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CBN: Intervention in Agriculture and Economic Growth

The agricultural sector has been a major focus of the interventions of the Central Bank of Nigeria since the 1970s.

The interventions  which are driven by the development finance mission of the apex bank are motivated by the recognition of the critical roles  agriculture  plays in economic growth and development.

These roles, according to Professors Kinderberger, Todaro and Lewis,  include: Supply of food to the population; Supply of raw materials for the non-agricultural sector; provision of employment; provision of investible surplus in the form of savings and taxes; and also foreign exchange earnings through export.

Stressing the importance of agriculture to the economic growth of Nigeria and hence the need for increased investment in the sector, Tolulope Odetola and Chinonso Etumnu, of the  International Food Policy Research Institute (IFPRI), Nigeria, said: “In Nigeria, because 70% of the population is employed in the agriculture sector, economic growth will be almost impossible to achieve without developing the sector.

“We therefore reaffirm that agriculture is an engine of economic growth in Nigeria and efforts should be made to add value to the sector through increased investment. Based on the evidence from this study, we also recommend that the linkages between agriculture and other sectors be strengthened to increase the effect of agriculture growth on growth across the sectors. This can be achieved through increased productivity and the development of the agriculture value chain”.

Credit Guarantee Scheme

The interventions of the CBN in the agricultural sector started in 1977 with the introduction of the Agricultural Credit Guarantee Scheme Fund (ACGSF). The Fund  was designed to encourage banks to lend to farmers. Under the scheme, the CBN through the Fund, guarantees loans to farmers up to 75% of the amount in default net of any security realized.

According to data from the CBN, the ACGSF since inception till March 2021, has facilitated 1.180 million loans valued N122.632 billion to farmers across the country.

Another intervention of the CBN in the agric sector is the Agricultural Credit Support Scheme (ACSS).

ACSS was introduced to enable farmers to exploit the untapped potentials of Nigeria’s agricultural sector, reduce inflation, lower the cost of agricultural production (i. e. food items), generate surplus for export, increase Nigeria’s foreign earnings as well as diversify its revenue base.

ACSS funds are disbursed to farmers and agro-allied entrepreneurs at a single-digit interest rate of 8.0 percent. At the commencement of the project support, banks will grant loans to qualified applicants at 14.0 per cent interest rate. Applicants who pay back their facilities on schedule are to enjoy a rebate of 6.0 per cent, thus reducing the effective rate of interest to be paid by farmers to 8.0 per cent.

Commercial Agriculture Credit Scheme (CACS)

In a bid to encourage commercial farming on a large scale, the CBN in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) in 2009 established the Commercial Agriculture Credit Scheme (CACS)  to provide finance for the country’s agricultural value chain namely production, processing, storage and marketing.

The CBN explained that increased production arising from the intervention would moderate inflationary pressures and assist it  to achieve its goal of price stability in the country.

Under the CACS, loans are provided to commercial farmers at a maximum interest of 9 percent.

The scheme also allows for moratorium in the loan repayment schedule taking into consideration, the gestation period of the enterprise.

Data for the CBN shows as at January 2021, banks under the CACS have disbursed N672.9 billion loans to fund 636 commercial farming projects while total loan repayment stood at N443.9 billion.

In terms of employment, the CBN disclosed that the firms that benefited from the CACS recorded  net job increases of 24,457 between 2009 and 2018.

Anchor Borrowers Programme

Following the sharp decline in crude oil prices in 2014 and the resultant decline foreign exchange earnings and reserves, the CBN  took radical measures to address the huge food import bill as a means of preserving the nation’s external reserves.

Thus, in addition to the foreign exchange restriction placed on 41 items (which were mostly food items), the CBN introduced another intervention in the agricultural sector to boost local food production.

Thus the birth of the  Anchor Borrowers Programme (ABP) which was launched by President Mohammadu Buhari in 2015.

According to the CBN, the ABP is intended to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities. The programme thrust of the ABP is provision of farm inputs in kind and cash (for farm labour) to small holder farmers to boost production of these commodities, stabilize inputs supply to agro processors and address the country’s negative balance of payments on food. At harvest, the SHF supplies his/her produce to the Agro-processor (Anchor) who pays the cash equivalent to the farmer’s account.

Speaking during the launch of the ABP and flag-off of the 2015 dry season farming season in Birnin-Kebbi, Kebbi State President Buhari expressed high hopes that the scheme would lift thousands of small farmers out of poverty and generate millions of jobs for unemployed Nigerians.

He  frowned at the huge sums spent by Nigeria on the importation of food items that could be produced locally, stressing that the N1 trillion importation bill was not sustainable.

Also speaking, the Governor of the CBN, Mr. Godwin Emefiele said the apex bank was concerned about the huge foreign exchange spent by Nigeria importing food items that could be produced locally.

According to him, the allocation of foreign exchange to the importation of items such as rice, wheat, milk and fish, among others, had contributed greatly to the depletion of the nation’s foreign reserves, especially in the face of low oil revenue resulting from falling oil prices.

Emefiele disclosed that the rising unemployment and escalating food imports prompted the CBN, under his leadership, to shift from concentrating only on price, monetary, and financial system stability to act as a financial catalyst in specific sectors of the economy particularly agriculture, in an effort to create jobs on a mass scale, improve local food production, and conserve scarce foreign reserves.

He said the ABP aims at creating economic linkages between over 600,000 smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilization of integrated mills.

Highlighting the impact of the ABP since inception five years ago, Emefiele, while speaking at the flag-off of the 2020 wet season harvest aggregation and 2020 dry season input distribution under the CBN-Rice Farmers’ Association of Nigeria (RIFAN) Anchor Borrowers’ Programme, Emefiele disclosed that  a total of 2,923,937 farmers cultivating 3,647,643 hectares across 21 commodities through 23 participating Financial Institutions had been financed in the 36 States of the Federation and the Federal Capital Territory from inception till date.

In his remarks at the event, which featured the sale of paddy to millers as loan repayment by rice farmers under the CBN-RIFAN 2020 wet season cultivation, the Kebbi State Governor, Sen. Abubakar Atiku Bagudu, commended the CBN Governor and his team for the novel initiatives. He noted that the moves had not only brought succour to the country in terms of food security and diversification but had also successfully made the country exit recession in two quick successions.


The above efforts have helped to increase the contribution of the agric sector to the nation’s Gross Domestic Product (GDP). According to data from the Nigeria Bureau of Statistics, NBS, agric sector contribution to GDP rose to 22.35 per cent in Q1’21, from 19.79 per cent in 20215.

Most notable is the  2.2 per cent real growth recorded by the agric sector in 2020, when the economy as a whole contracted  by 1.92 per cent.

Significantly in this regard is the 3.4 per cent real growth recorded by the sector in Q4’2020, the highest growth since 2017.

According to analysts,  the robust growth recorded by the agric sector in Q4’2020, helped the economy  to record  its first growth in three quarters, and also out of recession,  following the contractions recorded in Q2’2020 and Q3’2020, which sent Nigeria into its second recession in five years.

Citing the role  of the apex’s intervention as a factor in the growth recorded in the  in agriculture in  Q4’2020, analysts at Vetiva Capital Management Limited said: “The agricultural sector maintained a clean sheet in 2020, supported by intervention efforts of the Federal Government and the development finance activities of the Central Bank. This was despite the interruptions to farming activities and food transportation, caused by floods and lockdown measures respectively experienced during the year.

Similarly, analysts at FBNQuest,  said: “Our expectation was a slowdown in contraction to -1.95% and was undone by robust growth of 3.42% for agriculture, the sector’s best showing since Q4 ’17. Several times we have made the point that Nigeria’s performance would be more muted than that of most emerging markets due to the protection its large informal economy enjoys from global headwinds (such as COVID-19). The argument still holds but it could now be that the credit interventions of the CBN, state development banks and others are starting to have an impact.”

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