THE INFLUENCE OF AGRICULTURAL COOPERATIVES IN THE DEVELOPMENT OF FOOD PRODUCTION IN NIGERIA

CHAPTER ONE

INTRODUCTION

Background to the Study

Agriculture accounts for about 20 percent of GDP, in the African sub-region (World Bank, 2005); two third of the people derive from livelihoods and 40 percent of exports commodities come from this sector (World Bank, 2000). Despite the importance of the agriculture sector, its performance over the last 30 years has been disappointing: agriculture and food production per capital in West Africa has stagnated in last ten years (FAO, 2005) yield of grain crops are less than half, those of other developing regions in Asia and South America. If Africa is to feed itself, lift its people out of poverty and attain a satisfactory level of sustainable growth, the poor in the performance of its agricultural sector must be addressed. It is the dominant sector in the rural areas of Nigeria as it provides less than 50% of the country’s cultivable agricultural land is under cultivation particularly because smallholder and farmers who use rudimentary production techniques cultivate most of this land with resultant low yields. The smallholder farmers are constrained by many problems including those of poor access to modern inputs and credit, poor infrastructure, inadequate access to markets, land and environmental degradation and inadequate research and extension services (Oluwatayo, et al 2008).

In an effort to overcome some of these issues, donor agencies and government have re-emphasized cooperative as a strategy to promote collective action to strengthen smallholder’s livelihoods by linking them to national and international markets. Cooperatives are defined as autonomous association of persons who unite voluntarily to meet their common economic and social needs aspiration, through a jointly owned and democratically controlled enterprise (International Cooperative Association’s, (ICA) 1995). Cooperatives are established by like-minded persons to purse mutually beneficial economic interest and they provide a unique tool for achieving one or more economic goals in an increasingly competitive global economy. These goals include achieving economic of size, improving bargaining power when dealing with other business, purchasing in bulk to achieve lower prices and obtaining product and services otherwise unavailable.

Develtere (1995), described cooperative as a medium through which services like provision of farm input, farm implements, farm mechanization, Agricultural loans, agricultural extension, members education, marketing of members farm produce and other economic activities and services are rendered to members. Cooperative can be multi-purpose or focused on area. An example of the latter is farmer’s cooperative provides smallholder farmers with economic of scale by facilitating cheaper and more efficient access to inputs, production technologies, market information and markets.

Today in an area where many people (especially small-holder farmers) feel powerless to change their lives, cooperative can serve as a strong, vibrant and viable economic alternative. They are based on the powerful idea that are formed together, a group of people can achieve goals that none of them can achieve alone. It has being considered as a third force, an alternative and countervailing power to both big business and big government (ICA, 1995)

Agricultural cooperative encourage members to engage in joint cultivation of food and cash crops among others. In view of the financial capacity and high level of underdevelopment, an individual farmer cannot achieve the desire for large-scale production. It is therefore; in the farmers’ interest that resources are pulled together so as to gain tremendous collective advantage and thus widening the industrial base of the economy and the management techniques of the farmers (Enikaselu et al, 2005).

Group projects are increasingly being relied upon by governments, bi-and multi-laterals and non-governmental organizations (NGOs) as the preferred model for rural development project implementation and poverty alleviation (Grootaet, 1998; Harris, 1997; World Bank, 1997). Thus despite the low performance of cooperatives, the World Bank (1997) claims they remain the preferred form of organization, and perhaps the only organization with which rural people are familiar (Hussi 199:12). For instance farmers cooperatives society are formed to bring in more agricultural inputs and product marketing services members, increase competition in the agricultural service sector and provide saving and credit to members, among many other function (Porvali, 1993). Small holder farmers stand a better chance with the formation of agricultural cooperatives.

The cooperative as a social organization began early in human development. Cheney (1999) opined that cooperatives were always inspired by the doctrine of human fellowship, by the new spirit of social services and by a firm faith that the time would come when people would work for the whole community, instead of their own gains. Ghosh and Maharjan (2001), modern cooperatives started in 1904 in British India when the cooperative societies act was enacted. The purpose of the cooperatives at inception was to provide cheap credit to the farmers. Cooperatives was introduced into Russia in mid-19^th century from Germany (Lohlein and Wehrheim, 2003), but the exact years was not stated. However, Lohlein and Wehrheim (2003) reported that by 1883, there were about 981 cooperatives in Russia. Those in rural areas are called credit cooperatives while those in the urban centers are refer to as credit union.

Furthermore, before Rochdale, cooperative pioneers societies had practiced most of the Rochdale principles. Gates (1998) found profit sharing and surplus sharing cooperatives between workers and owners, as far back as 1795 and (as might be expected) the genius of the Rochdale cooperative was that they actually developed principles, which they then practiced and popularized. Subsequently, following the guiding principles of cooperative promotions by the ICA, various cooperatives rapidly developed worldwide-both in developed and developing countries and this made immense contribution to social and economic development (ICA, 2008).

The evolution of cooperatives has shown that the cooperative movement has been influenced by the social and economic conditions. Cooperative was created by their members to deal with their own difficulties, in relation to aspects of economic change (Fairbain, 2004a). Djik (1997) summarized the historical reasons to industrially firms which included the need for counterbalancing power; to gain access to industrially produced goods and services; efficiency by economies of scale; risk management and the improvement of members’ income and the rural economy.

Illiopulous and Cook (2004) over-view the historical development of famers’ cooperatives in America, and divided them into two main types which included ‘Traditional’ cooperatives and; new generation’ cooperatives. Traditional cooperatives often refer to producer-owned, controlled with open membership, and risk capital generated primarily by means of retained earnings from member patronage and illiquid equity ownership rights. A new generation cooperative (NGOs) often adapts “a property rights structure that enables them to partially ameliorate the aforementioned constraint” (Illiopoulous & Cook, 2004). Cook and Burress (2009) further research also proposed a dynamic life cycle framework includes five phrase of economic justification: organizational design. Growth, glory and heterogeneity, recognition and introspection, and choice (Cook and Burress, 2009).

The early cooperative societies in Nigeria were established to facilitate cocoa farming which led to the establishment of the Cooperative Registrar of the Colonial Government in 1935.

Later, these cooperative societies began providing intermediation to members (World Bank, 2000). Eventually multi-purpose cooperative societies were designed to simultaneous solve several problems facing members and marketing of farm produce. Consequently one could arguably state that the need to reduce shortage of loans to the low income farmers among the members thus promoting agricultural development brought about cooperative societies in Nigeria (Oluyombo, 2010). The operation of cooperative within and outside Africa varies from one nation to another. In some countries, there are rules and regulations guiding the operation of cooperatives which they are expected to comply with. The regulation may require the cooperative to be under the direct control the Central Bank of such nation or a separate agency may be created to monitor and control the affairs of cooperative depending on what the country deems acceptable to do (Henry and Schimmel, 2011).

The survival of cooperative societies in any country depends largely on the overall political and economic environment of such nation because cooperatives exist within the wider economy of the particular country where it operates (Calkins and Ngo, 2005). The practice of cooperative has grown over the years across the globe either as formal or informal institutions. The regulation of farmers’ cooperatives is a function of the roles they are expected to perform in such economy vis-a-vis the level of economic development and poverty in such a nation (Oluyombo, 2010). Cooperative with track records of prudent management and cohesive membership stand to play a major role in agricultural and rural development in Nigeria.

International organizations such as the United Nations (UN), the World Bank and the International Labour Organization (ILO) are convinced that agricultural cooperatives can play a vital role in achieving sustainable rural development. UN (2008) noted that cooperatives are by nature with concerned with democratic and human values, as well as car8ing for the environment.

Successive governments in Nigeria recognize that cooperative societies are essential for the development of the agricultural sector. This laudable goal was supported by the establishment of the Agricultural Development Programme (ADPs) and he River Basin and Rural Development Authorities (RBRDAa). Both ADPs and RBRDAs always organize farmers under their programmes into cooperative group for better co-ordination of the farmers’ activities. The cooperatives approach to group action has been effectively utilized by these two programmes. Although, the primary objectives of forming group farming cooperatives in ADPs and RBRDAs is to increase agricultural outputs, it has been possible to get them involved in marketing of their produce as well.

Farmers are the single largest group of users and managers of land, water, and other ecological resources throughout the world. Most small holder farmers regardless of gender require services and information obtainable through membership of agricultural cooperative. Such information includes appropriate technology and sound technical advice not only to increase their agricultural productivity and incomes but also make farming and rural life richer and more sustainable. Herein lies the retinal why agricultural cooperative is deserving of research attention particularly in Abaji Area Council where major farming activities are taking place around the Federal Capital Territory of Nigeria.

1.2   Statement of Research Problem

Small-holder farmer including Nigeria has accounted for over 90% of all agricultural output in Nigeria (World Fact Book, 2011). The farmers are burdened with high cost of farm inputs, insufficient farming techniques, inadequate infrastructure, poor producers’ prices and heavy constraints in obtaining credits and insurance. Benson (2004) remarked that the situation is further compounded by the general economic downturn and governments drive to remove all subsidies on inputs such as fertilizers, vaccines and foundation stock. Consequently, the cooperative option comes into focus as viable way to effectively mobilize farmers to form groups and pool resources so as to become more effective in agricultural production.

In addition to the values and principles of cooperatives, Veerakumaran (2005) explained that cooperative serve as fundamental tool for achieving food security at household level. Cooperatives are the best institution invention for attaining food security in any country.

The developed national like United States of America, Canada, Australia, almost all European countries and socialist country like China have attained food self-sufficient through cooperatives (Chambo, 2009)

Gertler (2001) using the profit model studied the potential impact cooperatives have in sustaining regional economies in Canada. The results show that cooperatives are practical vehicles for cooperation, collective action and they build and reinforce community, stabilize regional economies and provide a favourable climate for further investment cooperatives reduce inequality and promote equitable sharing of the cost and benefits of development. Cooperatives can promote economic democracy and the empowerment of marginalized groups a hallmark of sustainable development and a precondition for shared responsibility.

Adefila (2012) examined the factors influencing the performance of farmers’ cooperatives organization in Gurara Area of Niger State, Nigeria using multiple regressions. The results from the regression analysis revealed that farmers’ cooperative organizations are variously involved in agricultural development and that factors’ influencing their role performance.

Include annual income, experience in farming, leadership training and membership size. The author concluded that cooperative in whatever form are seriously viewed as catalyst in the process of rural socio-economic development and the law should empower cooperatives to perform certain functions, such as strengthening their bargaining power as effective agents of socio-economic rural transformation.

Ojiako and Ogbukwa (2012) examined loan repayment capacity of small-holder cooperative farmers in Yewa North Area Ogun State, Nigeria using regression technique. The results show that farm credits played vital roles in the socio-economic transformation of the rural economies. However, loan acquisition and repayment were characterized by numerous challenges smallholder cooperative farmers’ loan repayment capacity would require conscious use of policies directed at increasing loan size and farmers’ farm holdings and/or reducing household size.

Similarly, Ofuoku and Urang (2009) assessed the effects of cohesion of farmers’ cooperatives societies on loan repayment among members in Delta State, Nigeria using Spearman’s rank order correlation analysis. The study observed that there was almost perfect positive relationship between rates of loan repayment perception and cohesion. Consequently, they recommended that extension agents should take advantage of the effect of cohesion on loan repayment to promote cohesion in upcoming cooperative societies.

In evaluating agricultural credit utilization by cooperative farmers in Benue State, Nigeria, Okwoche et al (2012), observed a significant difference between the agricultural output and income of farmers’ before and after the utilization of loan acquired. The t-test analysis shows that famers joined the farmers’ cooperatives societies mainly to access credit.

They recommended that the farmers should be adequately motivated with needed credit facilities as this will further balance agricultural production.

However, considering various studies (Gartler, 2011 Veerakumareen, 2005; Ofuoku and Urang, 2011; Adetila, 2012; Ojako and Ogbulewa, 2012; and Okwoche, 2012) it is on this aforementioned explanation that informed the choice in the development of agricultural in Abaji Area Council.

1.3 Objective of the Study

In general, this study set out to determine the extents to which the cooperative societies can contribute to the development of agriculture in the specific objectives are:

1. provide insight into the role cooperative societies plan in the development of agriculture in Abaji Area Council.
2. identify the types of agricultural cooperative societies in the Area Council
3. examine problems militating against cooperative activities in Abaji Area Council
4. examine the forms of benefit members derive from cooperative societies in Abaji Area Council.
5. provide insight into the process through which the community and cooperative leaders can ensure genuine development of agriculture in the Area Council through cooperative societies
6. examine the measures which all the levels of government will embark on to enhance the cooperatives for better development in Abaji Area Council.

1.4       Significant of the Study

In recognition of the worsening food situation in Nigeria, successive developments have instituted different policies, programmes and project directly or indirectly connected with agricultural production these programmes include, the National Accelerate Food Production Programme (NAFPP of 1973), the Nigeria Agricultural Cooperative Bank (NACB in 1973) transformed to Nigerian Agricultural and Rural Development Bank (NACRDB) in the year 2000 to reflect the rural nature of cooperative activities in Nigeria (FGN Budget, 2000), the Agricultural Credit Guarantee Scheme Fund (ACGSF of 1976), the Agricultural Development Projects (ADPs in 1975), operation feed the Nation in 1976, the River Basin and Rural Development Authority (RBDA in 1976), the Green Revolution in 1976 and very recently presidential instructive on food production, National Fadama Programmes among others.

Despite these programmes, policies and schemes instituted by the government to improve agricultural development, the sectors remain backward. Moreover as governments around the world cut services and withdraw from regulating markets, there is the need to continuously evaluate strategy that involves the reorganization of rural producers into viable cooperatives (ICA 2007). Cooperative constitute the most appropriate instructional mechanism for reaching the million of scattered peasant producer in the rural areas for ensuring their access to suitable markets and credits sources for introducing new technologies; skills and development oriented attitudes; for protecting these peasant farmers from the exploitation of the middlemen and money lenders and for ensuring effective participation by the peasants in the development process (Njoku, 1998). In other words, cooperative are considered the most effective instruments for mobilizing the pleasant farmers for rural development and for ensuring that they benefit substantially from the development process.

This study concentrates on variables of agricultural productivity that makes for agricultural development. This helps to trace the role of cooperatives to ownership of farm assets, enterprises assets, enterprise productivity and increase in farm income to determine their contribution to agricultural development. This study seeks to contribute to the emerging body of knowledge on how best to make agricultural cooperative to be more productive, it will deepen the understanding of the values and principles of cooperatives, incorporating them into competitive strategies relying on cooperation, trust loyalty as coordinating forces of economic activities and as sources of competitive difference in agricultural system.

The underlying argument of the study is that cooperatives, based upon some principles represent a unique third way of social organization that enhances technology development and extension markets information and organization, and government policy, it is particularly useful in cases of simultaneous markets and government failure to assure adequate credit, input delivery, technology training, output delivery and social development in poor areas of Africa (Brayerman et al 1991).

The findings of this study will help to suggest to government and non-governmental agencies how social institutions like agricultural cooperatives could overcome the problem of low agricultural productivity and betterment of living condition

1.5 Scope of the Study

The spatial scope of this study is Abaji Area Council Abuja, FCT. The area council is made up of ten wards: Abaji Central ward, Abaji Southeast ward, Abaji Northeast ward, Nuku Sabon-Gari ward, Rimba-Ebagi ward, Yaba ward, Agyana ward, Alumamagi ward, Guridi ward and Gawu ward.

The content scope of the study focuses on the influence agricultural cooperatives have in gradual but sustained in substitution of local implement with improved or modern ones and local species with improved ones. That is gradual transformation from subsistence farming culture to commercial farming.

The choice of the study area is centered on the fact that agricultural cooperative are better and efficiently organized in those areas. In addition, the study area is dominated by poor peasant farmers who come together with common goal of influencing the value-chain with respect to agricultural production, distribution, transfer and marketing. The study focused on agricultural cooperatives such as producers, consumers, marketing and multipurpose. Thrift and credit and not in any way cooperative in general.

1.6 Research Questions

The objectives of the study will be served with the following research questions:

1. What role do cooperative societies play in the development of agriculture in Abaji Area Council?
2. How many types of agricultural cooperative societies are in Abaji Area Council?
3. What are the problems associated with the cooperatives in Abaji Area Council?
4. What forms of benefits do members derive from the cooperative societies in Abaji Area Council?
5. What are the processes that community and cooperative leaders take to ensure genuine development of agriculture in Abaji Area Council?
6. What measures can government embark on to enhance cooperative development?

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