The Role Of Central Bank Of Nigeria In Credit Supply To The Agricultural Sector.

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The main point of this study is the role of “Central bank of Nigeria in credit supply to agricultural sector”.

The project is intended to focus on the adequate of credit supply to Agricultural sector by the central bank of Nigeria’s guarantees scheme has contributed to agricultural financing and the extent the Nigeria Agricultural and co-operative bank has contributed to agricultural project financing.

The related literature, which, consists of the view of their authors, were reviewed, as it is seen in the second chapter of this project.

The source of data is only on secondary sources. It will consist of the use of newspapers, journals, magazines and seminar papers.

After all the information gathered in this project, it was discovered at the end that.

*        The central bank policy guidelines on agriculture are adequate.

*        The sectoral allocation has influenced significantly agricultural financing.

*        The agricultural credit guarantee scheme has contributed significantly towards agricultural programme financing.

The recommendation made include that the government should encourage agricultural research by provision of more funds, the financial institutions should be more liberal in their credit policies and farmers on their sides should make efficient use of the funds provided to them and should stop credit diversion.


Cover page

Title page

Approval page




Table of content




Background of the study

Statement of the problems

Objective of the study

Significant of the study

Scope and limitation of the study

Definition of terms



Review of related literature



Research design and methodology

Location of the data

Sources of data











Agriculture, man’s oldest profession that use to be Nigeria’s chief foreign exchange earner, has been neglected over the years because of the discovery of oil. This factor has led to the disappearance of most mineral resources in the country like the groundnut pyramid of the North, the cocoa sacks of the west and the palm oil drums of the east. Not only the hard currency accruing from agricultural export gone but the population which continued to grow without a corresponding increase in agricultural production has outstripped he available food supply, hence the need for an urgent.


Experts hold that over 90 percent of the rural populace are engaged in farming but these people have little or no access to credit facilities because they lack the requisite collateral to back up such loans. As it should be farmers need money to meet various outlays for seasonal agricultural production for development of land, under standing such allied activities and also to tide over liquidity shortage during  the time intervening the sowing and harvesting of crops.

They need short-term, medium and long-term financing for meeting of production and post harvest expenses as well as processing and marketing of crops. This is why this central bank of Nigeria has gone beyond its role as the apex financial institution is the country to harness its regulatory and participating function in the area of agriculture in a variety of ways, some of which are its previously terminated association with the commodity boards, the initiation and management of the Agricultural credit guarantee scheme (ACGS),parts ownership of a specialist agricultural credit institution, initiation if rural banking program, the setting out of a target proportion of commercial and merchant banks loans that will go to agricultural every year. It also made prescription of concessionary rate o the nation agricultural credit study.

The central bank of Nigeria has adopted the policies in recognition of the importance of the agricultural sector in the nation’s economy and promotional role which the bank is expected to play in its development.

The usual reasons advanced by commercial and merchant banks for giving loans to farmers are the long gestation of many agricultural projects and natural hazards to which seasonal crops are prone to. It was the recognition of these constraints which made the central b bank of Nigeria to conceive the idea of the Agricultural credit guarantee (ACGS) as an inducement to the banks to increase lending particularly to small  scale farmers for agricultural production.

The Agricultural credit guarantee scheme fund (ACGSF) was established by Decree 20 of 1977, which provided a fund of N100m with the federal government and the central bank of Nigeria subscribing to 60 percent and 40 percent respectively. As a rule, the borrower is required to provide the primary securities for the loan while the facilities of the agricultural credit guarantee scheme as a secondary risk bearer. Acceptable primary securities include the following according to the act.

A change on land in which the borrow has legal right of occupancy or charge on assets on the land both movable and immovable.

Stock and share of reputable companies.

A personal guarantee.

A life policy assurance certificate, a promissory note or other negotiable securities.

The stated maximum amount any individual can borrow is N50,000 (fifty thousand naira) and plans are no the way or possible has been made to raise it up to N100,000 (hundred thousand naira/are below.

The central bank of Nigeria is the over-all managing body of al administrative work concerning the scheme which is done through the agricultural finance department credit officers in all the branches and currency centers of the bank in all the state capitals of the branches and currency centers of the bank in all the state capitals of the federation.


With respect to the recognized peculiar problems of the agricultural sub-sector, it was through that the sector needed a specialist institution that would provide finance for the development, hence, the establishment of the Nigeria Agricultural and co-operative bank is owned 60 and 40 percents respectively by the federal government and the central bank of Nigeria. The Nigeria agricultural bank has a share capital of N150 million (one hundred and fifty naira).

The rural banking programme started in 1977 by the central bank of Nigeria in order to bring banks closer to the rural areas. The phase one of the programme ended in 1980, a total of 188 out of the 200 branches emanated under the phase were opened in this period. The second phase (1980 – 1984) of the programme identified 260 rural centers for opening of bank branches, at the end of the phase in 1984, 229 branches of the target were established. At the command of the central bank of Nigeria, additional 19 and 9 branches, in the rural area were opened in 1985 and 1986 respectively under the second phase of the programme. This brought to the number of branches opened to 259 to target. The federal government in 1991 has abolished the third phase of the programmed.


The central bank of Nigeria monitory policy circular introduced grace periods for a agricultural loans for the first time in 1985. this enjoined banks to give grace periods to certain categories of farmers. The circular assured such as that financial institution providing agricultural credit such as Nigerian agricultural bank and insurance companies that the central bank of Nigeria would continue to allow them participate in equity ownership of agricultural enterprise. The circular also promised that commercial and merchant banks portions of the banking decree of 1969 in amended. The monetary policy by the central bank also enjoined the merchant and commercial banks to allocate not less than 10 percent and 15 percent of their loans to the agricultural sector yearly.


All these are effort being made by the central bank of Nigeria to see that agriculture being in the primary sector of the economy is well financed.

The performance of the commercial banks merchants’ banks, Nigerian agricultural and co-operative bank and the agricultural credit guarantee scheme will be fully analyzed later in this study.



Because of the too much importance of agricultural in Nigeria economy, it has been given much concern by the federal government for its realization. However, despite all the clearly mapped out programme for its development of agricultural sector in Nigeria is still largely. Under developed. This has been attributed to poor strategies planning and implementation of agricultural programmes. The experience gained from many governments over the past decade is that they can withstand only short-term situations and the sufficient consideration is not given to the assessing of the long-term implication or effectiveness of such programme and policies for the above reason, therefore, agricultural production contributes only a little tot the gross domestic product over the years. This actually has resulted in our importation of food especially in the late 1970’s and early 1980’s. the trend, however, changed with the introduction of the structural adjustment programme in 1986. Even the introduction of the second-Tier foreign exchange market also made the importation of goods very expensive as a result of the depreciation of the naira. This further resulted of food production and thereby intensified the need for local production to be increased.

One of the fundamental problems militating against the growth and development of agriculture in Nigeria is the shortage of credit (finance) to this sector despite central bank instructions.

Agricultural development will only result with the process whereby farmers have to adopt new techniques and improve in their skill and efficiency in production. But for this to be possible, it entails that an average Nigeria farmer who operates on a relatively small scale must have access to credit facilities.

The finance (credit) problems in Nigeria can be broadly categorized into:

Availability and supply of credit o farmers. Not channeling or focusing of the funds to farmers that have the most effective demand for it.

The non-productive utilization of funds due to lack of managerial skill and technical know how as a result of low education within the agricultural sector.



Te major purposes of study of the central bank of Nigeria in credit supply to agricultural sector are as follows.

To determine the adequacy of credit supply to the  agricultural sector by the central bank of Nigeria guidelines.

To identify the extent to which the agricultural credit guarantee scheme has contributed to the financing of agricultural programes in Nigeria.

To ascertain the influence of the central bank of Nigeria sectorial allocation of the supply of finances to agriculture.

To determine the extent to which the Nigeria Agricultural and co-operative bank has contributed to the financing of agricultural projects in Nigeria.

To highlight the factors that militates against credit supply to agriculture.

To make workable recommendations which will enhance the flow of more fund to the agricultural sector.



The significance of this study will only be meaningful with some indication of its value for other in the immense benefit to the following:

The central bank of Nigeria

The commercial and merchant banks

The farmers

The Nigerian economy


The central bank of Nigeria will only benefit from this study in the sense that the reasonable suggested ways through which compliance to agricultural credit guidelines could be achieved. This actually will help central bank of Nigeria achieve their objective adequate credit supply to the agricultural sector.



The research work on credit supply to agriculture will also be of benefit to the commercial and merchant banks because they will have no cause to deposit any amount with the central bank of Nigeria as short fall of the credit supply the were supposed to channel to the agricultural sector as shown by the central bank of Nigeria policy guidelines.



The farmers will also benefit very well from this work if the recommendation and suggestions given are being seen to, by the commercial bank especially and the central bank. There will be sufficient fund made available to farmers to help them grow by acquiring more farm tools, equipment and other farming inputs. This will of course lead to an increased production of agricultural products.


The Nigerian economy will also benefit from this work because if the commercial banks, the central bank adhere to the recommendations and suggestions, more fund will be released to he population. This will also help in exportation of some agricultural products that will earn foreign reserve for the country.



A thorough study of the role of the central bank of Nigeria (CBN) in credit supply to agriculture was made in this work.

This work focuses more on the help given so far by the central bank together with commercial banks and merchant banks to the development of agricultural sector in Nigeria.



The limitation faced in this course of this study faced or caused some constraints, which is some ways affected the quality and quantity of the study

The problems of finances was being encounter, with insufficient money to meet up all the costs of the works carried out which include traveling to various places for materials.

The limitations of time also enable the work to be properly carried out at the in-depth study of the topics, the lecture period and other academic obligations were there to be attended to.



1.       ACGS                  Agricultural credit guarantee

2.       NACB                  Nigeria agricultural and co-operative bank.

3.       CBN                     Central bank of Nigeria

4.       CREDIT               Money advanced lent to somebody, which is repayable over an agreed period of time after the borrower must have met certain conditions of the lender.


Asabia .S. (1992)Financing Institutions and Agricultural Finance-Role of                             Central Bank of Nigeria CBN Bullion Vol. .6.No 2                          April/June, Pp 21-23.

Adebiyi (1994)     the Contributions of the Central Bank of Nigeria                                       Towards Enhancing Credit Supply for Agricultural”                       CBN Bullion, Vol. 13, No 3-4, July/Dec. P10.

Udo Acoroeun .U. (1991)        “Small farmers and their Finance                                             problems” Business Times, 24 June, Vol. 3. NO                                        3, PP. 19-20.


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The Role Of Central Bank Of Nigeria In Credit Supply To The Agricultural Sector.