…Says credit guarantees are critical to unlocking private investment in agriculture
The Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso, has expressed optimism that lending rates will decline next year, a development he said would positively impact the agricultural sector and its value chain.
Cardoso, who identified high interest rates as a major challenge confronting agricultural financing, stressed the importance of strengthening credit guarantee mechanisms to unlock private-sector investment, reduce lending risks and expand access to sustainable funding for farmers and agribusinesses.
The CBN governor spoke on Tuesday in Abuja at the National Stakeholder Roundtable on Strengthening Agricultural Credit Guarantees, with the theme, “Strengthening Agricultural Credit Guarantees for Inclusive and Sustainable Growth.”
Cardoso, who was represented by the Deputy Governor in charge of Financial System Stability, Mr Lamido Yuguda, said a strengthened agricultural credit guarantee system would help address the financing constraints confronting Nigeria’s agricultural sector by giving financial institutions greater confidence to lend to viable agricultural enterprises.
He noted that the country’s agricultural financing requirements could not be met through public resources alone, making it imperative to deploy credit guarantee mechanisms strategically to attract increased commercial and development finance.
According to him, agriculture remains central to Nigeria’s economic transformation, food security, employment generation and rural development, but inadequate access to sustainable financing continues to limit the sector’s enormous potential.
He identified climate-related risks, commodity price volatility, inadequate collateral, information asymmetries and the seasonal nature of agricultural production as major factors discouraging financial institutions from extending credit to the sector.
Cardoso explained that the challenge was not simply to increase agricultural lending but to establish a financing ecosystem in which credit is accessible, risks are properly allocated and managed, and investments remain commercially sustainable.
He recalled that the Agricultural Credit Guarantee Scheme Fund (ACGSF), since its establishment, had played an important role in facilitating credit flows to agriculture by providing guarantees that reduce some of the risks confronting participating financial institutions.
However, he said changing operating conditions, including emerging climate risks, evolving agricultural value chains, technological advancements and increasingly sophisticated financial markets, had made it necessary to review the scheme’s operations to ensure its continued relevance and sustainability.
He maintained that agricultural credit guarantees must evolve beyond protecting lenders against loan defaults to becoming catalytic instruments for improving risk allocation, strengthening lenders’ confidence and unlocking additional private capital for productive investments across agricultural value chains.
The CBN governor said the apex bank was repositioning its development finance approach towards market-based financing, increased private-sector participation, stronger institutional collaboration and sustainable risk-sharing mechanisms.
He emphasised that sustainable agricultural financing must ultimately be driven by viable economic activities and sound credit decisions, with financial institutions retaining responsibility for credit assessment and lending decisions.
According to him, public institutions should concentrate on addressing identifiable market failures, reducing structural constraints, strengthening confidence and creating an enabling environment for greater private-sector participation.
To achieve these objectives, Cardoso identified four priority areas for strengthening agricultural credit guarantees.
These include improved institutional coordination among guarantee institutions, commercial banks, microfinance banks, insurers, development finance institutions and government agencies to reduce fragmentation, address information gaps and ensure that public interventions complement, rather than replace, private financing.
He also called for stronger risk management and climate resilience through the integration of credit guarantees with agricultural insurance, data-driven credit assessment and climate-risk mitigation mechanisms.
On digital transformation, Cardoso said modernising the operations of the ACGSF would facilitate faster processing, improve monitoring, strengthen data integrity and enhance the assessment of guarantee performance.
He added that improved information infrastructure would enable financial institutions to assess agricultural credit risks more accurately and expand responsible lending to farmers and agribusinesses.
The fourth priority, he said, was mobilising private capital through guarantee mechanisms designed to achieve additionality by deploying public resources strategically to attract significantly larger volumes of commercial and development financing.
“Our objective should be to crowd private capital in, not crowd it out,” he said.
Cardoso maintained that the future of agricultural financing in Nigeria would not be determined solely by the volume of public funds deployed but by the country’s ability to build credible institutions and functional markets capable of mobilising capital, managing risks and directing financing towards productive and commercially viable activities.
He expressed confidence that a strengthened ACGSF could contribute significantly to developing a deeper and more sustainable agricultural finance ecosystem by improving lenders’ confidence, supporting effective risk-sharing and facilitating access to finance for viable agricultural enterprises.
He urged stakeholders at the roundtable to focus on practical and measurable outcomes, particularly how guarantee arrangements could unlock more financing, improve risk-sharing, leverage technology to expand access and accountability, and ensure the long-term sustainability of institutions responsible for agricultural credit guarantees.
He said the outcome of the deliberations should provide a clear pathway for strengthening the scheme, deepening agricultural financing and improving the productivity, resilience and competitiveness of Nigeria’s agricultural sector.
The CBN, he assured, remained committed to providing the monetary, regulatory and institutional environment required to support financial stability, sustainable economic growth and greater private-sector participation.
In his opening remarks, the Chairman of the ACGSF Board, Dr Olusegun Oshin, said the scheme was being repositioned to improve farmers’ access to affordable financing, strengthen lenders’ confidence and promote sustainable agricultural development in Nigeria.
Oshin identified high interest rates, inadequate collateral, climate-related risks and financing conditions that do not align with agricultural production cycles as major impediments to farmers’ access to credit.
He said addressing these challenges required more than increasing the volume of funds available to the agricultural sector, stressing the need for stronger institutions, innovative financing mechanisms, effective risk-sharing arrangements and sustained collaboration among stakeholders.
According to him, farmers must be able to access financing on terms that reflect the realities of agricultural production and enable them to generate sufficient returns to sustain their businesses and provide for their families.
The ACGSF chairman recalled that since its establishment in 1977, the scheme had played an important role in encouraging financial institutions to extend credit to agricultural operators by providing guarantees that reduce lending risks.
However, he said changing realities in the agricultural sector had made institutional reforms imperative, adding that the Fund was working towards introducing more sustainable financing arrangements through partnerships with financial institutions and development partners.
He disclosed that the scheme was exploring climate-related guarantees, agricultural insurance, climate-risk management and complementary financing arrangements to expand access to agricultural credit over the next two years.
Oshin also revealed plans to develop co-financing and refinancing mechanisms with relevant institutions to strengthen credit delivery and make agricultural financing more accessible and affordable.
On the sustainability of agricultural lending, he challenged stakeholders to reassess existing financing targets to ensure they reflected the realities of agricultural production while remaining commercially viable for participating financial institutions.
As part of its institutional transformation, he said the Fund would introduce revised operational guidelines and a new digital portal to simplify processes, improve transparency and enhance service delivery.
He explained that the revised guidelines were designed to strengthen the operational framework of the scheme, while the digital portal would facilitate more efficient engagement with participating financial institutions and other stakeholders.
The chairman further disclosed that the roundtable would provide an opportunity for the signing of strategic partnership agreements aimed at strengthening institutional collaboration, risk-sharing arrangements and agricultural financing.
He said the partnerships underscored the importance of collective action in addressing the funding challenges facing the agricultural sector, rather than relying on isolated interventions by individual institutions.
Oshin urged stakeholders, including financial institutions, development finance institutions and development partners, to contribute practical ideas and identify opportunities for sustainable agricultural financing.
He said the ultimate objective of the Fund was not merely to issue more credit guarantees but to facilitate affordable financing, strengthen lenders’ confidence, improve farmers’ access to credit and support national food security.
He expressed the Board’s commitment to ensuring that recommendations from the roundtable would guide the continued modernisation and strategic repositioning of the scheme.
