The Central Bank of Nigeria (CBN) says it is repositioning the Agricultural Credit Guarantee Scheme Fund (ACGSF) to attract more private-sector investment into agriculture, improve access to loans for farmers and strengthen the management of risks associated with agricultural lending.
The CBN Governor, Mr Olayemi Cardoso, stated this in his keynote address at the National Stakeholder Roundtable on Strengthening Agricultural Credit Guarantees in Abuja.
The proposed repositioning, he said, is expected to encourage more financial institutions to lend to farmers and agribusinesses by providing a stronger framework for sharing the risks associated with agricultural production and investment.
Cardoso identified stronger institutional coordination, improved risk management, climate resilience, digital transformation and private capital mobilisation as major priorities for the future of the Scheme.
The CBN governor who was represented by the Deputy Governor, Financial System Stability, Mr Isa Yuguda, said the
proposed reforms, the apex bank said, would move agricultural financing towards a more market-driven system in which commercial banks, microfinance banks, insurance companies and development finance institutions play greater roles in providing funds to farmers and agricultural businesses.
The move, the CBN governor clarified, does not amount a return to the Bank’s previous direct Development Finance Intervention (DFI) programmes.
Rather, he said the Bank was seeking to strengthen the existing credit guarantee framework and use public resources to encourage financial institutions and private investors to provide more agricultural loans.
Under the proposed approach, the CBN governor said financial institutions would retain responsibility for assessing borrowers and making lending decisions, while the apex bank and other public institutions would concentrate on addressing market weaknesses, reducing lending risks and creating an enabling environment for private-sector financing.
Cardoso said the changing realities of the agricultural sector and financial markets required a fresh approach to agricultural credit guarantees to ensure that the Scheme remained effective and financially sustainable.
The ACGSF wasestablished in 1977 to encourage financial institutions to lend to agriculture by providing guarantees against certain lending risks, needed to evolve beyond its traditional responsibility of protecting banks against loan defaults.
The Scheme, he noted, should become an instrument for improving the allocation of risks, strengthening the confidence of lenders and attracting additional private investment into productive agricultural activities.
The CBN Governor said the Bank was already moving its development finance strategy towards market-based financing, stronger private-sector participation, institutional collaboration and sustainable risk-sharing arrangements.
“Sustainable agricultural finance must ultimately be driven by viable economic activity and sound credit decisions,” he said, adding that financial institutions should remain responsible for evaluating loan applications and making lending decisions, while risks should be assigned to institutions with the capacity to manage them.
The CBN Governor said the country’s agricultural financing requirements were too enormous to be met through public resources alone, making it necessary to attract more commercial and development finance into the sector.
“Our objective should be to crowd private capital in, not crowd it out,” he pointed out.
On risk management, he said agricultural credit guarantees alone could not adequately address the challenges confronting farmers and financial institutions.
He called for closer integration of credit guarantees with agricultural insurance, data-based credit assessment and mechanisms for managing climate-related risks.
Combining these arrangements, he said, would improve the confidence of lenders, while strengthening the ability of farmers and agricultural businesses to withstand production and climate-related challenges.
Agricultural lending in Nigeria, he noted, has continued to face difficulties arising from climate uncertainties, fluctuations in commodity prices, inadequate collateral, limited information about borrowers and the seasonal nature of farming.
These factors influence the willingness of financial institutions to extend credit to farmers, particularly those operating small agricultural businesses.
The CBN Governor said addressing these challenges required stronger cooperation among commercial banks, microfinance banks, insurance companies, guarantee institutions, development finance institutions, government agencies and other participants in the agricultural value chain.
He explained that improved coordination would reduce fragmentation, close information gaps and ensure that government-supported financing arrangements complement rather than replace private-sector investment.
On technology, Cardoso said the modernisation of the ACGSF would improve the speed of processing applications, strengthen monitoring, protect the integrity of information and provide better assessments of the Scheme’s performance.
He said improved information infrastructure would also enable financial institutions to assess agricultural borrowers more accurately and expand responsible lending to the sector.
The Governor said the CBN wanted the Scheme to facilitate access to finance for viable agricultural enterprises and support investment across different segments of the agricultural value chain.
The future of agricultural financing, he added, would depend less on the amount of public money committed and more on the ability to build credible institutions, strengthen functioning markets and manage risks effectively.
On his part, the Deputy Governor, Yuguda, called for a reassessment of Nigeria’s agricultural development strategies, recalling that the country was a leading producer of both cash and food crops about 50 years ago.
He questioned why the country lost much of its former agricultural production capacity despite having similar soil and weather conditions, saying Nigeria needed to revisit successful agricultural practices and strengthen extension services to improve farmers’ knowledge, productivity and access to modern agricultural support.
Also, he called for renewed collaboration among financial institutions and development partners to mobilise private financing for farmers in a manner that could be sustained without continued dependence on government funding.
In his welcome address, the Acting Director, Development Finance Advisory Department of the CBN, Dr Paul Oluikpe, said the roundtable was organised to develop practical solutions to the financing difficulties facing farmers and agricultural businesses.
He said financing costs, repayment arrangements and collateral requirements often failed to reflect the realities of agricultural production, while financial institutions remained concerned about production risks, climate variability, market uncertainties and inadequate information.
Oluikpe said the two-day meeting would examine the existing agricultural credit guarantee framework and identify opportunities for stronger cooperation among lenders, insurers, guarantee institutions and development partners.
He said participants would also discuss whether existing agricultural lending conditions were suitable for farmers, particularly in relation to the affordability of loans and repayment periods that should take account of agricultural production cycles.
The Acting Director announced that the ongoing transformation of the ACGSF would include the introduction of a new brand identity, presentation of revised operational guidelines as an exposure draft for stakeholders’ comments and the unveiling of an online portal.
He said the initiatives were designed to improve access to the Scheme, transparency, operational efficiency and engagement with participating institutions.
According to him, strategic partnership agreements would also be signed to strengthen institutional cooperation and improve agricultural financing delivery.
Oluikpe said the second day of the meeting would focus on attracting private and development capital, identifying complementary financing arrangements and translating the discussions into practical institutional actions.
He said the technical sessions would bring together development partners, financing institutions, credit guarantee and credit-enhancement organisations, agricultural insurers and participating financial institutions.
The Acting Director said the success of the engagement would be measured by the partnerships established, the practicality of the proposed solutions and the willingness of participating institutions to implement agreed recommendations.
The ACGSF was established in 1977 to encourage banks to provide credit to farmers and agricultural businesses by guaranteeing loans granted for agricultural purposes.
The CBN believes strengthening the Scheme through better risk-sharing, improved technology and greater private-sector participation will help deepen agricultural financing and improve productivity, resilience and competitiveness across Nigeria’s agricultural sector.
