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Getting Credit
Despite the huge wealth generated by the oil sector, agriculture remains the backbone of the Nigerian economy. [1] It is responsible for employing about 60% of the country’s labor force and generating one-third of the nation’s Gross Domestic Product (GDP) [2]. Strong performance in the agricultural and rural sectors is thus critical to achieving the country’s development goals. In recognition of the importance of the sector, every economic initiative launched by the Nigerian government in recent years has spoken of the need to increase the availability of affordable credit to these sectors. However, the net effect of these initiatives has been modest.
Reasonably priced credit with appropriate durations can positively affect every level of the agricultural sector. Small and medium sized farmers benefit through the use of credit to purchase inputs such as seed and fertilizer, finance harvesting activities, and obtain vital extension and informational services. Credit helps to improve the income of medium and large farmers by alleviating the need to sell crops immediately after the harvest at low prices. Similarly, credit can facilitate the expansion of all types of agribusinesses by providing the funds necessary to purchase and process farm produce. [3]This chapter provides an overview of the current status of lending, with an emphasis on credit to the Nigerian agricultural sector. Three key areas, if properly addressed by the government, would create a much improved credit environment and in turn, increase the amount of credit to the agricultural and rural sectors. These areas are: government credit initiatives; Nigeria’s out-dated legal framework; and the limited capacity of the participants on both the supply and demand side of the credit process.
[1] World Bank, Project Appraisal Document. Third National FADAMA Development (FADAMA III) Project. June 10, 2008.
[2] Crops contribute about 27% of GDP, livestock another 3.3% and forestry and fisheries another 1.5%.
[3] World Bank, Report no. 346180NG. Getting Agriculture Going in Nigeria: Framework for a National Growth Strategy. March 27, 2006. page 5.
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