It is now generally known that among the various sectors of economic development, the agricultural sector is not only the highest employer of labor but also one of the most profitable economic sectors. Agriculture in Nigeria contributed about 32% to Nigeria’s GDP in 2001and also provided employment for about 30% of the nation’s population as at 2010.
This among other reasons has brought about the change in the concentration of Nigeria as a nation from crude oil to agriculture. The large area of arable land and favorable climatic conditions has given rise to the development of agriculture in Nigeria. In1990, 82million hectares out of Nigeria’s total land area of about 91million hectares were found to bearable. 42% of the cultivable area was farmed. Much of this land was farmed under the bush fallow system,whereby land is left idle for a period of time to allow natural regeneration of soil fertility. 18million hectares were classified as permanent pasture, but had the potential to support crops. Most of the 20million hectares covered by forests and woodlands are believed to have agricultural potential.
The Nigerian agricultural sector has been faced with the problem of capital to start up agricultural business. This problem has brought about the granting of loans for agriculture by the Nigerian government. This then brings us to the question of how to secure agricultural loans in Nigeria?
1) Central bank of Nigeria (CBN) Agricultural loan
This loan scheme was set up by the federal
government to provide low-interest loans to farmers in Nigeria and it is divided into;
a)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. At a 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.
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b) 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.
c) 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.
2) Bank of Agriculture(BOA) loans:
The Bank of agriculture of Nigeria is the main channel that the government uses to provide loans and grants to the public. The Bank is owned by the Federal government, with the Central Bank of Nigeria and the Federal Ministry of finance incorporated as shareholders. The bank’s activities are controlled by the Federal Ministry of Agriculture and Rural Development.
Requirements for Bank of Agriculture(BOA) loans.
a)You must have maintained a minimum customer account relationship for about six months.
b)You must have deposited at least 20% of the required loan amount into the account.
c)You must provide collateral, excluding land.
d)You must submit a detailed business plan.
3) Commercial banks:
The Federal government through the Bank of Agriculture and the Bank of industries have partnered with different commercial banks to help farmers with the acquisition of loans. Some of the commercial banks you can approach to access loans are:
UnionBank, FirstBank, ZenithBank, UBA, Stanbic IBTC.
Commercial banks also give loans to individuals and cooperatives for agricultural purposes. There is a variety of credit facility that you could apply for from commercial banks, this include: short-term loans, medium-term loans, long-term loans.
The general requirement for all the commercial banks include:
a) Open an account with the bank.
b) Submit a loan application.
c) Deposit at least 10% of the total money you applied for.
d) Provide the bank with collateral.
e) Provides detailed business plan with a complete feasibility study.
4) Agricultural Cooperative societies:
Some of the most important agricultural cooperatives that you can join to access loans are:
a) All Farmers Association of Nigeria(AFAN).
b) Youth Empowerment in the Agricultural Program(YEAP).
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