EXAMINE THE ROLE OF FINANCIAL INSTITUTION IN AGRICULTURAL DEVELOPMENT IN NIGERIA WITH PARTICULAR REFERENCE TO NIGERIA AGRICULTURAL AND CO-OPERATIVE BANK ENUGU
ABSTRACT
This project is an attempt to examine the role of a financial institution in agricultural development in Nigeria with particular reference to Nigeria’s agricultural and cooperative bank Enugu. And to suggest ways by which they can be of better use to the nations. The project also made a desperate attempt to get a view of some farmers. Chapter one consists of the general introduction of the research topic, the statement of problems, the purpose of the research, and the methodology… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
INTRODUCTION
Background
Agricultural is one of the most important sectors of our country’s economy. Enugu state is no exception. Enugu state is characterized by low farm incomes, primitive farming techniques which lower the level of production, and low level of capacity to satisfy the food and fiber need of the nation.
Infant agriculture is in part-type peasant agriculture which has been mentioned by many writers as caught in a vicious circle of property low income resulting in poor savings and little investment because technology is poor, the output is always low and income yield is low. Generally, agriculture in Nigeria is caught as a low-level equilibrium trap. The nature of technology is used always affects the rate of return; i.e. the rate of return cannot rise because of poor technology in use. This also a result of poor financing, such agriculture has been described as efficient but poor.
In order to alleviate the numerous problems being encountered by farmers and the economic loss suffered by both individual farmers and government in the international and local trade transactions, then government decided to finance most of the agricultural projects limited by individual farmers, co-operatives, and institutions… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Statement of the Problem
Many developing countries of the world have very few financial facilities, considering the evolution of the financial market in Asia, Latin America, and Africa countries, it was asserted that new financial facilities are very much needed to extend financial help especially in Nigeria. In supporting this assertion, it was contended that at a certain stage in agricultural development.
Agricultural credit clearly does become a strong force for further improvement, when a man with energy and initiative who lacks only the resources for more and efficient production is enabled by the use of credit to eliminate the block on his path to improvement.
Within the two capital markets (institutional and non-institutional) available to rural producers, the informal sources are the most extensive supplier of credit Nigeria yet these sources have not supplied the amount of credit enough in terms of the requirement by farmers to modernize their farming methods… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Research Objectives
The objectives of the study are to determine the role of a financial institution in agricultural development in Nigeria. This will specifically include
- To examine and evaluate the agricultural create it granted the farmers in recent years… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Significance of the Study
The agricultural sector of the Nigerian economy like any other sector of the economy cannot function without fund. Unlike the other sectors of the economy, the agricultural sector can guarantee repayment of loan borrowed or collected only after a long period of time. This is because of the slow nature of the production process.
However, this has acted as a hindering factor for giving out loans to the agricultural sector by financial institutions. If this continues in its current path, the continuous lack of fund would lead to the eventual collapse of agricultural activities… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
LITERATURE REVIEW
- Theoretical background
There are many problems operating against the development of agriculture in Nigeria. The most serious of these problems is the inadequacy of credit facilities. This has caused a lot of setbacks to the development of this sector of the Nigerian economy. Several banks have been encouraged by the federal government to give out loans to needy farmers to boost agricultural production in the country. The effect of agricultural production in relation to bank credit is a master of great value based on the effect an unhealthy agricultural environment has on a country.
These can be seen from such angles which include; Starvation, poverty, unemployment, poor economic growth, over-dependence on other countries, and many more. According to Uchegwu (1995:10),” in trying to solve this problem and encourage the bank to meet the prescribed credit target, the federal government established by decree no. 20 of 1977, the agricultural credit guarantee scheme fund (ACGSF) managed by the central bank of Nigeria”… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Agricultural Credit Policies
These are policies set up or made by the government at different levels in a bid to increase agricultural output. According to Uchegwu O. (1995), the various governments intensified their effort towards maximizing agricultural production during the first half of 1977. In order to induce banks to increase loans and advances to agriculture, the federal government and central bank established an agricultural credit guarantee scheme fund designed to guarantee loans given by any bank to farmers and cooperate institutions for agricultural purposes… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Features of the Agricultural Credit Guarantee Scheme
Loans given out order ACGS are done at concessionary interest rates. The guarantee is backed by an authorized fund of a 100 million naira to be subscribed to by the federal government and the central bank of Nigeria in the proportion of 60% and 40% respectively. The fund is under the management of the ACGS. The Fund board works with the central bank as the managing agent for its day-to-day administration. The agricultural purposes of which loans can be guarantee by the fund are:-
- The cultivation and production of cereal crops, tubers, fruits of all kinds, cotton, beans, groundnut, bananas plantain, and pineapples.
- The establishment or management of plantation for the production of rubber, oil palm, cocoa, coffee, tea and similar crops, animal husbandry, pig and cattle rearing, fish farming depending on the magnitude of the loan… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
The Role of Parastatals in the Development of Agriculture in Nigeria
The federal government has also set up various parastatals to aid the development of agriculture in Nigeria by decentralizing their roles and status. Such parastatals include:-
- National Accelerated Food Production Project (NAFPP):
NAFPP was based on the green revolution concepts and experiences of Mexico, India, the Philippines, and Pakistan. It was established in the year 1973.
The project had 3 components namely:
- Research
- Extension
- Agro services
Its main objectives were the acceleration of the production of six major food crops, namely rice, millet, sorghum, maize, meats, and cassava. However, this program failed due to inadequate commitment by some states, inadequate public, and poor infrastructural facilities… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Extension Research and Rural Development Strategies in Aid of Agricultural Development in Nigeria Extension
According to Yomere G.O and Agbonifoh B.A (1999), this is a service that assists the farmers through educational producers in improving their farming techniques thereby increasing their production efficiency income as well as improving their standard of living.
It helps rural farmers solve their problems through the application of scientific knowledge in a voluntary program. The aim of agricultural extension is to teach rural people how to raise their own resources. It encourages progressive growth through local leadership, civic pride, and self-help.
The scope of extension is very broad. It is not a mere matter of giving the farmers knowledge from research and technology to help raise efficiency, but it helps them learn about changes, the reasons for it and the uncertainties inherent in the change… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Introduction
This chapter will focus on the exposition of the methods used in obtaining data and information for the purpose of this study. In this case, primary attention would be paid to the type of information to be collected, the sources of data, and the data collection procedures.
Research Design
The survey method shall be adopted for this study. This method focuses on the framework for controlling data collection. The main objective of the survey method is to ensure the accuracy of information. The use of questionnaires for data collection will be adopted.
Population of the Study
The population of this study includes farmers, which could include larger scale and small-scale farmers, financial institutions that provide credit facilities for the farmers, and the Nigerian Agricultural And Co-Operative bank… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
RESEARCH FINDINGS AND DISCUSSION
The analysis of data collected from respondents would be dealt with here. A total of 200 questionnaires were administered to 200 farmers comprising large-scale farmers and small scale farmers and small-scale farmers. Of the 200 questionnaires administered, 188 were dully completed and collected, thus representing a 94% return rate while 12 questionnaires were not returned representing 6%.
Characteristics of Respondents
Table 4.1: Distribution of Respondents According To Educational Qualification
| Qualification | Frequency | Percentage |
| Elementary | 150 | 79.2 |
| SSCE | 35 | 19.1 |
| NCE/OND/HND | 3 | 1.7 |
| B.Sc | – | – |
| M.Sc | – | – |
| Total | 188 | 100 |
Source: Fieldwork, 2010
Above, shows that 79.2% of the respondents have an elementary qualification which is to no qualification, 19.1% of them possess SSCE while 1.7% of the respondents are NCE/OND/HND holders. In other words, a greater percentage of the farmers has a low educational qualification.
Table 4.2: Distribution of respondents according to the level of operation
| Level of operation | Frequency | Percentage |
| Large scale | 58 | 30.8 |
| Small scale | 130 | 69.2 |
| Total | 188 | 100 |
Source: fieldwork, 2010
The data above shows that 30.8% of the respondents operate on large scale farming while 69.2% of them operate on small-scale farming… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
SUMMARY OF FINDING, CONCLUSION, AND RECOMMENDATION
Summary of Findings
In the course of the study, we discovered that over the years there has been a steady decline in banks investment in agriculture especially by our indigenous banks, this is attributed to the risk involved in the trade of agriculture ranging from weather conditions to divergences of funds and hence low recovery rate of finances which affects the banks’ willingness to assist. There was also the discovery that there were no enough loan officers or staff willing to supervise and follow up the farmers to monitor the use of funds for the farm operations.
The inadequacy of financial institutions to cater to the needs of farmers is yet another problem of the agricultural sector; coupled with this is the problem of collateral security demanded by banks. High-interest rates are also another factor that pushes the farmers from even considering a bank loan and so food production remains on the small-scale level. In cases where farmers take the loans they find it difficult to pay back over the years, interest rates have been between 15-30%, which the farmers say is high… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Conclusion
The role of agriculture in the development of the country is an enormous one. Agriculture is not only important for food production and for the production of raw materials of different sectors examples of which are clothing, pharmaceutical, furniture, etc but also serves as foreign exchange earners for the country.
In Nigeria Agriculture has not been able to attain its full objectives and improper funding has been identified as its major problem. It is known that the effective contribution of agricultural lies increasing the hectares under the farmers’ management, will reduce the unit cost of product and the total cost of credit administration and also bring about improved farm management and facilitate the adoption of improved technologies in agriculture. This can be facilitated if the banks could enhance the greater flow of funds to agriculture… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
Recommendations
In regard to the discoveries made above, the following recommendations are put forward:
- Loan increase
It is advisable to increase the number of loans given to farmers to assist them adequately considering the fact that increased input generally yields an increase in output. Banks and other formal credit institutions should de- emphasized the possession of securities and collateral before loans are given. The social rating of individual credit worthiness measured by guarantors should be used to guarantee the repayment of the loan.
- Qualified Staff
This suggestion stresses the need for qualified and skilled staff to assess, follow up, and monitor the farmer and the investment loan is given so as to help him pay back and make some profit.
Bank and other formal credit institution should make it easier for the farmers to get loans without undergoing long processes which are usually involved in securing loans from their institution. Loans supervision should also be carried out to make sure loans are not used for another purpose… (Scroll down for the link to get the Complete Chapter One to Five Project Material)
BIBLIOGRAPHY
Adegeye A.J and Ditton J.S. (1985), Essentials of Agricultural Economics, Impact Publisher, Ibadan.
Anyanwu et al (1977), The Structure of the Nigerian Economy 1960- 1977, Joanee Educational Publications Ltd;
Anyanwu, J.C (1993), Monetary Economics. University of Ibadan Press. Ibadan, Nigeria Ed.3
Coast, W.L.(1987), Money and Monetary Policy in Less Developed Countries, Puganon Press, New York, U.S.A, Ed.1
Essay M.S and Otayide S.O (1974), Intermediate Economics Analysis, Aromolaran Publishing Company Limited, Ibadan. Focus on Agriculture and Rural Development(Executive Summary) http;//www.Nigeria Gov./ Democracy/Chapter 3/Agriculture.Htm.pg 1
Furness Eric. L. (1975), Money and Credit in Developing Africa, Heinnemann Educational Books Limited.
Hornby A.S (1999), Oxford and Advanced Learners Dictionary of Current English. (Financial Institution)
Inegbenebo A.U (2002), Introduction to Entrepreneurial Development. (Financial Institution)
Layi Afolabi (1999), Law and Practice in Banking, Heinnemann Educational Books (Nigeria) plc. (Financial Institution)
Lord Hailey (1996), Credit Facilities and Agricultural Development; Chicago University Press. (Financial Institution)
Ogiemuoniyi E.L (1985), Commercial Banks and Agricultural Development in Nigeria, Nigeria Institute of Banking, Longman Group Limited Burnt Mill Harlow Essex, U.K. (Financial Institution)
Okigbo, P.N.C (1981), Nigeria’s Financial System, Structure and Growth, Nigeria Institute of Banking, Longman Group Limited, Burnt Mill Harlow Essex, U.K. (Financial Institution)
Osula E.C.C(1987), Introduction To Research Methodology, Africana FEP Publishers Limited, Onitsha, Nigeria. Ed. 2 (Financial Institution)
Patrick I.Osiegbu (1999), Money, Banking and Economy in Nigeria, Outreach Publications, Calvary College of Theology Port Harcourt, Nigeria. (Financial Institution)
Sanusi. J.O (1996), Financing Agriculture in a depressed Economy. (Financial Institution)
Anyanwu et al(1977) the Structure of the Nigerian Economy, (1960-1997), Joanee Educational Publishers ltd. Onitsha pp 14-17. (Financial Institution)
Layi (1999) law and practice in Banking, Heinemann Educational Books (Nigeria) plc pp 1-4. (Financial Institution)
Patrick i. osiegbu (1999) Money, Banking and Economy in Nigeria Outreach publications, Calvary college of theology, Porthacourt, Nigeria, pp.188-190. (Financial Institution)
Yomoere G.O and Agbonifoh B.A.(1999) Research Methodology in Social Science And Education Centre piece Consultants Nigeria Limited, Benin City, Nigeria pp.98-123. (Financial Institution)
Anyanwu, J.C (1993), Monetary Economics, University Ibadan Press, Ibadan. Nigeria. Ed. 3. (Financial Institution)
Anyanwu et al (1977), The Structure of the Nigeria Economy 1960 – 1977, Joane Educational publications Ltd, Onitsha pp 14-17. (Financial Institution)
Hornby A.S (1999). Oxford and Advanced learners Dictionary of current English. (Financial Institution)(Financial Institution)
Layi Afolabi (1999) Law and Practice in Banking. Heinemann Education Books (Nigeria) Plc pp 1-4. (Financial Institution)(Financial Institution)