How FCMB Helped Build an Agribusiness Serving 300,000 farmers

As Nigeria strives to improve food security and guarantee improved livelihood for millions of Nigerians, one financial institution is demonstrating that agriculture can be both profitable and transformative.

First City Monument Bank (FCMB) has emerged as one of the leading financiers of Nigeria’s agribusiness sector, deploying innovative financing models that help farmers increase productivity, access markets, and improve livelihoods while contributing to national food security.

For many years, agricultural financing was considered a high-risk venture by most financial institutions. Smallholder farmers, who account for the bulk of food production in Nigeria, were often excluded from formal financing due to limited collateral, poor record-keeping, climate risks, and inadequate infrastructure.

However, FCMB has proven that with the right strategy, agricultural lending can be profitable while delivering significant developmental impact.

Speaking in an interview, FCMB’s Divisional Head of Agribusiness and Non-Oil Exports, Mr. Kudzai Gumunyu, said the bank has successfully developed a financing model that supports every player in the agricultural ecosystem, from input suppliers to farmers, processors, distributors and exporters.

According to him, the bank’s intervention is helping to drive agricultural productivity, increase exports and create sustainable economic opportunities across rural communities.

“Agriculture contributes about 25 per cent of Nigeria’s GDP, and we believe the sector should contribute significantly to the growth of the bank as well,” Gumunyu said.

He noted that Nigeria’s heavy dependence on crude oil revenues has repeatedly exposed the economy to external shocks when global oil prices fluctuate.

This reality, he said, underscores the importance of developing alternative sources of economic growth, with agriculture occupying a strategic position.

“Whenever there is a problem in the oil sector, the Nigerian economy suffers. That is why diversification is critical. Since establishing our agribusiness unit in 2012, FCMB has deliberately focused on supporting agriculture and non-oil exports as part of our contribution to national development,” he said.

Unlike conventional lending approaches that focus on individual borrowers, FCMB has adopted a value-chain and ecosystem financing model that enables the bank to support all participants involved in agricultural production.

The model covers input suppliers, seed companies, fertiliser manufacturers, farmers, aggregators, processors, manufacturers, distributors, and exporters.

According to Gumunyu, this approach allows the bank to better manage risk while ensuring that all components of the agricultural value chain function efficiently.

“A value chain is only as strong as its weakest link. If one segment fails, the entire chain is affected. That is why we finance the whole ecosystem and ensure that all participants are properly connected,” he explained.

The strategy has become increasingly important in Nigeria, where smallholder farmers face multiple challenges that limit their access to formal credit.

Many farmers operate in remote locations with poor infrastructure and limited access to banking services. Most do not possess formal land titles that can be used as collateral, while others lack the financial records required to secure loans.

Climate change has compounded these challenges, exposing farmers to droughts, floods and changing weather patterns that can destroy harvests and affect loan repayment capacity.

According to Gumunyu, these realities explain why agriculture receives only a small proportion of total banking sector lending despite its importance to the economy.

“On average, only about four per cent of banking sector assets are allocated to agriculture. At FCMB, our exposure at over thirteen percent is significantly higher because we understand the sector and have built structures to manage the risks,” he said.

The bank’s success in agricultural financing is rooted in its risk-management approach.

Rather than relying solely on physical collateral, FCMB evaluates the entire production and marketing process before approving loans.

The bank assesses the source and quality of inputs, expected yields, access to mechanisation, market availability, transportation arrangements, and the financial standing of borrowers.

It also ensures that farmers and agribusiness operators are linked to reliable off takers who can purchase their produce after harvest.

This approach has helped the bank maintain one of the lowest non-performing loan ratios in the sector.

“You manage most of your risk at the point of approval. We focus on understanding what we are financing, identifying potential risks and putting measures in place to mitigate them before funds are disbursed,” Gumunyu said.

One of the bank’s most effective risk management tools is structured aggregation models.

Under this arrangement, farmers are grouped under aggregators who provide quality inputs, extension support and guaranteed market access.

The aggregators purchase produce from participating farmers and sell to processors or larger buyers, ensuring a stable flow of products and payments.

The model has delivered remarkable results.

Gumunyu revealed that one FCMB-supported aggregator that started with approximately N16 million in financing has grown into a major agricultural enterprise supporting more than 300,000 farmers across Nigeria.

Through access to quality seeds, fertilisers, mechanisation services, and structured markets, participating farmers now achieve average maize yields of about 4.2 tonnes per hectare, significantly above the national average of 1.5-2 tonnes.

In addition, farmers receive prices approximately 38 per cent higher than they would typically earn through informal market channels.

The impact on livelihoods has been substantial.

Farmers are investing in education, healthcare, transportation, and agricultural equipment, while rural economies are experiencing increased economic activity.

“We have demonstrated that smallholder farmers can be financed profitably and with very low risk. The aggregator benefits, the farmer benefits and the entire ecosystem benefits,” he said.

The bank has also introduced several mechanisms to de-risk agricultural financing.

These include insurance products covering droughts, floods, fire outbreaks, theft and transportation risks.

FCMB also works with development finance institutions and guarantee providers to reduce exposure and expand access to affordable credit.

Additionally, the bank deploys collateral management systems that monitor financed commodities and prevent diversion of proceeds.