The Nigerian Agricultural Bank was set up in 1973 by the Federal Government. It started operation with a paid up capital of M1 million and a loan of N11 million both of which came from the government. The
objective of the Bank is to increase l agricultural production (including
horticulture, poultry farming, pig breeding, fisheries, forestry timber production) enhance the availability of storage facilities and promote the marketing of agricultural products through liberal credit to farmers.
During the year 1973 to 1978 the Bank sponsored 177 projects with a total value of N286.3 million. It gave priority mostly to small scale farmers who found it difficult to raise capital from the other banks. The
scope of the Bank's responsibility was widened in 1978 to include financing of co-operative societies. At the end of 1980, the assets of the bank stood at N135.5 million. Agriculture is classified as a favoured sector according to the Central Bank of Nigeria credit guideline. For this
reason, the rate of interest is relatively low. At present, it stands at 10 percent compared with the minimum lending rate of 17 percent for other sectors.
In an effort to encourage banks to release more funds to agriculture and enable small farm holders to benefit from agricultural credit, the agricultural credit guarantee scheme (ACGS) was set up in 1977. The scheme was set up with a fund of N100 million subscribed by the Federal
Government and the Central Bank in the ratio of 60 to 40 percent respectively. The sole objective of the scheme is to provide guarantee for loans and advances granted by Commercial and Merchantile Banks for
agricultural purposes.
The A.C.G.S. became operational in 1979. By the end of that year, loans amounting to N11.3 million covering 341 projects located in 18 States of the Federation were guaranteed by the scheme. By the end of
1981, the value of loans made under the scheme had increased to N114.1
million.
The most serious problems facing the banks with regard to agricultural
lending is the high rate of loan deliquency. This is largely a result of inconsistent agricultural policy. For example, poultry and maize farmers are periodically exposed to unfair competition from cheap imports subsidised by exporting countries. Adequate storage facilities are also
lacking as a result of which farmers cannot reasonably anticipate future
prices and prepare realistic cash flow and profit projections which are essential requirements for commercial propositions involving bank loans.