CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Agriculture involves the cultivation of land raising and rearing of

animals and raw materials for industries. It involves cropping live stock

forestry and fishing processing and marketing of these agricultural

products.

Food is man‟s most important basic need before those of clothing and

shelter. It is provision therefore has been the major concern of man from the

past years since it is both an essential condition and sinequanon to life.

Agriculture being the provider of food can then be concluded as the life wire

of any nation and thus be concluded as the life wire of any nation and thus its

importance cannot be over emphasized.

When Nigeria gained their political Independence in 1960 agriculture

was dominant sector of the economy. It contributed over 65% of the

country‟s Gross Domestic Product (GDP) and provided the bulk of the

foreign exchange earnings through the foreign exports of the cash crops. The

sector catered adequately for nearly all food requirement and raw materials

for industry in the country. Agriculture performs a number of functions in

an economy such as:

1.2 STATEMENT OF THE PROBLEM

Nigerian agriculture is confronted with many problems which ranged

from low yield to low productivity and inadequate facilities among others.

Oyatooye (1981) was on the same path when he noted that the problem of

agriculture in Nigeria can be discussed under four headings.

I. Technology

II. Marketing

III. Finance and Government

Such problems include problems of providing adequate extension

services agricultural inputs storage facilities agricultural credit marketing

information and efficient marketing arrangement infrastructures such as

feeder roads efficient power supply and institutional reforms where

necessary. William (1981) pointed out that the major problems facing

Nigeria today are the needs to transform her agricultural industry from one

traditional input with low productivity to one which enables her to meet the

rising expectations of her people and to correct the social and economic

imbalance created by lopsided development between her rural and urban

areas which have encouraged the youths and others to migrate from rural

areas.

His statement is a valid one as when it was made from we have seen the

Nigerian economy is characterized by a high degree of rural to urban drift in

search of greener pastures leaving the farm land to old aged men who are

unable to provide all the food requirements of the growing population. This

is responsible of the growing population. This is responsible for the high cost

of food as there is pressure on the little produced.

Adekanye‟s assertion (1988) when he stated that: it is a common

knowledge that present farmers and artisans who the back of the rural

population do not get adequate and timely loans from financial institutions

and they have no collateral and equally they do not get supplies of raw

materials of standard quality even at the market place as they come under the

ditches of rich farmers and sellers in the urban areas. The need for setting up

of rural based commercial banks is very urgent.

1.3 OBJECTIVE OF THE STUDY

The main objective of this study is to assess the role of the commercial

banks in agricultural development in Nigeria from 1986-2009. Specifically

the study tends to be achieving the following objectives.

I. To access the scope and achievements as well as highlight new role of

Nigerian Commercial Banks to Agriculture.

II. Identify the inherent problems of agricultural financing which have

hindered the smooth flow of credit from banks to agriculture.

III. To offer solutions to identified problems.

1.4 HYPOTHESIS OF THE STUDY

The hypothesis guiding this study are of two type H0 which is the null

hypothesis and H1 which is the alternative hypothesis H0 is that the Banking

Industry has played an important role in agricultural development in Nigeria.

H1: is that the Banking Industry has not played an important role in

agricultural development in Nigeria.

1.5 SIGNIFICANCE OF THE STUDY

This study is useful in many ways.

Firstly Nigerian farmers can know the type of credit or assistance

offered by Nigerian Banking Industry and the benefit from them.

Secondly it will help to update knowledge on how the banks especially

commercial banks in Nigeria thus making it useful for other researchers

schools and readers.

Thirdly it will enable the Nigerian government to take advantage of the

suggestions and more result oriented policy towards boosting agricultural

production in Nigeria.

Finally the salient findings of this study will also make the farmers to be

more result oriented in agriculture.

1.6 SCOPE AND LIMITATION OF THE STUDY

This study covers the period between 1986-2009; it will be an

oversight to think that study such as this will be accomplished without

impediments and constraints. Much as it seems incontrovertible that odds

will be imminent there are some glaring inexorable cases.

Some respondents to interviews are always simplified and simplify in

relating information to researchers.

Again to think of development only in terms of increasing agricultural

output is an under statement.

There is also the clamored non-existence of relevant and indispensable

literature as versatile as possible.

The limitation put together explains why the research is scaled down from

1986-2009

The study only centers on the role of commercial Banking in

agricultural development and factors surrounding their credit decisions to

agricultural sector.

Thus it only assessed the performance of the banks in executing the

role of financing agriculture.

Since it was not possible to get the whole information needed in this

study the study is limited to the Nigerian Economy. The study is equally

limited by time and limited sources of data. There are time constraints in the

process of carrying out research due to in accuracy of data. It is sometime

possible to underestimate or over estimate.