How Nigerian Banks Have Financed Agriculture — 2024 to 2026

AgricNews Digest Report

Nigerian banks have historically treated agriculture as high-risk and highly seasonal, which explains why direct lending to primary production remains a small slice of overall credit. Agriculture accounted for 6.18 percent of total bank lending in 2022 before slipping to 4.82 percent in 2024. That figure recovered to 5.33 percent by May 2025, signaling a cautious return of appetite among deposit money banks.

The turnaround is largely anchored on de-risking instruments from the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending. NIRSAL does not disburse loans itself. Instead, it provides credit guarantees that make banks comfortable with agribusiness exposure. In 2025, the agency guaranteed more than ₦100 billion in agricultural loans, the highest volume in its history. The third quarter alone saw ₦70 billion facilitated, representing nearly a quarter of all agricultural lending NIRSAL has mobilized since 2013. Two additional commercial banks entered the agriculture space this year after adopting NIRSAL’s frameworks, and more than 1,100 bank staff received training on structured agricultural finance in 2025.

Where banks do lend, the focus extends well beyond the farm gate. Funding flows to commodity exporters, agro-processors, input distributors, storage operators, warehousing firms, and logistics companies that service the value chain. Primary production still struggles to attract unsecured commercial credit, but integrated agribusinesses with offtake contracts and insurance are increasingly bankable.

Most of what the public calls “bank financing” for agriculture is actually government or multilateral money channeled through commercial banks and development finance institutions. The Bank of Agriculture is undergoing a major overhaul with a ₦250 billion lending facility already approved and a ₦1.5 trillion recapitalization target on the table. The mandate is to extend single-digit credit to smallholders for improved inputs, mechanization, and modern farming technologies.

Multilateral partners have deepened that pipeline. The European Investment Bank approved a €190 million credit line, equivalent to ₦320.5 billion, to expand lending to farmers and agribusinesses through Nigerian banks and DFIs. The facility covers cocoa and dairy, climate-smart agriculture, and institutional capacity building to de-risk agricultural lending. Technical assistance is built into the package to strengthen underwriting standards across participating banks.

The African Development Bank has committed $134 million and a separate $200 million loan to support the Federal Government’s National Agricultural Growth Scheme and Agro-Pocket program. The funding targets seeds and grains, with specific goals to multiply wheat output fivefold and raise rice production by 20 percent. Climate-smart technologies and agricultural insurance are embedded in the design to protect both farmers and lenders.

The World Bank’s $500 million AGROW project, running from 2026 to 2032, expects to catalyze an additional $220 million in private investment. The program is designed to reach one million smallholders with better seed and fertilizer systems, while prioritizing youth and women inclusion across the value chain.

Risk transfer is the real driver behind recent lending growth. The Nigerian Agricultural Insurance Corporation provided ₦700 billion in risk cover for 199,275 farmers, giving banks a backstop against climate shocks and crop losses. When a harvest fails, insurance responds, and lenders avoid writing off entire portfolios.

NIRSAL’s model combines credit guarantees with technical assistance and value-chain risk frameworks. Managing Director Sa’ad Hamidu described the ₦100 billion in guarantees as evidence of a “shift from hesitation to increased confidence” among banks. The agency has now signed 41 master agreements with financial institutions, standardizing the terms under which guaranteed lending can scale.

Federal policy is deliberately moving agriculture from subsistence activity to commercially driven agribusiness. The value chains attracting the most bank and DFI funding are clear. Staples such as rice, maize, wheat, sorghum, millet, cassava, and soybeans dominate because of their link to food security and import substitution. The AfDB funding explicitly targets wheat and rice productivity gains.

Export crops are the second priority. Cocoa, cotton, and oil palm feature heavily in the EU credit line, which also carves out support for dairy development. Mechanization is a third pillar. The Bank of Agriculture’s recapitalization is framed as a transition “from hoes and cutlasses to tractors and harvesters,” with loans earmarked for equipment acquisition and hiring services.

Post-harvest systems are also receiving attention. The National Post-Harvest Systems Transformation programme is targeting the estimated $10 billion lost annually to poor storage, handling, and processing. Banks are being encouraged to finance aggregation centers, cold chains, and value-addition plants that reduce those losses and improve returns.

Despite guarantees and insurance, banks continue to flag structural risks that limit direct exposure to smallholder farmers. Weather volatility, logistics bottlenecks, and commodity price swings make cash flow unpredictable. Agriculture’s contribution to GDP growth has slowed, and the sector remains highly informal with significant underemployment. As a result, most commercial lending still favors processors, aggregators, and exporters with auditable books and offtake contracts rather than two-hectare farmers.

For AgricNews Digest readers, the takeaway is structural: Nigerian banks are financing agriculture primarily as intermediaries for BOA, AfDB, World Bank, and EU funds, with NIRSAL absorbing much of the credit risk. Direct commercial lending sits at just 5.33 percent of bank portfolios, but the trajectory is upward. The 2025-2026 shift is toward blended finance models built on guarantees, insurance, and technical assistance. For any agribusiness seeking credit, the path runs through NIRSAL cover, NAIC insurance, and verifiable offtake agreements. Those three documents now matter more than a farm’s size.

The next markers to watch are the full rollout of the BOA ₦1.5 trillion recapitalization, disbursement rates on the EU ₦320.5 billion line, and whether NIRSAL’s ₦100 billion guarantee milestone translates into sustained lending growth beyond the third quarter.