The rural finance solution Nigeria can no longer ignore

Spread the word Nigeria’s agricultural potential is immense. With millions of hectares of arable land and a vast population of farmers, the country should be feeding itself—and beyond. Yet, millions remain mired in poverty and hunger. The fundamental barrier? The near-impossible challenge farmers face in accessing affordable, timely, and suitable finance. Professor Muhammad Ahmad Makarfi’s recent inaugural lecture at Bayero University Kano offers a powerful, evidence-based framework for how microfinance can break this deadlock and propel Nigeria toward genuine food security and poverty reduction.

With over 40 years of expertise in banking, academia, diplomacy, and public service, including a tenure as Nigeria’s ambassador to Brazil, Professor Makarfi has a rare and comprehensive insight into the financial obstacles that keep rural farmers locked out of growth. His message is unambiguous: Nigeria cannot secure its food future without revamping how agricultural finance works for smallholder farmers and rural entrepreneurs.

Traditional banking methods consistently fail because they do not reflect agricultural realities. Farmers need loans disbursed when the planting season begins, with repayment schedules aligned to harvest cycles. Beyond credit, access to seeds, fertilisers, irrigation, modern equipment, extension services, storage, and reliable markets are non-negotiable if agriculture is to thrive.

Despite boasting an estimated 71.2 million hectares of cultivable land, much remains unexplored or underutilised—not for lack of land but for lack of financial and technical support. Without these essentials, farmers cannot boost productivity or seize market opportunities.

Professor Makarfi’s solution is clear and backed by rigorous research: hybrid microfinance models that leverage the strengths of formal banks alongside semi-formal and informal microfinance providers entrenched in rural communities. These providers often have a deeper understanding of farmers’ needs and are more accessible, especially to those lacking formal collateral.

His ground-breaking study from Kano State reveals stark contrasts. Formal institutions struggle under heavy operational costs and subsidy dependence, while many semi-formal and informal groups demonstrate far better sustainability and outreach. Critically, women—who form the backbone of Nigeria’s agricultural workforce—are reached far more effectively through community-based finance, with participation rates as high as 99% in some informal models.

Furthermore, embracing non-interest and Islamic microfinance is indispensable. These ethical, risk-sharing models appeal to a large segment of farmers and traders uncomfortable with conventional interest-based lending, representing a vast untapped opportunity to expand financial inclusion.

But Professor Makarfi is unequivocal: no single model can solve Nigeria’s agricultural financing crisis. A diversified, complementary approach is essential—one based not on policy platitudes but on demonstrated efficiency, sound financial management, and measurable impact on farmers’ livelihoods.

There are real risks policymakers must heed. Microfinance institutions cannot scale without stable funding, sound capitalisation, and strong loan recovery. Without addressing these fundamentals, expanding credit risks creating financial distress rather than alleviating it.

This is where government must act. The Federal Ministry of Agriculture and Food Security, in partnership with the Finance Ministry, Central Bank, Bank of Agriculture, and state authorities, should urgently pilot a microfinance programme built on these findings. Commercial banks and development institutions would channel wholesale funds to credible rural microfinance providers who understand local context and can responsibly manage lending.

Repayment terms must be realistic—aligned with agricultural calendars—to prevent default pressures that drive farmers back into poverty. Digital payment systems, agricultural insurance, and integrated support services must be part of any serious effort to transform rural finance.

Robust monitoring and transparent, independent evaluation are critical. Targets for farmer outreach, women’s inclusion, repayment rates, operational costs, productivity gains, and income growth must be set and scrutinised. Evidence, not rhetoric, should guide policy expansion.

A bold and sensible step would be for government to invite Professor Makarfi himself to lead this pilot initiative. Drawing on his unmatched expertise and research, he could coordinate a multi-stakeholder task force to translate theory into tested practice. This is no favour to an academic but a pragmatic use of research talent to solve Nigeria’s food security crisis.

Nigeria’s record on agricultural finance has been disappointing. Repetitive schemes have faltered amid weak implementation, poor accountability, and inadequate institutional capacity. What is missing is political will to pilot rigorously tested solutions, support what works, and hold implementers genuinely accountable.

Professor Makarfi’s research offers a roadmap to do just that. It is not about grand promises but practical change—finance designed for farmers, for the realities they face, and for sustainable results. Microfinance alone will not end hunger, but an objectively evaluated, well-structured system could dismantle a key barrier that has crippled rural Nigeria for decades.

The time for rhetoric is over. Federal and state governments must seize this opportunity to foster agricultural transformation, starting with tangible reforms in rural finance. The success or failure of this effort will define Nigeria’s ability to feed itself and build resilient rural economies.

No more policymaking without impact. No more programmes without measurable outcomes. It is time to convert research into reality—and give Nigeria’s farmers the financial tools they desperately need.

… Abdullahi writes from Kaduna via [email protected]