That the CEO of a Nigerian bank, with the word “city” in its name, participated in a session on agriculture at the recent World Economic Forum on Africa, is proof that financial companies in Africa’s most populous country are starting to take the opportunities that farming offers more seriously.

“The fact that you have a bank that has its origins in investment banking, as we do, looking seriously at agriculture, is a positive development,” said Ladi Balogun, MD and CEO of Lagos-based First City Monument Bank.

In recent years, many Nigerian banks have been more interested in lending to speculators on the stock market, than funding the real economy, including agriculture. This was one of the reasons for the near collapse of the banking sector in 2009, which forced the Central Bank of Nigeria (CBN) to bail out nine banks and introduce deep reforms.

Under the leadership of its straight talking governor Lamido Sanusi (also one of TIME magazine’s most influential people in the world for 2011), the CBN has put a new focus on agriculture. One of the measures introduced is the Commercial Agriculture Credit Scheme (CACS) that has made money available to the banks and state governments to finance agricultural enterprises.

“In Nigeria today, agricultural lending comprises about just 1% of total loans, where [agriculture] is responsible for about 42% of our GDP,” noted Balogun.

He said the policies being put in place by government and regulators to fast-track agricultural growth are “bringing players like ourselves, who haven’t previously taken agriculture very seriously, to look at this sector very, very closely”.

According to Balogun, Nigeria still has a lack of technical expertise regarding agricultural finance. “If you look at the history of a lot of commercial banks . . . the depth of skills in areas such as agricultural lending is very low. Now what you are beginning to see is banks in Nigeria starting to gear up and train, and even import talent from other African countries to set-up agricultural desks.”

The entry of large retailers such as Spar and Shoprite into Nigeria also bodes well for agricultural lending because it gives farmers a ready market for their products, thereby reducing the risk that they won’t be able to pay back their loans.  “One of the big challenges . . . is that you can’t do any sort of credit analysis on the financial viability of the small farmer. They also don’t necessarily have a credit history. If you have a more established company buying the produce, it certainly makes it a lot easier to finance,” Balogun explained.