THE ROLE OF FINANCIAL INSTITUTIONS IN AGRICULTURAL DEVELOPMENT (1990-2010)

Abstract   This study examined the role of financial institutions in agricultural development. A case study of Nigeria Agricultural Cooperative and Rural Development Bank, with a view to make useful suggestions and recommendations as way of enhancing the development of agricultural sector. The population for the study includes large and small scale farmers and the sampling method adopted for the study is the stratified random sampling in order to ensure adequate representation of the population. In order to achieve the objective of making useful suggestions that would improve the agricultural sector, a number of hypotheses were made and tested. Samples of one hundred and eighty responses were collected and analyzed using the chi-square (ײ) and tested method. It was discovered that bank credit loan scheme is making some impacts in lending loans to farmers. The result also showed that farmers prefer informal to the formal sources of finance mostly because of the demand of formal institutions that farmers most present collateral security. Finally, the study also indicated that the problems facing agricultural financing.          TABLE OF CONTENT Title page –          –        –        –        –        –        –        –        –        i Approval page – –        –        –        –        –        –        –        ii Dedication           –        –        –        –        –        –        –        –        iii Acknowledgement           –        –        –        –        –        –        –        iv Abstract  – –        –        –        –        –        –        –        –        v Table of Contents – – – – – – – vii CHAPTER ONE – –        –        –        –        –        –                   INTRODUCTION –        –           –        –        –        –        –        –        1 1.0 Background of the Study         –        –        –        –        –        1 1.1    Statement of Research Problem – –        –        –        3 1.2 Objective of the Study    –        –        –        –        –        5 1.3 Scope of the Study          –        –        –        –        –        –        6 1.4    Significance of Study –          –        –        –        –        –        6 1.5 Statement of Research Hypothesis – – – 8 1.6    Sources of Data –          –        –        –        –        –        –        9 1.7 Limitation of Study         –        –        –        –        –        –        9 1.8    Definition of Terms      –        –        –        –        –        –        10 References          –        –        –        –        –        –        –        13 CHAPTER TWO – –        –        –        –        –        –        – LITERATURE REVIEW – –        –        –        –        –        –        14 2.1   Theoretical Background         –        –        –        –        –        14 2.2    Sources of farm Credit           –        –        –        –        –        19 2.3   Agricultural Credit Policies – –        –        –        –        20 2.4   Features of the Agricultural Credit Guarantee Scheme       22 2.5   Bank Credit for Agricultural Development        –        –        24 2.6   The role of parastatals in the Development of Agriculture            In Nigeria –          –        –        –        –        –        –                  26 2.7   Nigerian Agricultural Cooperative and Rural Development           Bank (NACRDB)  –        –        –        –                            31 2.8 Assessment of the Banking Industry’s Development of           Agriculture and Future Expectation        –        –        –        35 2.9   Extension Research and Rural Development strategies In aid           of agricultural development in Nigeria –          –   41 2.10   Importance of credit facilities in Agriculture – – 45 2.11   Constraints of the Nigeria Agricultural sector – 47 Reference –          –        –        –          CHAPTER THREE –          – – – – 50 RESEARCH METHODOLOGY –         – – – – – 52 3.1      Introduction      –        –        – – – – – 52 3.2      Research Design         –        – – – – – 523.3      Population of the study      – – – – – 52 3.4      Sample design –          –        – – – – – 53 3.5      Methods of data collections – – – – 53 3.6     Method of data analyses     – – – – – 54 References          –        –        –        –        –        –        – CHAPTER FOUR – 55 4.0    DATA PRESENTATION AND ANALYSIS     –        – – 56 4.1   Test of hypothesis         –        –        –        –        – – 67 Reference –          –        –        –        –        –        –        –CHAPTER FIVE – 76 SUMMARY RECOMMENDATION AND CONCLUSION – 775.0    Summary and Conclusion     –        –        –        – – 77 5.1    Summary of Findings –          –        –        –        – – 78 5.2    Conclusion –        –        –        –        –        –        – – 805.2    Recommendations       –        –        –        –        – – 82 5.3    General Policy Recommendations          –        – – 84 5.4    Prospects of agricultural financing in Nigeria – – 86 Bibliography       –        –        –        –        –        –        – – 89

 CHAPTER ONE INTRODUCTION BACKGROUND TO THE STUDY Nigeria is endowed with natural resources, large fertile farmland, wide range of crops, and river amongst others. Despite its abundant nature resources it is faced worth a poor food situation. The poor food situation is traceable to the decline in the agricultural sector. The problem of feeding and provision of natural resources is increasing by the day. However, several efforts are being made to improve the standard. Prior to the discovery of petroleum in Nigeria agriculture used to be the highest foreign exchange resources earner and its contribution to gross domestic product GDP has been estimated to about 62.63% in 1960, 48.08% in 1970, and 20.63% in 1980. Recently due to the growing awareness of the role of agriculture, the various governments have intensified efforts aimed at transforming from its present subsistence level to a market oriented production. One of those efforts was the ban made on importation of agricultural products like palm oil, maize and rice. This was done to encourage improvements on our production standard. Due to the fall in the level of production from decade to decade, the country could no longer feed the large population, provide raw material for domestic industries, engage in export of agricultural produce and employ the labor force of the country despite the abundance of human and material resources. In spite of growing urbanization, Nigeria is known to be predominantly rural in nature and majority of the population is dependent directly or indirectly on agriculture for their livelihood. Though, the Nigerian agriculture is characterized by low farm income, low level capacity to satisfy the fond needs of the country, due to the outdated and primitive techniques of production, it is still the mainstay of the nation’s economy. Measures and program setup to upgrade the Agricultural sector involve the construction and reformation of the whole structure of the agricultural sector by the creation of appropriate institutions and public services. This would help strengthen the economic position of the dependent farmers. Examples of such measures are National Accelerated Food Production Project (NAFPP), Structural Adjustment Program (SAP), Nigeria Agricultural Cooperation and Rural Development Bank (NACRDB).  STATEMENT OF RESEARCH PROBLEM. According to Anyanwu Etal (1997:14) ‘’the agricultural sector has been recognized for a long time as an important sector to Nigerian economy and development is one of the crucial requirements for the overall economic growth. He noted further that the decline in agricultural activities might appear natural in any development process; it is obvious that in Nigeria agricultural activities would remain the most important single sector for some time to come. He emphasized that in the past, development planners have introduce programs such as national accelerated  food production project (NAFPP), green revolution programs (GRP), in search for all appropriate technique in order to increase farm output an d productivity and such program have at one time been implemented. In recognition of the aforementioned that attempt is made in this study to provide answers or solution to the research problems below. 1.    What are the reasons for continuous fall or decline in the production level of the agricultural sectors of the Nigerian economy? 2.    What actions can be taken to upgrade the current production level of the agricultural sector? 3.    What effect does the decline in agricultural sector have on the human resources of the economy? What measures have been taken in the past to redress the perceived slow growth rate of the agricultural sector? How and to what extent does the performance and commitment exhibited by financial institution in general, Nigeria agricultural cooperation and rural development bank (NACRDB) in particular in terms of providing financial support influenced the activities of agricultural sector?OBJECTIVES OF STUDY. The objectives of the study are to determine the role of financial institution in agricultural development in Nigeria. This will specifically include1.                To examine and evaluate the agricultural create it granted  the farmers in recent years. 2.                To ascertain the effectiveness of credit granted by Nigeria  agricultural cooperation and rural deve3lopment bank  (NACRDB) in the achievements of the pre-planned objectives  of the agricultural sector. 3.                The study seeks to analyze the measures and program set by  the government in a bid to enhancing the agricultural sector. 4. To determine the influence of these measures at  accelerating the growth rate of the agricultural sector. 5. To establish and verify ways by which the agricultural sector  can be improved in the future. The study seeks to achieve the above system aims or objectives.   SCOPE OF THE STUDY. With the aim of examining how the financial institutions influence the activities of agricultural sector, through their credit policies and farm credit system, programs that have been established to review the agricultural sector would be analyzed. A lot of sources for farm credit have been and a number of them have failed to perform their pre-planned functions. An example of such scheme is the Nigeria local development board (NLDB). Our point of focus in examining institution program and scheme setup to upgrade the agricultural sector would be on Nigeria agricultural co-operative and rural development bank (NACRCD).