Demand for food far outweighs the quantity produced thus far. The country’s current population of about 223 million people is projected to increase to 263 million by 2030, yet its agricultural productivity stagnates, and food needs remain unmet. To meet the populace demand, Nigeria needs to invest more in agriculture financing to boost yield and achieve at least 70% domestic food self-sufficiency.
Historically, financing agriculture, either in cash or kind, had ranged from family and individual savings and gifts, private money lenders, daily contributions, cooperative thrift associations/cooperative societies produce buyers, to state agricultural credit corporations and agencies, agricultural development agencies among others.
However, agricultural financing has faced numerous constraints due to several volatilities plaguing the sector. Access to credit is limited due to a lack of collateral among farmers, high interest rates, and the limited reach of financial institutions in rural areas. Market and infrastructure constraints, including poor infrastructure, price volatility, and limited market access, further exacerbate the challenges.
In addition, the perception of high risk in agricultural lending, coupled with farmers’ limited financial literacy, creates significant obstacles for the sector.
Today, hunger and poverty remain the biggest challenges in the country because Nigeria’s agricultural businesses and farmers are significantly undercapitalised. Small and medium-sized agribusinesses in Nigeria, which often integrate farming and processing, face significant hurdles in accessing both short-term and long-term financing. As Nigeria’s largest economic driver and primary employer, the lack of finance for agriculture hinders the sector’s growth, ultimately limiting opportunities for small holder farmers to improve their livelihoods and food security in the country
Finance drives the commercialisation of innovations. in the Nigerian agricultural sector, finance is the catalyst for mechanisation and to achieve productivity in agriculture these groups require ample financing.
Farmers and small agricultural entrepreneurs- rural farmers and small supply companies need finance to expand production. It is required for inputs like seeds and fertilizers, production machinery and equipment, processing, packaging, and transport according to the Food And Agriculture Organisation, FAO.
The agricultural sector depends heavily on infrastructure such as rural transport systems, irrigation systems, water supply, sanitation, electricity, storage, and telecommunication facilities that require large amounts of financing.
The sector entails a sequence of interlinked activities, transactions, in a chain that starts from the supply of seeds and fertilizers and finishes in the mouth of the consumers. There are financial instruments specifically designed to strengthen these links between the actors along the value chain.
Research and Development, R&D, should focus on financially supporting knowledge generation for the sector. This includes the generation of agricultural technology and new technical knowledge about products, processes, and services for the sector.
AljazirahNigeria is of the view that agriculture financing will reshape food security In the country as evidence from countries that have prioritised agricultural financing underscores its critical role in achieving food security. For instance, China’s substantial investment in agricultural research, from 600,000 yuan to 10.5 million yuan between 1961 and 2007, correlated with a remarkable 350% surge in grain production. This, demonstrates the powerful link between agricultural financing and productivity.
Beyond private investment, government support is essential.
AljazirahNigeria urges governments at all levels especially now that the current Tinubu-led administration has ensured the independence of the three tiers of governance, to ensure the sustainability of Value-Chain Finance.
The new non-traditional means of financing agriculture are mostly developed within the interlinked relationships between suppliers, buyers, producers, and credit facilities. The focus of this financing is on the business transaction between two or more participants of the chain, rather than direct financing of the farmer or entrepreneur.
Currently, technology-enabled commodity exchanges aimed at providing solutions to farmers’ challenges in aggregation, storage, and financial inclusion as well as providing a ready market for both farmers and buyers to participate are in vogue. Both financial and technical support should be offered to organisations who are stakeholders in the sector so as to improve the productivity of farmers by providing proper access to farm inputs and markets. Doing this through its input disbursement programmes, smart warehousing systems, and the Exchange. Thereby reducing costs and risk, increasing efficiency, and improving the credit profile of the actors in the chain.
To attain food security, agriculturel financing should be boosted. However, given the sector’s inherent peculiarities in securing competitive funding, direct government intervention is imperative to reach its capacity.
