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Nigeria – The Central Bank of Nigeria expands finance to the agriculture and SME sectors through development finance operations

The Central Bank of Nigeria (CBN) has supported the expansion of finance to the agriculture and SME sectors through its development finance operations.

The Development Finance Department formulates and implements the policies and innovations needed for financial institutions to deliver services efficiently and sustainably.


The CBN implements a number of schemes to support finance to agriculture and SMEs, including the following:

Agricultural Credit Support Scheme – which disburses loans to farmers and agro-allied entrepreneurs. Banks grant loans to qualified applicants at a 14 percent interest rate, but applicants that repay on schedule receive a rebate of 6 percent, such that the effective rate of interest for farmers is 8 percent.
Commercial Agriculture Credit Scheme – through which participating financial institutions disburse loans to commercial agricultural enterprises at a 9 percent interest rate, with the subsidy covered by the Central Bank of Nigeria.
The MSME Development Fund in 2013 – which is split between developmental objectives such as grants, capacity building, and administrative costs (10 percent), and a commercial component (90 percent). Through the commercial component, participating financial institutions receive funds at a low interest rate (2 percent) for on-lending to MSMEs at a maximum interest rate of 9 percent per annum.
Anchor Borrowing Scheme – which improves the linkages between smallholder farmers and agro-processors. Smallholder farmers and agro-processors agree that smallholders will sell their products to the agro-processors at harvest, and this agreement reduces the risk for banks to lend to smallholder farmers without collateral. In five years, the program has created over 250,000 direct jobs for farmers and up to 1.25 million indirect jobs.
Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) – which de-risks the agricultural sector. It has facilitated the lending of $375 million from commercial banks to agribusiness across
the value chain; trained over 700,000 farmers on good agronomic practices and financial skills; and provided more than 500,000 smallholder farmers with quality agricultural inputs. It also has a Climate Smart Agriculture and Renewable Energy Business Unit to address climate-related risks in agriculture.
National Collateral Registry – which seeks to expand credit to SMEs through enhanced acceptability of moveable assets such as equipment, machinery, vehicles, tricycles, crops, livestock, account receivables, inventories, and jewelry as collateral for loans by financial institutions. Established with IFC support, the Registry has assisted over 150,000 micro, small, and medium enterprises to access ₦1.2 trillion loans.
Index-based insurance – in 2017 an insurance roadmap was launched that outlines the steps needed, with support from public-private partnerships, to develop new index-based insurance products. Index insurance triggers payouts based on an index that is correlated with agricultural losses, rather than actual losses. This reduces the costs of insuring smallholder farmers and the delays in processing payouts.

The CBN reports that key industry stakeholders have attributed the recent increase in bank loans to the agriculture sector to CBN interventions.

In 2018, bank credit to the agriculture sector reached a record level of ₦2.2 trillion, equivalent to 4 percent of the total lending of commercial banks, a 16 percent increase from 2017.