Why can't Nigeria's Smallholder Farmers Access Credit Facilities?

by Toluwalemi Oluwadare on 04 Jan 2019 • 0 comments
4 min read

Agriculture is one of the world’s oldest professions and is widely practised in Nigeria. In the third quarter of 2017, agriculture contributed 24.44% to nominal GDP of Nigeria (according to the National Bureau of Statistics (NBS)).

In Nigeria, there are 38 million smallholder farmers in Nigeria (about 20% of the population). These smallholder farmers in Nigeria face a major challenge - lack of access to credit facilities. Dr Usman Bugaje, the Convener of Arewa Research and Development Project (ARDP), reported that over 90 per cent of smallholder farmers in Nigeria did not access loan facilities from conventional banks. Agricultural credit is imperative in smallscale farming - to secure viable seeds, equipment and fertile land needed to run a successful farm which in turns yields an increase in agricultural production and poverty reduction.

Generally, financial institutions are responsible for giving out agricultural credit to smallholder farmers. In Nigeria, there are nine (9) categories of financial institutions (Commercial Banks, Finance Companies (FCs), Micro-finance Banks (MFBs), among others) under the supervisory purview of the Central Bank of Nigeria (CBN). There are tens of financial institutions in Nigeria; yet, smallholder farmers have limited or no access to credit institutions.


One can arguably say that information is a very crucial aspect of life. Most smallholder farmers in Nigeria live in rural areas and are unaware of available credit facilities that can help boost their agriculture produce. Only a handful are aware of credit facilities although they may lack adequate knowledge in the use and process of these agricultural credits.

The general terms and conditions for credit facilities is also a major reason Nigerian smallholder farmers cannot access credit facilities. Most financial institutions often have a high interest rate which can be quite steep for the farmer and may discourage many smallholder farmers from applying for creditIn addition, a lender may need certain collateral before loaning a farmer and undoubtedly, the farmer may not meet the required collateral. Collateral includes property, belongings like sheep, goats, cow, equipment or vehicles, fixed deposits, among others. Financial institutions may decide not to lend smallholder farmers due to the risk of insufficient or inadequate collateral.

The inability of smallholder farmers to repay loans equally contributes to the aforementioned challenge - lack of access to credit facilities. At the International Agric Expo 2018 held in Kano in October, the Deputy Governor of Kano State, Alhaji Nasiru Yusuf Gawuna, bemoaned that many farmers in Kano had refused to pay back loans which they benefited from. According to him, only four farmers out of 4,500 in Kano were able to repay the loans given to them. Situations like this only discourage the government and financial institutions in assisting smallholder farmers.

Way forward...

  • Awareness
Educating farmers on the pros, cons, including other important factors surrounding the use of credit facilities. Financial bodies should educate smallholder farmers on how and where to source for the credit facility. The significance of paying loans for posterity's sake should also be emphasized. In addition, financial bodies willing to help farmers can form a farmers’ organization for faster dissemination of information. Existing farmers’ organization could be used to provide farmers with information on how they could come together to access to agricultural credit for massive agricultural productions.
  • Equitable Terms and Conditions
A great number of smallholder farmers in Nigeria have very little financial strength and this factor ought to be considered while granting loans to farmers. 24.3% of smallholder households live below $1.25/day (according to the CGAP Smallholder Families Data Hub). The lending terms and conditions, interest rates of the contracts should be reduced and made affordable to farmers.

Smallholder farmers in Nigeria face various challenges which impede their growth and limit their yields, of which accessibility to credit facilities is a major concern. Awareness, fair terms and conditions, reduction in interest rates are few of the many solutions that can help Nigerian smallholder farmers have access to credit facilities. 

Read up on how Crop2Cash is digitising the Agric value chain.


Anderson, Jamie, and Danielle. 2018. “Executive Summary: CGAP National Surveys of Smallholder Households.” Washington, D.C.: CGAP

Akinnagbe Oluwole Matthew and Adonu Anthony Uchechukwu, 2014. Rural Farmers Sources and Use of Credit in Nsukka Local Government Area of Enugu State, Nigeria. Asian Journal o Agricultural Research, 8: 195-203.

CBN Supervision: Financial Institutions. See full list https://www.cbn.gov.ng/supervision/finstitutions.asp

Kano govt laments failure of farmers to repay loans. Retrieved from https://www.vanguardngr.com/2018/10/kano-govt-laments-failure-of-farmers-to-repay-loans/

Nigerian Gross Domestic Product Report(Q3 2017). Report date: November 2017.

Usman Bugaje: 90% of smallholder farmers don't access loan facilities. Retrieved from  https://www.today.ng/news/nigeria/usman-bugaje-90-smallholder-farmers-access-loan-facilities-175883

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