CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Nigeria is endowed with natural resources large fertile farmland wide range

crops and river amongst others. Despite its abundant natural resources it is faced

with 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 improved the

standard.

Prior to the discovery of petroleum in Nigeria agriculture used to be the highest

foreign exchange resources earner and contribution to gross domestic product GDP

has been estimated to about 62.63% in 1960 48.08% in 1970s 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

natural and majority of population is dependent directly or indirectly on agriculture

for their live hood. Credit delivery is perhaps one of the most important roles of

microfinance banks as the loans extended are used to expand existing businesses

and in some cases to start new ones. According to CBN (2008) microfinance loans

granted to clients is increasing from 2007 to date and most of it goes to financing

micro-enterprises in rural areas.

Ketu (2008) observed that Microfinance banks have disbursed more than eight

hundred million micro-credits to over 13000 farmers across the country to

empower their productive capacities. As such it is expected that agricultural output

will increase with the increase in finding. The entrepreneurial capacity of the

farmers we thus improve.

1.2 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 Nigeria economy and development is one

of the crucial requirements for the overall economic growth.

He noted further that the declined 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 (NATPP) green revolution programs (GRP)

In search for all appropriate technique in order to increase farm output and

productivity and such program have at one time been implemented.

Based on these a number of problems one facing the agricultural sector and they

are as following. Inadequate finance or credit facilities inadequate farms input

lack of storage facilities lack of basic amenities Lack of technical know-how lack

of research and illiteracy of the farmers.

The questions to which this research will provide answers to one is the credit

advanced to farmers through microfinance adequate to have a significant impact on

agriculture? All these problems can be solved or rather reduce when there is

adequate financing.

1.3 RESEARCH QUESTIONS

This study revolved around the answering of the following research question.

What extent does microfinance loans influences the agricultural output in

Nigeria economy?

What policy actions can be implemented to boost the agricultural productivity

in Nigeria through microfinance?

1.4 OBJECTIVES OF THE STUDY

In this study therefore the researcher hope to accomplish the following objectives:

To determine how microfinance loans/credit granted to the farmers can

influences the agricultural output in Nigeria economy.

To determine policy actions in which agricultural output can be improved

through microfinance bank credit.

1.5 HYPOTHESIS OF THE STUDY

Microfinance banks loans have no significant impact on agricultural

development in Nigeria.

1.6 SIGNIFICANCE OF STUDY

Microfinance services particularly those sponsored by the government have

adopted a traditional supply led subsidized credit approach mainly directed to the

agricultural sector and other non-farming activities but the effect has short lived.

The Nigerian economy stands to derive lot of benefits if concrete steps are taken to

salvage the agricultural sector opinions are divided as the actual benefit of

microfinance policy regulatory and supervisory framework and how it can develop

economy most especially the agricultural sector because it has grasps of the

challenges facing agriculture.

To the researcher this work will serve as an avenue to broaden my knowledge as

it places a challenge that will expand my intellectual horizon by and applying

various economic tools analysis draw conclusion for future analysis. It is also

expected to serve as an impetus for further researchers in this area of study. It

should not be considered as an end to research and policy making but as a guide

taking into consideration of its limitation.

To the government and its agencies it looks at earlier policies designed and why

they failed. Therefore it is hoped that it will provide a useful guide to policy

makers in agriculture for steady and consistent policies and programmes in terms

of funding.

To the society this researcher’s work will create awareness of the microfinance

services that enables them engage in economic activities to be self-reliant increase

employment opportunities wealth creation growth and development. Finally the

salient findings of the study will also make the farmers to be more oriented in

agriculture.

1.7 SCOPE OF THE STUDY

The scope of this research covers the period from 1980 to 2013. The period is

significant because a lot of measures were adopted following the advert of crude

oil and its collapse. That is pre-sap and implementation and role in financing the

agricultural sector.