• Super Admin
• 06 Mar, 2026

The Bank of Agriculture (BOA) has disclosed that more than 70 percent of loans by farmers are yet to be returned due to the fragmentation of the agricultural sector that stalls proper tracing. At BusinessDay's Foundation Trade and Investment Series, themed 'Innovative Capital Architecture for Resilient Agricultural Value Chain' on Friday, Ilelaboye Segun, divisional head, Risk Management and Control of BOA, said that the traditional lending model has failed the Bank because it gave loans to farmers directly, and it backfired. When the BOA gave loans to farmers directly, Segun noted that it was difficult for the Bank to trace these loans, making them eventually become 'bad debts'. "As I speak to you, we have over 70 percent default loans." "For the Bank of Agriculture, traditional lending has actually failed us," he said. "What we used to do before was disburse directly to the farmers without going through associations in the value chain. However, some of these people have poor implementation if you give them loans," Segun said at the gathering. However, this shortcoming has forced the Bank into a new loan disbursement model where associations and aggregators are given loans on behalf of farmers. Moving forward, Segun said, "There is now a total transformation. What we do now is to ensure that we involve different value chains in our disbursement. We now disburse loans and farming equipment not to individual farmers, but to service providers, who will pay 25 percent to the bank, and the farmers will pay them," he added. He also disclosed that BOA currently gives loans to only registered cooperatives. "This model has been helping us and we have been getting back our money so far." But for defaulters, with the aid of digital lending, the Bank is able to withdraw the loan directly from the defaulters' accounts. "Because we try to attach your bio-data to your loans, we call it global starting instructions. We just get your information. Whether you like or you don't like it, they will just be deducting that source," noted Segun. Adeyemi Aduwo, chief finance officer, Sunbeth Global Concepts Limited, an active cocoa player, confirmed the challenge in giving loans to individual farmers. For him, his company now deals directly with aggregators after several unpleasant experiences with getting their loans back from farmers. "From Sunbed's perspective, being a major player within the cocoa industry specifically, we've actually seen a lot within the agro system. One thing we've also realised is that when it comes to funding in the agro sector, most potential investors are more focused on the farmers, forgetting that the agro sector is a very broad ecosystem." Akintoye Alawode, partner, Consumers/Industrial Markets at KPMG, said a lack of structure makes organisations default on their lending, highlighted three factors that limit farmers' ability to access loans from development financial institutions (DFIs) -- corporate governance, poor financial management, and succession problems. "It's lack of structure that makes them unattractive to patient capital or cheap capital. In Nigeria, a lot of farmers are smallholders," he said, adding that for many smallholder farmers, the scale to de-risk their structure is small. Alawode noted that some businesses are usually a one-man enterprise or a family business, and with that kind of structure, it was difficult for investors to trust them with capital, as they could use it for other purposes. According to him, with the lack of structure, some organisations are "owner-run and for such organisations, you can't guarantee that once the owner leaves, the business will continue. Hence, you will not be interested in providing a five-year capital." The event closed with a successful deal room where over 15 businesses pitched to about seven investors, including BOA, KPMG, Wema and FCMB. Source: https://businessday.ng/agriculture/article/fragmented-farming-system-drives-70-loan-defaults-among-farmers-boa/