By Kehinde Ibrahim, Lagos
NIGERIA’S banks are increasing their exposure to agriculture, with credit to the sector rising by 23 per cent, a development that points to a gradual reallocation of financial resources towards an industry central to food security, employment and economic diversification.
The increase comes at a challenging period for Nigeria’s food economy, with farmers and agribusinesses facing high input costs, inadequate infrastructure, insecurity, climate-related risks and limited access to affordable financing. At the same time, households continue to contend with elevated food prices, making the performance of agriculture increasingly important to the wider economy.
The rise in agricultural credit is significant because access to finance has remained one of the sector’s most persistent constraints. Farmers require capital for land preparation, seeds, fertiliser, machinery, irrigation, labour, storage and transportation. Yet many smallholder farmers remain outside the formal credit system because they lack conventional collateral, established financial records and predictable cash flows.
Agricultural production also carries risks that distinguish it from many other economic activities. Farmers operate within seasonal production cycles and remain exposed to flooding, drought, pests, diseases, insecurity and fluctuations in commodity prices. These challenges can affect production as well as the ability of borrowers to service their loans.
The result has been a persistent gap between Nigeria’s agricultural potential and the financial resources available to unlock it.
The latest increase in credit indicates that more financial resources are flowing into the sector, but its broader economic significance depends on the distribution and productive use of the financing.
Agricultural credit covers a broad range of activities, including lending to individual farmers, cooperatives, commercial farms, processors, input suppliers, commodity traders, logistics companies and storage operators. An increase in aggregate lending therefore does not necessarily mean that smallholder farmers are gaining proportionately greater access to finance.
This distinction is particularly important in Nigeria, where smallholder farmers remain central to domestic food production but often have limited access to formal financial services.
The country’s agricultural transformation consequently requires financing structures capable of bringing smaller producers into the formal value chain while maintaining appropriate safeguards for lenders. Aggregation models involving cooperatives, organised producer groups and established agricultural businesses could provide one avenue for improving access while reducing some of the difficulties associated with individual smallholder lending.
The broader movement of credit must also be considered against the operating conditions in other major sectors of the economy.
Oil and gas remains critical to Nigeria’s foreign exchange earnings and public revenue, but the industry continues to operate amid crude oil-price volatility, production challenges, regulatory developments and the global transition towards lower-carbon energy.
Manufacturing faces a different set of pressures, including high energy costs, foreign exchange constraints, expensive raw materials, logistics challenges and weak consumer purchasing power.
These conditions have implications for businesses seeking finance and for the allocation of credit across the economy.
Agriculture provides a broad investment landscape stretching beyond primary production. Opportunities exist across input supply, mechanisation, irrigation, processing, storage, transportation, packaging, distribution and agricultural exports.
Availabele data underlined the scale of the opportunity. Credit to agriculture stood at about N3.86 trillion in March 2026, compared with N10.58 trillion for oil and gas and N5.77 trillion for manufacturing. Real estate credit stood at N6.29 trillion, while power and energy lending was about N1.61 trillion.
Total private sector credit increased from N57.41 trillion in January to N59.74 trillion in March, indicating that the increase in agricultural financing occurred within a broader expansion and reallocation of credit rather than in isolation.
The figures also put the 23 per cent increase into perspective. Agricultural lending is growing, but its outstanding volume remains significantly below credit to oil and gas and several other major sectors.
Financial analysts therefore increasingly focus not only on the volume of credit but also on its allocation and economic impact.
The International Monetary Fund has noted that private-sector credit in Nigeria remains relatively low compared with the size of the economy, standing at about 12 per cent of GDP in 2025. It has also highlighted the concentration of credit in sectors including oil and gas, services, manufacturing and industry.
The implication is that Nigeria’s challenge is not simply to expand lending but to improve financial intermediation so that domestic savings are more effectively channelled into productive investment.
The movement of more credit towards agriculture could support that objective if the financing is directed towards viable productive activities.
The quality of agricultural credit is particularly important because farming and agribusiness operate under conditions that differ significantly from conventional corporate lending.
A loan used to finance irrigation, mechanisation, storage or processing can create productive assets capable of generating returns over several years. Working-capital financing can also support seasonal production, but its success remains dependent on harvests, commodity prices and market conditions.
The structure and tenor of financing must therefore reflect the nature of the activity being funded.
Agricultural businesses cannot always operate effectively under short repayment schedules because production and revenue cycles may extend over several months or years. Longer-term financing may be required for infrastructure such as irrigation systems, warehouses, processing plants and farm machinery.
Risk management is equally important.
Flooding, drought and irregular rainfall can significantly affect agricultural output and borrowers’ ability to repay. Crop and agricultural insurance can help protect both farmers and financial institutions from some of these risks.
The Central Bank of Nigeria’s Agricultural Credit Guarantee Scheme Fund is designed to encourage banks to lend to agriculture by guaranteeing a portion of qualifying agricultural loans in default. Such mechanisms are intended to reduce some of the risks that have historically constrained agricultural lending.
The experience of agricultural finance also demonstrates the importance of the lending model.
The Bank of Agriculture has reported significant challenges in recovering loans from farmers, with its management attributing some of the difficulties to the fragmented nature of agricultural lending and the challenge of tracing individual borrowers.
This has encouraged greater emphasis on aggregation models in which farmers are organised through structured groups or businesses that can facilitate financing, production and market access.
Such arrangements could help improve the efficiency of agricultural lending while reducing some of the administrative and monitoring challenges associated with financing individual smallholders.
However, access to credit remains only one component of agricultural productivity.
Infrastructure is equally important.
A farmer may obtain financing to increase production but still struggle to generate adequate returns if poor roads make it expensive to transport produce to markets. An agro-processing company may secure funding for machinery but face high operating costs because of unreliable electricity.
Storage is another major constraint.
Farmers without adequate storage facilities may be forced to sell shortly after harvest, sometimes when prices are unfavourable. Investment in warehouses, cold-chain systems and other storage infrastructure could therefore increase the value generated from agricultural financing.
Post-harvest losses represent a significant economic cost because resources used to produce food are wasted before the commodities reach consumers.
Greater financing across the agricultural value chain could help address some of these weaknesses.
Agricultural processing is particularly important because it allows Nigeria to capture more value from commodities produced domestically.
Financing processing facilities can create reliable demand for farmers while generating additional employment and economic activity. It can also reduce dependence on imported processed food products and improve the competitiveness of Nigerian agricultural businesses.
The export market presents another opportunity.
Nigeria has significant agricultural production capacity, but inadequate processing, packaging, quality certification and logistics have constrained the country’s ability to capture greater value from agricultural exports.
More financing for these areas could help businesses move from exporting raw commodities towards higher-value processed products.
Such a transition could support economic diversification and generate additional foreign exchange.
The potential impact on food prices, however, requires a measured assessment.
Increased agricultural credit does not automatically translate into lower food inflation. Food prices are influenced by a combination of factors, including input costs, transport expenses, exchange-rate movements, energy costs, insecurity, weather conditions and market dynamics.
Nevertheless, financing that increases production, reduces post-harvest losses and improves storage and distribution can strengthen domestic supply over time.
The broader economic impact will therefore depend on whether agricultural credit is converted into productive capacity.
Economists and financial-sector analysts have repeatedly emphasised the importance of directing credit towards productive investment. The issue is particularly relevant for Nigeria because the country needs stronger private-sector investment to support sustainable economic growth.
The 23 per cent increase in agricultural credit should consequently be viewed within this wider financial context.
It represents an increase in funding for a sector with significant economic potential, but it does not by itself establish that Nigeria’s agricultural financing gap has been resolved.
The distribution of the credit remains important.
Agricultural lending can support large commercial farms, processors and other established businesses, but smallholder farmers also require access to affordable and appropriately structured financing if the benefits of increased credit are to reach the broader farming population.
Digital financial services could contribute to this process.
Transaction histories, digital payment records and alternative credit-assessment systems can help financial institutions evaluate borrowers who may not have conventional credit histories.
Such tools could improve financial inclusion, particularly among smaller agricultural operators, while giving lenders better information for assessing risk.
However, technology cannot substitute for the physical and institutional infrastructure required to make agriculture more productive.
Farmers still need roads, irrigation, storage, electricity, security, extension services and access to reliable markets.
This means the responsibility for agricultural transformation cannot rest with financial institutions alone.
Government policy remains important in creating an environment in which agricultural businesses can invest, expand and repay financing.
Development finance institutions also have a role to play by providing guarantees, longer-term funding and other risk-sharing mechanisms that can encourage commercial lending without transferring excessive risk to banks.
Insurance companies can contribute by developing products that protect farmers and agricultural businesses against climate and production risks.
The objective should be to create an agricultural financing ecosystem in which different institutions perform complementary roles.
For the banking sector, sustainable agricultural lending will require effective credit assessment, sector expertise, appropriate risk pricing and strong monitoring.
For government, increased access to finance must be supported by infrastructure and policies that reduce the cost of agricultural production.
For farmers and agribusinesses, access to capital must be matched by sound business practices, market access and productive investment.
The latest lending figures therefore provide an important indicator of changing credit patterns in Nigeria’s economy.
Agricultural credit is increasing, while lending to some other major sectors has declined. Yet agriculture remains substantially smaller than oil and gas and several other sectors in terms of outstanding bank credit.
The development should consequently be viewed neither as a complete transformation nor as a marginal event.
It is a sign that agriculture is attracting more financial resources at a time when Nigeria urgently needs to strengthen domestic production and diversify its economic base.
The more important test will be the economic results generated by the financing.
If additional credit enables farmers to increase yields, processors to expand capacity, businesses to improve storage and logistics, and exporters to move into higher-value products, the benefits could extend throughout the economy.
But if credit expansion is not matched by improvements in productivity, infrastructure and market access, its impact on the wider economy will remain limited.
For Nigeria, the objective should therefore be to improve not only the volume of agricultural financing but also its quality, accessibility and economic effectiveness.
Agriculture has repeatedly been identified as a pathway towards food security, employment and economic diversification. Turning that potential into sustainable growth requires capital, but it also requires an environment in which that capital can be deployed productively.
The 23 per cent increase in agricultural credit represents a step in that direction.
Its ultimate significance, however, will be determined by whether the additional financing produces more food, stronger agricultural businesses, higher productivity, greater value addition and improved incomes across the sector.
For Nigeria, that is the measure that will matter most not simply how much banks lend, but what the money ultimately produces.
