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

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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country due to the outdated and primitive techniques of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

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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

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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?

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OBJECTIVES OF STUDY.

The objectives of the study are to determine the role of financial

institution in agricultural development in Nigeria. This will

specifically include

1. 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.

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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).

SIGNIFICANCE OF THE STUDY.

The agricultural sector of the Nigeria economy like any other

sector of the economy cannot function without fund. Unlike the

other sectors of the economy agricultural sector can guarantee

repayment of loan borrowed or collected only after a long period

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of time. This is because of the slow nature of the production

process.

However this has acted as a hindering factor to giving out

loan 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.

The problem of lack of fund and credit facilities in the

agricultural sector has been chosen because the persistent

shortage of fund would lead to a fall in the production level of the

agricultural sector the agricultural sector whose importance

cannot be over stated.

Nevertheless there would be some beneficiaries in this

study which will include the government financial institutions

large and small scale farmers as well as the general public.

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STATEMENT OF THE RESEARCH HYPOTHESIS.

This study would be guided by the following hypothesis;

i. Ho: the agricultural down drain cannot be curbed through

effective bank credit.

Hi : the agricultural down drain can be curbed through

effective bank credit.

ii. Ho: bank credit and financial facilities are not made available

by development bank to farmer.

Hi: bank credit and finance facilities are made available by

development bank to farmers.

iii. Ho: bank credit facilities have been ineffective due to their

policies formulated and not their implementations and

utilization.

Hi: bank credit facilities have been ineffective due to their

improper implementations and utilization and not due

to the policies formulated.

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SOURCES OF DATA.

For this study data and information from different sources

would be required to test the research hypotheses and solve the

research problem. Content that would be analyzed in the process

of data generation include books newspapers magazines

journals minutes of meetings publication of any involved body as

well as other media for recording historical data. The sources

listed above would provide primary and secondary data.

LIMITATION OF THE STUDY.

Some factors may limit the level of accuracy and reliability of

this study. Such factors include.

i. Difficulty in obtaining data.

ii. Low response rate from involved parties.

In the absence of the above mentioned limitations all other

errors and omissions are entirely those of the researcher.

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DEFINITION OF TERMS.

i. AGRICULTURE: This can be defined as the growing of crops

and rearing of animals for human consumption. Agriculture

involves live stock forestry wide life and fisheries as well as the

production of crops like cocoa palm product groundnut cotton

and rubber. Historically the Nigerian agriculture can be

categorized into three. They are

 The subsistence type.

 The diversified type.

 The plantation type.

The subsistence type is the production type done mainly for

human consumption with little or no surface.

The diversified type is the production type that is done

beyond individual consumption or domestic level.

The plantation type although have not made any impact in

the Nigeria agriculture it accounts for a small amount of total

Nigeria agricultural output. It involves the use of improved

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modern techniques and it is run in the state by their development

cooperation.

ii. AGRICULTURAL SECTOR: The agricultural sector is one of the

sectors of Nigeria economy... it is the sector responsible for the

provision of food supply and raw materials for domestic and

foreign industries.

iii. FINANCIAL INSTITUTION: These are organization owned

either by individual group or persons state or country as a whole.

Financial institutions are established mainly for saving money

(deposit) for their customers and providing for such deposit and

when needed and also the granting of credit facilities to their

customers based on the credit worthiness of such customers.

iv. NIGERIA AGRICULTURAL CO OPERATIVE AND RURAL

DEVELOPMENT BANK (NACRDB): It is a body charged with the

duty of granting credit facilities to individual farmers as well as

the group farmers for the purpose of fueling their farming

activities. It was previously known as Nigeria agricultural

cooperative bank (NACB) and became Nigeria agricultural

cooperative and rural development bank (NACRDB) after merging

with the defunct people’s bank of Nigeria and family economic

advancement program.