CHAPTER ONE
1.0 BACKGROUND OF THE STUDY
1.1 INTRODUCTION
According
to Olayide and Heady (1982) small holder farmers contribute over 95% to the
total food output and own over 90% of the cultivated farmlands. Although a
number of constraints to achieving increased agricultural production exist,
such as non-availability of complementary inputs in the right quality quantity,
poor conditions of feeder roads and other transport facilities, inadequate
technologies and so on, credit is the most limiting factor in agricultural
production and productivity in Nigeria (Verheye, 2000). According to Yunus
(2000), micro-credit has proven as an effective and popular measure in the
ongoing struggle against poverty, enabling those without access to lending
institutions to borrow at banks rates to start business. Microcredit is
particularly relevant to increasing productivity of rural economy, especially
agriculture. It may enable small and marginal farmers to purchase the inputs
they need to increase their productivity, as well as financing a range of
activities adding value to agricultural output (Nosiru, 2010). A wide range of
micro credit schemes has been launched in Nigeria in the last two decades to
meet the needs of farmers. Examples of such schemes were the Nigerian
Agricultural and Cooperative Bank (NACB), People’s Bank of Nigeria (PBN). These
organizations had tailored rules and their requirements over the years to suit
the context in which they operate. The Central Bank of Nigeria (CBN) introduced
the Agricultural Credit Guarantee Scheme in 1977. Despite these governmental
programmes and policies aimed at channelling credit to farmers, their credit
problems have persisted. Most of these farm credit programmes have been
criticized on account of their low recovery rate and inadequate diversified
portfolio amongst others (Fakayode et. al, 2009). According to Berger (2002),
micro finance has proven to be effective and efficient mechanism in poverty
reduction all over the world. The 1997 micro credit summit declared as its
goals to reach ‘100 million of world’s poorest families, especially women of
those families, with credit for self-employment and other financial business
services by 2005’. This is a bold objective, since reaching the poorest
families through micro finance is still infancy, and most finance institutions
currently reach the poor, not the poorest. Fischer (2002) admitted that, for
micro credit to have a macro impact on growth and development, we may need it
to evolve in more market oriented ways, so that they can tap the capital
markets, increase their size and reach and truly make a difference at the
aggregate level. Micro finance programme have the potential to transform power
relations and empower the poor, both men and women. This is true regardless of
the methodology or whether the institution takes a minimalistic financial
services approach or holistic or integrated approach. As a consequence, micro
finance has become a central component of many donor agencies and national
governments, gender, poverty alleviationand community development strategies
(Kuhn and Cheston, 2002). According to Snow (2000), micro credit programs
become sustainable institution when net benefits to the community exceed total
sales. Benefits accrue to the community when net businesses are successful and
income increases.
Agriculture is still the most important
sector of the Nigerian economy due to the fact that it plays very important
role in its developmental process. An honest survey of the current agricultural
situation in Nigeria will immediately reveal not only a progressive decline of
the contribution of agriculture to the gross domestic product both in relative
and absolute terms, but also a stalemate in the country’s ability to maintain
its food independence. Food production has not kept pace with the country’
population growth rate. While the annual rate of population growth is estimated
at between 2.5% and 3%, that of food production is between 1 and 1.5% (Opara,
2010). This substantial population growth affects urban and industrial centres
more than rural areas because the population of the rural areas, where food is
produced, remains essentially stable but has not met the requirements of a burgeoning
urban population. In other words, while the number of food producers remains
essentially unchanged, the number of consumers is rapidly increasing (Verheye,
2000). Almost the entire output of agriculture comes from small-scale farmers
with very little capital and employing techniques that are usually
characterized as primitive.
In Nigeria the provision of
institutional credit to small holder farmers has been the policy thrust of
successive governments. The first attempt at the injection of financial capital
into the agricultural subsector in Nigeria was made by the Federal Government
in the 1962 – 1968 development plan with the provision of six million naira
(N6m) for the development of that sector of the economy (FMED, 1981). Following
this, bank credits to the agricultural sector in nominal terms over the years
increased from N230 million (then about $233 million) in 1978 to over N262
billion ($2.23 billion) in 2005 (CBN, 2010 a). This is in realization of the
fact that to sufficiently boost food production and adopt new agricultural
technologies and innovations, there is the need for farmers to borrow money
from lending institutions (Obasi et al, 1995). Moved by the desire to reduce
import dependency, as well as by the need to relieve dependence on the oil
sector for economic growth, Federal and state governments stepped up efforts to
promote agricultural development through the establishment of a number of
agricultural credit schemes. These schemes include the Agricultural Credit
Guarantee Scheme Fund (ACGSF), the Special Emergency Agricultural Loans Scheme
(SEALS), the Supervised Agricultural Credit Scheme (SACS), the Small and Medium
Enterprises Equity Investment Scheme (SMEEIS), the Agricultural Credit Support
Scheme (ACSS), and the Commercial Agricultural Credit Scheme (CACS), and
recently the Nigerian Incentive based Risk Sharing system for Agricultural
Lending (NIRSAL). The NIRSAL though not a scheme at such, encourages farmers to
insure their farms against natural disaster, and to borrow from commercial
1.2 STATEMENT OF PROBLEM
Local government is the third tier
government established to bring the presence of government nearer to the people
at the grass root, with the aim of providing some basic functions or needs of
life such as, food, shelter, job opportunities primary b health service,
primary education, by roads, market and so on. But contrary to expectations,
the local governments have noticeable failed in their constitutional
responsibilities. They are generally classified as been unproductive (President
Oluegun Obasanjo in his address to the nation on the reasons behind the current
local government reform: 2003. This current reform going on now is one of the
major reforms previously done on the local government system in Nigeria, with
their sole objective of reforming the local government system to be effective
and efficient and responsive and objective.
The local government is faced with a
number of problems. This study is equivocally poised to investigate this
problems with a view to fashion out solutions to them. Some of the problems
with a view to fashion out solutions to them. Some of the problems t looks at
in this study includes:
- The problem
unproductively in the local government.
- The problem of
unemployment and low incomes for target group.
- Lack of
improved qualities in the basic needs of life- food, shelter, job opportunities
health service, education etc.
- Inability of
the local government council to ensures that the poorer section of the
population has some share in the fruits of economic activities.
- Lack of social
services and economic growth.
1.3.0 OBJECTIVE OF THE STUDY
The main objective of the study is to
examine the effect of micro credit on agricultural performance in Nigeria.
Hence, the
specific objectives of the study are as follows:
i.
To identify the role of micro credit on
agricultural performance in Nigeria
ii.
To ascertain the effects of inefficient
administration of micro credit on agricultural performance in Nigeria.
iii.
To suggest the strategies for effective
micro credit on agricultural performance in Nigeria.
1.3.1 RESEARCH QUESTIONS
1. What are the
major roles of micro credit on agricultural performance in Nigeria?
2. What are the
Obstacles, if any that militate against the implementation micro credit on
agricultural performance?
3. What are the
strategies for effective micro credit for agricultural performance ?
1.3.2 HYPOTHESIS
OF THE STUDY
1. Ho: There is no positive effect
on the role of micro credit on agricultural performance in Nigeria.
Hi:
There is positive effect on the role of micro credit on agricultural
performance in Nigeria.
2. Ho: There
is no specific strategy put in place for effective micro credit on agricultural
performance
Hi: There is specific strategy put in place for effective micro credit on
agricultural performance
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