Farmers accuse banks of diverting agric funds to real estate

Nigeria's agricultural finance system is facing a credibility crisis. On Thursday, Prince Wale Oyekoya, former Chairman of the Agriculture and Non-Oil Group at the Lagos Chamber of Commerce and Industry, publicly accused Nigerian banks of systematically diverting funds earmarked for agricultural development into the more profitable real estate sector—a damaging allegation that exposes structural failures in the nation's farm financing architecture.

This accusation arrives at a critical moment. Nigeria's agricultural sector, which employs over 35 million people and contributes roughly 24% to GDP, is already under strain from inflation, currency depreciation, and climate volatility. If banks are indeed redirecting agric credit to real estate, the consequences for food production, rural livelihoods, and national food security could be severe.

## Why are banks allegedly diverting agricultural loans to real estate?

The incentive structure is simple: real estate returns are faster, more tangible, and carry lower operational risk than agricultural lending. Agricultural loans require technical expertise, weather monitoring, supply chain visibility, and longer repayment cycles (12–24 months for crop cycles). Real estate deals close in months, generate immediate cash flow, and collateral is easier to value and liquidate. For banks optimizing quarterly earnings, the choice is rational—though economically destructive.

This pattern reflects a wider problem in African financial systems: short-term profit maximization overrides developmental mandates. Nigeria's Central Bank has repeatedly published guidelines encouraging agricultural lending, but without enforcement teeth or penalty structures for divergence, banks treat these as suggestions, not rules.

## What evidence supports these claims?

Oyekoya's public statement carries weight because it comes from within the private sector establishment—not a grassroots activist or opposition politician. The Lagos Chamber of Commerce represents institutional credibility. However, verifiable data is limited. Nigeria's Central Bank publishes sectoral credit allocation reports, but granularity is weak; loans may be officially categorized as "agricultural" when functionally they finance real estate owned by agribusiness entities or farm holding companies.

A 2024 analysis by agricultural economists noted that despite the Central Bank's push to increase agricultural credit to 40% of total lending, actual disbursement to smallholder and medium-scale farmers remains under 8%. This gap suggests either intentional diversion or systemic design flaws.

## What are the market implications?

For investors, this signals three risks:

**Food inflation risk**: Reduced farm financing constrains production. Nigeria already imports food; further production shortfalls drive prices up.

**Agricultural stock underperformance**: Publicly listed agribusiness firms (like Oando Agro, BUA Foods supply chains) may face input cost pressures if financing for contract farmers tightens.

**Real estate bubble risk**: Misallocated agricultural credit inflates property valuations in Lagos and Abuja, creating a secondary asset bubble vulnerable to interest rate shocks.

The Central Bank must act decisively: implement mandatory sectoral lending quotas with quarterly audits, impose penalty rates on banks that miss agricultural targets, and establish a dedicated agricultural mortgage bank. Without intervention, Nigeria's food security—and investor confidence in sector fundamentals—will continue deteriorating.

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