Federal Government Assistance in Agricultural Finance

An Overview of the Federal Government Assistance in Agricultural Finance

The federal government of Nigeria has formulated and unimplemented various schemes, programmes and institution, to provide facilitate and encourage the financing of agricultural sector through the central bank of Nigeria and other financial institutions. In 1969, the first circular was issued to commercial bank by the Central Banks of Nigeria (CBN) as a credit guideline embodied in its monetary policy to give preferential treatment to agricultural sector in terms of loan the treatment cover both the value of loan allocated to the sector and the interest rate chargeable on such loans. As from 1972 the CBN introduce sectoral allocation forkoan and advances by commercial banks. The CBN monetary guideline stipulated that loan and advances allocated to agriculture should form 4% of total lending by commercial banks. The minimum percentage was raised to six percent (6%) in 1979, while another three percent (3%) was allocated to Agro allied industries.

In 1981, the rate was further increased to a minimum of eight percent and in 1983, it increased to ten percent. Though in 1981 the interest rate for agricultural project attracted between 6 to 8 percent interest whether the loan made by commercial bank or merchant bank.

The federal government in conjunction with the Central Bank of Nigeria in their bid to encourage commercial bank to meet the target set for them in the monetary policy circular set up the Nigerian agricultural and co-operation in 1973.

The NACB is fully owned by the federal government and it was set up to improve the level and quality of all aspect of agricultural production to enhance the availability of storage facilities and to promote the marketing of agricultural products. The bank does this through a deliberate polities extending liberal credit facilities to farmers and agricultural related business establishment. It has also extended credit facilities for the purpose of storage facilities distribution and marketing connected with agricultural production. The offer loans to farmers co-operation and private sector who wants to venture into agricultural production so long a the proposed projects are variable and for private sectors provided they are 60% ingeniously owned.

In 1977, the agricultural credit guarantee scheme fund was established. The purpose of the scheme is to proved guarantee up to 75% in respect if all loans and advances granted by commercial banks and merchant bank for agricultural projects with the aim increasing the level of bank credit to the agricultural sector and the level of agricultural productivity. The act establishing the scheme defined agricultural purpose for which the scheme will provide guarantee and

(a)              The establishment of management of plantations of  production/plantation of rubber, oil palm, cocoa cofee tea and similar tips.

(b)             The cultivation/production of cereal crop, tubers, fruits ofall kinds,cotton, beans, groundnut,vegetables, pineapples, bananas and plantain.

(c)              Animal Husbandry, that is to say, poultry piggery, cattle rearing and that the tip stock and fish farming.

The security which may be offered on the commercial bank for the purpose of any loan under the scheme may be one or more of the following.

(a)              A charge or land in which the borrower hold a legal interest ir a right to farm or a charge on assets on the land including fixed assets, crop or livdestock.

(b)             A charge on the unmovable property of the borrower.

(c)              A life assurance policy, a promissory note or other negotiable security.

(d)             Stocks and shares.

(e)              Any other security acceptable to the bank.

(f)               Personal guarantee.

Application received commercial bank specifically are expected to be processed promptly and it is evasaged that the period elaping between the submission of an application and its disposal should not exceed to days if a commercial bank rejects any request for a loan render the scheme, such a commercial bank is expected to give reason for the rejection to the applicant and specify steps he should take to enable him comply with rural banking and mobile banking programme are another Central Bank of Nigerian’s activity directed as assisting and transforming the rural economy  so as especially to provide credit facilities to farmer.

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