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This Is Why Nigerian Banks Reject Rural Land as Collateral

Nairametrics by Nairametrics
September 15, 2014
in Uncategorized
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Article Highlights

1. Chairman, Chartered Institute of Bankers of Nigeria, Mr. Abolade Agbola, says a controversial clause in the Land Use Act is the main reason why banks reject rural parcels of land as collateral for loans.

2. He said the unfavourable situation had prevented rural farmers from accessing agricultural loans which could have enhanced farming and food security in the country.

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3. He said, “The Land Use Act made it difficult for rural farmers to access agricultural loans using lands as collateral. The Land Use Act says if your land is acquired for public purpose, the only compensation you will be given is that of development on it. But If I clear the land, it’s a development.

“If you clear10,000 hectares of land today as far as the Land Use Act is concerned, it’s only when there are economic trees on it that you can be compensated. So, that land has no compensation. And that is one of the reasons why rural lands are not presentable as collateral.”

4. Consequently, the CIBN chairman called on the Federal Government and the National Assembly to take a second look at the Act with a view to reviewing it.

5. He went to  “So, the real transformation we need is to actually make any land within the Nigerian landscape accessible as collateral and have a value, not just development on it; and that is the only way the rural farmers can use their land as collateral to obtain loan,” he said.

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Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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