Abstract
In this paper we analyse the legal instrument establishing the Agricultural Credit Guarantee Scheme Fund and the Fund's operation in 1978. The Fund is directed at increasing the productive capacity of the agricultural sector and the public share of the social costs of agricultural development in Nigeria. However, the legal instrument discriminates against small-scale traditional farmers since such farmers cannot meet the collateral requirements of the Fund unless they are members of group or co-operative farms. By implication, therefore, the Fund aims at re-organising the agricultural sector in favour of large-scale farms. Despite the financial incentives given to the banks, they have not found agricultural loans attractive enough to meet that sector's loan ratio as prescribed by the Central Bank. It is suggested that a village guarantee system be introduced for traditional farms and that loans granted under such a system should carry higher guarantees from the Fund.
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