How to apply for agriculture loans from the Central Bank of Nigeria

How to apply for agriculture loans from the Central Bank of Nigeria


Agriculture is the backbone of Nigeria’s economy, employing over 70% of the working population and contributing significantly to GDP. However, smallholder farmers face challenges in accessing the finances needed to boost production. Agriculture loans from the Central Bank of Nigeria (CBN) aim to address this challenge by providing subsidized credit to farmers and agricultural value chain participants.

Overview of CBN Agriculture Loan Programs

The Central Bank of Nigeria manages three main loan schemes to boost access to finance for farmers and agribusinesses:

1. Anchor Borrowers’ Programme (ABP)

Launched in 2015, the ABP is one of CBN’s flagship interventions. It provides credit facilities to smallholder farmers (maize, rice, wheat, cotton, soya beans, poultry, palm oil, cassava, etc.) to serve as “anchor companies” that will off-take the target commodities. Loans are disbursed through Deposit Money Banks (DMBs), Development Finance Institutions (DFIs), and Microfinance Banks (MFBs) at concessional interest rates.

2. Commercial Agriculture Credit Scheme (CACS)

Introduced in 2006 to support large-scale commercial agriculture, the CACS gives loans to commercial farms and agro-processors/investors. Eligible activities include plantation agriculture, livestock (dairy, piggery, ranching, etc.), poultry, fisheries and logistics. Loans are accessed from participating CBN-licensed banks.

3. Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL)

Launched in 2011, NIRSAL uses risk-sharing facilities and incentives to encourage banks to lend more to the agricultural sector. It reduces risks for banks and provides credit enhancement for farmers and structured trading commodities.

These programs collectively aim to boost agricultural production, generate employment, and reduce food imports. In the following sections, I will delve deeper into each and how to apply for funding from them.

Anchor Borrowers’ Programme (ABP) Application Process

Being the largest of CBN’s agricultural schemes, let me first highlight the step-by-step procedure for applying for loans under the ABP:

1. Identify Anchor Company

Visit your state’s designated agricultural produce aggregator/anchor company that is registered under the ABP. They are usually involved in the production, processing, and marketing of specific commodities.

2. Obtain Loan Application Form

Collect an application form from the anchor company or participating financial institution (PFI), such as a microfinance bank or commercial bank.

3. Fill Out Form & Attach Documents

Fill out the form with details like biodata, group membership (if applicable), farming experience, farm size/asset ownership, etc. Attach required documents like means of identification and certificate of incorporation (for companies).

4. Submit Application & Guarantor Form

Submit completed forms with two guarantors to the anchor company or PFI. Guarantors must be persons of proven creditworthiness and integrity residing within the same location as the borrower.

Nigerian Government Money Grant and Empowerment 2024

5. Facilitate Loan Assessment & Approval

Anchor company will conduct due diligence on applications, organize farmers into clusters, and facilitate loan assessment by the participating bank. CBN will disburse the approved loan from its Real Sector Support Facility account through the participating bank.

6. Receipt of Loan

Once approved, the loan amount (starting from ₦150,000) will be disbursed to the farmer through his/her bank account. The loan period is usually one production cycle between 6 to 12 months.

7. Repayment & Further Benefits

Farmers are to repay the loan after harvest by selling produce to the anchor company. Timely repayment qualifies them for subsequent cycles, while defaults attract penalties. Farmers may get access to inputs, extension services, etc., with membership.

That summarizes the procedure for obtaining loans under the Anchor Borrowers’ Programme in 7 steps. Let’s move to other schemes now.

Applying for Commercial Agriculture Credit Scheme (CACS) Loans

The application process for large commercial farms/agribusinesses seeking funds under the CACS is as follows:

1. Identify Eligible agribusiness ventures

Eligible projects are large-scale agricultural production and processing setups with equipment and assets. You must have demonstrable competence and capacity to deliver projected outputs.

2. Obtain Loan Application Form

Collect a CACS application form from any CBN-licensed participating deposit money bank (DMB) or development finance institution (DFI).

3. Fill Out Form & Attach Key Documents

Fill out the form with details of promoters/directors, business registration, enterprise description, funding requirements, and projected financials/cashflows. Key documents needed are BVN, means of ID, certificate of incorporation, business plan, and land/asset ownership documents.

4. Submit Application & Collateral Requirements

Submit an application to the lending bank along with collateral like titled documents for land, buildings, and equipment worth a minimum of 125% of the loan value. Personal guarantees from directors may also be required.

5. Facilitate Appraisal & Loan Approval

The bank will conduct an appraisal involving an assessment of commercial viability and technical, financial, economic, social, and environmental impacts. CBN will review the appraisal report and approve eligible projects.

6. Receipt of Loan funds

Upon approval, funds will be disbursed through the facility of term Loan, Overdraft, Lines of Credit, and Lease Financing payable over the maximum tenor of 7 years at 9% interest p.a., including a one-year moratorium.

That covers the key steps to access loans under the Commercial Agriculture Credit Scheme. Let’s move to our third and final program.

Applying for NIRSAL-Backed Agricultural Loans

To access loans facilitated using NIRSAL’s risk-sharing and incentive schemes, follow these steps:

1. Visit Participating Bank

Visit any CBN-licensed commercial or microfinance bank that has signed on to NIRSAL’s platforms. They include agricultural value chain aggregators and primary mortgage institutions.

2. Obtain Loan Application Form

Collect loan application forms from the banking officer along with product details, interest rates, and loan terms.

3. Fill Out Form & Attach Documents

Fill out the form with biodata, farm/business details, and projected cash flows. Attach key documents like BVN and identity/incorporation documents as required by the bank.

4. Submit Application & Collateral

Submit the completed form along with acceptable collateral, which may include farm machinery/produce as movable assets, landed properties, and warehouse receipts, depending on activity.

5. Facilitate Appraisal And Risk-Rating

The bank will appraise the project based on NIRSAL’s Agriculture Promotion Policy guidelines. They will collaborate with NIRSAL to risk-rate the project.

6. Loan Approval & Disbursement

Upon CBN approval, the bank disburses the loan to the applicant at a single-digit interest rate while sharing the risks with NIRSAL. Loan tenure ranges between 1-5 years, including a moratorium period.

7. Repayment & Further Services

Repay the loan as agreed while benefiting from technical assistance, insurance, off-takers linkages, and market support under NIRSAL initiatives.

This concludes the key application procedures under NIRSAL’s risk-sharing platform to boost agricultural financing in Nigeria.

Key Tips for a Successful Application

Here are some important tips to maximize your chances of loan approval under these schemes:

  • Conduct Due Diligence: Visit your anchor aggregator, bank branch, or NIRSAL office to understand requirements before applying.
  • Choose Viable Projects: Loan officers prefer commercially viable projects with bankable proposals and processes that reduce risks.
  • Assemble Quality Documents: Provide all necessary supporting documents correctly, as incomplete applications may be declined.
  • Engage Cooperatives/Groups: Joining cooperatives or cluster groups strengthens applications by aggregating land and loans and yields benefits of economies of scale.
  • Seek Technical Assistance: Consult experts for quality business plans, financial projections, and loan purposes that demonstrate loan need and utmost utilization.
  • Provide Adequate Collaterals: Collaterals secure loans and assure repayments. Make available acceptable collaterals, as unsecured loans are rarely granted.
  • Pay Loans As Scheduled: A good credit history gives privilege to subsequent applications. Ensure prompt repayment as agreed to build borrower integrity.
  • Utilize Funds Judiciously: Loan officers track fund usage. Spend the money only on the intended agricultural purpose specified in your application to avoid penalties for the diversion of funds.
  • Maintain Transparent Records: Keep proper accounting of inputs procured, expenses incurred, harvests achieved, and monies generated for reporting and future verifications.
  • Improve Farm Management: Apply learning from training and onboard extension advisers for better production methods that guarantee repayment capacity.
  • Consider Crop Insurance: It provides assurance against risks of crop failure, disease outbreaks, or natural disasters that affect repayments.

Following these tips will position you with the best chances for approval and subsequent disbursements timely. With the funds invested prudently, you are sure to increase productivity and income and lift yourself out of poverty.

Frequently Asked Questions

Here are answers to some common questions about applying for CBN’s agriculture loans:

1. What is the minimum and maximum loan amount under each scheme?

  • ABP: ₦150,000 minimum, no upper limit.
  • CACS: ₦5 million minimum, ₦300 million maximum.
  • NIRSAL: ₦100,000 minimum, ₦200 million maximum.

2. What are the interest rates charged on these loans?

All schemes offer single-digit interest rates starting from 9% per annum, including a one-year moratorium depending on activity. For ABP specifically, interest is charged at 9% for food crops and 11% for cash crops.

3. How long is the loan repayment period?

  • ABP: 6-12 months per production cycle based on crop planted.
  • CACS: Maximum seven years, including a 1-year moratorium.
  • NIRSAL: 1-5 years, including moratorium, depending on asset life.

4. Can women apply independently without male applicants?

Yes, all schemes encourage women’s participation in agriculture. Women can apply directly without joint applications with male partners. Group applications strengthen chances.

5. What happens if a loan is not repaid on time?

Applicants are legally bound to repayment agreements. Failure attracts default penalties like additional interest charges, legal suits, naming and shaming through media, and denial of further loans.

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