operates through State Implementation Committees (SICs) instituted to ensure that the objectives of the scheme is realized without hindrance.

2. Commercial Agriculture Credit Scheme (CACS)

As part of its developmental role, the Central Bank of Nigeria (CBN) in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) established the Commercial Agriculture Credit Scheme (CACS) in 2009 to provide finance for the country’s agricultural value chain (production, processing, storage and marketing). Increased production arising from the intervention would moderate inflationary pressures and assist the Bank to achieve its goal of price stability in the country.

3. Agricultural Credit Guarantee Scheme Fund (ACGSF)

The ACGSF was established by Decree No. 20 of 1977, and started operations in April, 1978. Its original share capital and paid-up capital were N100 million and N85.6 million, respectively. The Federal Government holds 60% and the Central Bank of Nigeria, 40% of the shares. The capital base of the Scheme was increased to N3 billion in March, 2001. The Fund guarantees credit facilities extended to farmers by banks up to 75% of the amount in default net of any security realized. The Fund is managed by the Central Bank of Nigeria, which handles the day-to-day operations of the Scheme.