Agriculture credit rises by 23% as banks shift lending from oil, manufacturing

Credit to Nigeria’s agriculture sector rose by 23 percent in the first quarter of 2026, as banks increased exposure to the sector while lending to manufacturing and oil and gas declined, a review of sectoral credit data shows.

According to the Central Bank of Nigeria (CBN), agricultural credit increased to N11.38 trillion in Q1 2026 from N9.29 trillion in the corresponding period of last year, representing a 23 percent increase within one year.

On a month-on-month analysis, agriculture sector credit rose to N3.86 trillion in March 2026, from N3.80 trillion in February and N3.71 trillion in January, representing a N150 billion increase within the three months.

The increase contrasts with developments in two of the country’s traditionally dominant credit destinations. Oil and gas lending declined from N38.5 trillion in Q1 2025 to N32.2 trillion in Q1 2026, while manufacturing credit fell to N18.7 trillion from N24.1 trillion.

On a month-on-month analysis, oil and gas credit fell from N10.91 trillion in January to N10.58 trillion in March, while manufacturing credit fell from N6.57 trillion to N5.77 trillion over the same period.

The divergent movement suggests that banks are gradually expanding agricultural financing as economic activity in the sector improves, while credit allocation to some established sectors moderates.

Analysts said the increase is being supported by stronger agricultural output, rising food demand, government-backed intervention programmes and banks’ efforts to diversify their loan portfolios.

“The growth is consistent with the stronger underlying performance of agriculture,” said Abiodun Ogunniyi, head of research and strategy at GTI Investment.

Nigeria’s real GDP grew to 4.39 percent in the second quarter of 2026 from 3.89 percent in the first quarter, while agricultural output strengthened significantly, providing a stronger economic basis for increased financing to the sector.

Ogunniyi said agriculture’s importance to the economy makes the recent credit expansion potentially structural rather than a temporary first-quarter development.

Agriculture accounts for more than 23 percent of Nigeria’s GDP and employs more than 30 percent of the labour force, yet the sector has historically attracted a disproportionately small share of formal bank credit.

“There’s also a structural financing gap: agriculture accounts for roughly 23 percent of GDP, but historically receives a disproportionately small share of bank credit,” he said.

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As agricultural activity improves, Ogunniyi said banks are responding to stronger demand for working capital and value-chain financing.

However, he cautioned that the pace of growth in agricultural lending may moderate as structural constraints become more apparent.

“I expect agricultural credit to continue growing over the medium-to-long term, but the current rate of growth is unlikely to be sustained indefinitely,” he said.

According to him, the sustainability of the trend will depend on whether increased lending becomes commercially driven rather than remaining heavily dependent on government and Central Bank of Nigeria intervention programmes.

“Better agricultural insurance, off-take structures, storage, security and value-chain financing will be critical,” Ogunniyi said.

Kehinde Jones, head of research and strategy at Anchoria Research Group, also attributed the increase to stronger policy and commercial interest in agriculture.

“The increase in agricultural sector credit reflects the growing focus of banks and policymakers on financing agriculture as a key sector of the economy,” Jones said.

He said improved agricultural activity, government support initiatives and the need to increase domestic food production are encouraging banks to allocate more funds to the sector.

The shift could also reflect efforts by lenders to diversify their loan books away from traditional sectors such as oil and gas, he added.

Jones expects agricultural credit to continue increasing over the medium to long term, particularly as the sector remains central to economic growth and food security.

He, however, identified infrastructure deficits, access to affordable financing, climate resilience and risk management as major factors that will determine whether the lending expansion can be sustained.

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Intervention funds remain important

The increased focus on agriculture is also reflected in the lending structures disclosed by Nigerian banks in their first-quarter financial statements.

FCMB Group’s Q1 interim financial statement showed that the group participated in several agricultural financing schemes, including the Commercial Agriculture Credit Scheme (CACS), Babagana Agricultural Scheme, National Agricultural Development Fund (NADF), and facilities involving the Bank of Agriculture.

The bank disclosed N580.1 million under CACS, N2.1 billion under the Babagana Agricultural Scheme, N1.8 billion under NADF, and N48.3 billion involving the Bank of Agriculture.

Fidelity Bank also disclosed that it received N2.1 billion under the Federal Government Intervention Fund through the Commercial Agriculture Credit Scheme.

The bank said the CACS facility is designed to provide concessionary funding to the agricultural sector. The facility attracts an interest rate of 2 percent per annum, with the bank required to on-lend to eligible customers at an all-in interest rate of not more than 9 percent.

Fidelity noted that the bank assumes the default risk on amounts lent to customers under the facility, while the facility itself is unsecured.

Sterling Bank similarly disclosed its participation in CACS, under which the Central Bank, in collaboration with the Federal Government through the Federal Ministry of Agriculture and Water Resources, provides funding to promote commercial agricultural enterprises.

The bank said it obtained CACS funding on behalf of customers at 2 percent and on-lent the funds at 9 percent, inclusive of management and processing fees. Repayments from CACS-funded projects are subsequently remitted to the CBN quarterly.

Sterling also disclosed its agricultural/small and medium enterprises investment scheme (AGSMEIS) reserve, maintained in line with the CBN requirement for banks to set aside 5 percent of profit after tax for investment in agribusiness and SMEs.

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