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Study Level: BTech, BSc, BEng, BA, HND, ND or NCE

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This study is aimed at evaluating the role of CBN on agricultural financing, policies, programs and initiatives for a sustainable development in Nigeria. The dwindling oil prices in the international market necessitate the needs for diversification of the economy, into agriculture for a sustained development in Nigeria. Data for the study were the secondary ones, sourced from the Central Bank of Nigeria (CBN) Statistical Bulletins, Annual Report and Statements of Accounts, Bullion, The Economic and Statistical Review of National Planning Commission, conferences Journals and Publications, World Bank and United Nations publications and text books, using the descriptive and inferential techniques. The study found that though the government has made serious efforts at making good agricultural policies through schemes, programs and institutions, it has not been able to back them up with adequate budgetary allocation and financing coupled with corruption in the execution of the policies. It is recommended that for the government agricultural financing policies to achieve its target of rural development, Nigeria will need an adequate level of strategically targeted investment in agriculture.




1.1 Background of the study

The main trust of sustainable development in Nigeria is the improvement of good condition of living standard of its citizens. This should be realized by stimulating the economic activities in all critical sectors, especially, the agriculture. Agriculture is the known sector that can bring about enhanced living condition of people for sustainable development (Nnamani, 2009). As the case with Millennium Development Goals (MDGs) from 1990- 2015, (now Sustainable Development Goals) from 2016-2030, underlying all the goals is support to agricultural growth that benefits the poor, for without a renewed effort to fast-track growth in the agricultural sector, few countries will be able to reach the goals, especially the goal of reducing poverty and hunger to 50% by 2015. The need to come up with better articulate good practice in agricultural policies, finances, and investment must be handy (www.developmentgoals.org). According to World Bank Agriculture Investment sourcebook (2005), it states that a growing population and limited natural resources base (agriculture) means that if current and future food and future needs are to be met, these resources will have to be applied in a more sustainable manner. Promoting sustainable agriculture therefore has some requirements such as having good farm management techniques, foster synergized stability, financing and investment in agriculture and to have good agricultural policies and initiatives. Onwioduokit (2013) postulates that prior to the oil boom in Nigeria in the 1960s to 1970s, the economy was largely the agrarian, which employed more than 70% of the working population of the country. He adds that the oil boom in Nigeria caused the rural-urban drift of the population, to the detriment of agriculture and its output. The study and good revenue from the oil revenue, created the impression that job creation was the sole and primary function of the public sector. Agriculture which has been the main stay of the economy was relegated to the background. However, as the oil fortunes dwindled with the present dispensation, it is now dawn to Nigerians that oil sector can no longer be sustainable, there is now the dearth need to turn to agriculture for a sustainable development of the economy. The agricultural sector has to be financed, and given good policies in order to attain the sustain ability status for development in Nigeria. Financing and good policymaking of this sector will be done through agricultural subsidies, provisions and maintenance of extension and irrigation services to farmers, provision of improved species of animals and seedlings, provisions of mechanized system of farming and the reformation of land tenure system, promote research and development to improve Introduction Agriculture contributes immensely to the Nigerian economy in various ways, namely, in the provision of food for the increasing population; supply of adequate raw materials (and labour input) to a growing industrial sector; a major source of employment; generation of foreign exchange earnings; and, provision of a market for the products of the industrial sector (Okumadewa, 1997; World Bank, 1998; Winters et al., 1998; FAO, 2006). The agrarian sector has a strong rural base; hence, concern for agriculture and rural development become synonymous, with a common root. Support for agriculture is widely driven by the public sector, which has established institutional support in form of agricultural research, extension, commodity marketing, input supply, and land use legislation, to fast-track development of agriculture. These are aside the Private sector participation is not limited to local or foreign direct and portfolio investment financing, but also to sponsorship of research and breakthrough on agricultural issues in universities, capacity building for farmers and, most importantly, the provision of financing to farm businesses. International governmental and non-governmental agencies including the World Bank, Food and Agricultural Organization of the United Nations, etc., also contribute through on-farm and off-farm support in form of finance, input supply, strengthening of technical capacity of other support institutions, etc. Macroeconomic policies that tend to promote growth of the sector, such as credit-channelling financial policies, price stabilizing monetary and exchange rate policies, and farm incentiveladen fiscal policies including tax exemptions for agricultural businesses, duty-free import of farm machinery, etc. Nigerian agricultural policy provides, among others, for adequate financing of agriculture. The role of finance in agriculture, just like in the industrial and service sectors, cannot be over-emphasized, given that it is the oil that lubricates production. Public expenditure on agriculture has, however, been shown not to be substantial enough to meet the objective of the Government agricultural policies (IFPRI, 2008). For a developing country with a monoproduct oil economy such as Nigeria’s, inadequate financing of agriculture portends great danger for many reasons.

For one, fluctuating food prices are a precursor of inflation. Secondly, from the expenditure approach to national income accounting, it is likely that Engel’s Law that a large chunk of expenditure in developing economies goes to food holds, meaning that shocks to the domestic agricultural production and supply could be damaging to price stability. There is also the perspective of food security, in an era when food has been used as a weapon of war (United Nations Oil for Food Deal in Iraq) and as bargaining tool (North Korea – United States food deal) , even within Nigeria, the Federal military Government during the Nigeria – Biafra war used food blockade as tool of war. Money is said to “answereth all things”. Perhaps this is why much has been said, and continuously being said, on the indispensability of finance in the revival and growth of agriculture in Nigeria. Indeed, NISRAL – Nigeria Incentive-Based Risk Management System for Agricultural Lending, another government scheme, launched in 2011, is all about pumping more money into the sector, albeit, emphasis on value chain. This is coming from the background of the poor performance of the agricultural sector in the economy, especially since the couple of decades ending the last century and thereafter. Prior to the advent of oil in commercial quantity in the immediate years before and after independence 52years ago, agriculture was the backbone of the economy, contributing about 65% to the GDP. Today, the performance is still low at about 42% of the GDP, rising from the abysmal level of less than 30% in the last two decades. The poor performance can be seen in the precarious food situation with apparent failure of the sector to ensure food security and the ridiculously high food import bill. Ogunbodede(2011) said that Nigeria “is still far from attaining the objective of food security, decades after setting the target”. He defined food security as a situation where everyone has access to food three times a day, all the year round and at affordable prices. With about 70-80% of the population living at subsistence level of less than USD1.00 a day, accessibility to food three times a day by the generality of the people may not be realistic today, considering the high food price index and constraints Earlier,Oladiran (2010), citing One World Guides (2009), had said “ food security has become the most intractable challenge for development agencies and that almost 1billion people experience hardship that hunger imposes, a figure which continues to rise even amidst the riches of the 21st century.” He said that “hunger exceeds 35% of the population in 15 African countries and food imports (especially cereals) are expected to rise to 190m metric tonnes by 2020, from 90m metric tonnes in 1990”. The food import bill of Nigeria since 2008 has been hovering around USD4bn (about N630 bn) yearly of which, in the year 2010 alone, rice importation bill was USD1bn (N155 bn), wheat USD1.1bn (N165 bn), fish USD 0.7bn (N105 bn), sugar USD 0.4bn (N60bn), etc, according to the 2010 annual report of CBN. By 2012, Nigeria annual import bill on rice alone had exceeded USD2.0bn (N365bn-[N1bn daily]). It is said that a strong and efficient agriculture should ensure, in a nation, adequate food security for the growing population, generate employment, enough raw materials for the industries and sustenance of balance of payment equilibrium. A sustaining growth in agriculture is a major factor in the eradication of poverty and hunger as it aids reasonable stability in the prices and availability of food, apart from being the foundation of export earnings which sustains the balance of payment equilibrium; it also ensures industrial growth of a nation with high capacity utilization not only through the production and smooth flow of raw materials but also release of labor and consequently, full employment. Agricultural growth and development is the foundation of a diversified economy and which in turn sustains the strength of a nation for real economic growth and development. With its apparent failure to meet up the above highlighted responsibilities, it is evident that the sector has relegated its prime position as the main anchor of the Nigerian economy to the petroleum sector that is not even effective in ensuring the citizens welfare and national security. One of the obvious effect is the security insurgences that cut across the country – with Boko Haram in the North, Massob and the Mend boys, etc in the East and South-South and the Armed robbers in the West. The above score card shows the precarious situation of agriculture and which perhaps, informed the decision of the Central Bank of Nigeria – CBN, in the year, 2011, to launch NISRAL – Nigeria Incentive-Based Risk Management System for Agricultural Lending. NIRSAL is said to be a dynamic, holistic approach that tackles both the agricultural value chain and the agricultural financing value chain. It is regarded as the monetary authority’s innovative approach of combating the challenges of low productivity, poor technology and cultural practices, low research and development, and under-financing of the agricultural value chain. With the current financing level of agriculture standing at about 2% of total banks lending, NIRSAL is planned to invest USD 500million(about N75 billion) via fixing of the agricultural value chain and encouraging banks to lend to the agricultural value chain through strong incentives and technical assistance. NIRSAL, unlike previous schemes which encouraged banks to lend without clear strategy to the entire spectrum of the agricultural value chain, emphasises lending to the value chain and to all sizes of producers (CBN, 2011). The previous schemes of the Federal Government included, amongst others, the Agricultural Credit Guarantee Scheme Fund (ACGSF -1977); Nigerian Agricultural, Cooperative and Rural Development Bank – NACRDB (now: Bank Of Agriculture-BOA) Ltd (1973), and the latest CACS –Commercial Agricultural Credit Scheme (2009), all of which, in about 40years, have sunk billions of naira into agricultural sub-sector. This is apart from the World Bank assisted States Agricultural Development Programmes (ADPs) and the States’ Agricultural Credit Programmes. Not much seems to have been achieved through these schemes.


The agricultural sector is central to Nigeria’s economy, accounting for 40 percent of the Gross Domestic Product (GDP) and providing over 60 percent of employment. However, the sector represents only 1 percent of exports. Over the last decade, agricultural growth has slowed down and today it is under-performing despite enormous potentials. To reverse the trend, there will be need to tackle some of its major challenges such as low productivity, poor technology and cultural practices, low research and development, and under-financing of the agricultural value chain. In particular, funding level in the agricultural sector stands at about 2 percent of the total lending of banks as against 6 percent in a country like Kenya. Some of the reasons for the low funding include lack of understanding of the agricultural sector, perceived high risks, complex credit assessment processes/procedure and high transaction costs. Addressing these issues require an innovative approach, hence the introduction of the Nigeria Incentive-Based Risk Management System for Agricultural Lending (NIRSAL). It is in view of the above that the researcher intend to investigate the role of CBN on agricultural financing.


The main objective of this study is to examine the role of CBN on agricultural financing with emphasis on NIRSAL, but to aid the completion of the study, the researcher intend to achieve the following specific objectives;

  1. To examine the role of CBN in financing agriculture in Nigeria
  2. To examine the effect of NIRSAL approach in improving agricultural productivity in Nigeria
  • To examine the relationship between agricultural productivity and economic growth in Nigeria
  1. To ascertain the impact of agricultural productivity on food security in Nigeria

The following research questions were formulated by the researcher to aid the completion of the study;

  1. Does CBN play any role in financing agriculture in Nigeria?
  2. Does NIRSAL approach has any effect in improving agricultural productivity in Nigeria?
  • Is there any significant relationship between agricultural productivity and economic growth in Nigeria?
  1. Does agricultural productivity has any impact on food security in Nigeria?

To aid the completion of the study, the researcher formulate the following hypotheses

H0CBN does not play any significant role in financing agriculture in Nigeria

H1CBN does play a significant role in financing agriculture in Nigeria

H0there is no significant relationship between agricultural productivity and economic growth in Nigeria

H2there is a significant relationship between agricultural productivity and economic growth in Nigeria


The effectiveness and efficiency of any agricultural sector lies in the availability of finance and manpower. Most agriculturist in Nigeria focus on small scale production for family consumption alone, thereby forsaking the power of agriculture as a major source of finance. In order to overcome this barrier agriculturist have to embrace research and development so as to attract finances from financial institutions to expand the frontier of agricultural productivity.

As part of my requirement for the award of masters of business management (M.BA) in business administration, this study is carried out to ascertain the role of CBN in Agricultural financing.


For some times now researchers have laid emphases on the role of commercial banks on agricultural financing, without investigating the role of CBN in financing and formulating policies that will aid agricultural productivity. It is in this backdrop that this study is embarked upon.

It is conceived that at the completion of this studies, the findings will be of great benefit to entrepreneurs and agriculturist on how to utilized the tremendous opportunity that NIRSAL offers in enhancing agricultural productivity. The findings of the study is also expected to be of great importance to large scale farmers in solving the problem of food scarcity.

The study will also be of great importance to researchers, academia, student marketers and the general public.


The scope of the study covers the role of CBN on agricultural financing with emphasis on NIRSAL project. But in the cause of the study, there were some factors that limited the scope of the study;

  • Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.
  • Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  • Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.


The Central Bank of Nigeria is the Central bank and apex monetary authority of Nigeria established by the CBN Act of 1958 and commenced operations on July 1, 1959


Agriculture is the cultivation of land and breeding of animals and plants to provide food, fiber, medicinal plants and other products to sustain and enhance life


Finance is a field that is concerned with the allocation of assets and liabilities over space and time, often under conditions of risk or uncertainty. Finance can also be defined as the science of money management


This research work is organized in five chapters for easy understanding as follows Chapter one is concern with the introduction which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study it’s based thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion and recommendations made of the study.



Account Number: 0709546102

Access Bank: Savings
Account Name: Emmanuel Idorenyin Samuel.



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