THE ROLE OF BANKS CREDIT FACILITY IN FINANCING AGRICULTURE IN NIGERIA. (A CASE STUDY OF NIGERIA AGRICULTURAL COOPERATIVE AND RURAL DEVELOPMENT BANK (NACRDB), LOKOJA)

CHAPTER ONE

1.0       INTRODUCTION

1.1       BACKGROUND OF THE STUDY

This research project is purposely carried out to examine the role of financial institution to aiding, the agricultural sectors, through granting of credit facilitates, using Nigeria Agricultural Cooperative and Rural Development (NACRDB) as a case study.

In the year back, the Agricultural sector has been faced much difficulty to meet up with their target due to inadequate financial assistance or credit facility from the government.

Much researchers have been able to disclose that agriculture provide over 80% employment and that over 80% of the farming population in Nigeria reside in the rural areas.

Hence, to develop agricultural production some important facilities have been put in place to encourage farmers. And this bring about agricultural credit facility.

Farmers before the introduction of the Nigeria Agricultural Cooperative and Rural Development Bank, seek credit from other sources such as commercial bank and private lenders which is really difficult if not unattainable due to the stringent condition imposed on intended borrowers by lenders.

The introduction of Nigeria Agricultural Cooperative and Rural Development Bank as a specialized agricultural bank has really relieved farmers of the difficulties imposed by the money lenders.

Agricultural is as old s the origin of Nigeria and the development in the area of agriculture has been a form of continuous variation.

The development of agriculture can be grouped into three stages:

1. 1. Pre-colonial stage

1. 1. Colonial stage

1. 1. Post colonial stage

1.         Pre-colonial Stage: It can be viewed into perspective which are stone and medieval age.

i.          Stone Age: In this era, human race were concerned with food and shelter, the method of farming then was so poor that crops were destroyed by most of the dangerous insects such as locusts, pest and diseases etc.

ii.         Medieval Age: This state emanates immediately after the age of stone, which was really a way of improving various stages of stone age.

The importance of agriculture was realized by human being. Life was some how primitive those man used animal skin for cloth others, cutlasses and hoes were made.

2.         Colonial Stage: By colonial stage, we refer to the period that Nigeria was actually colonies by British people and the coming of the country of British people about some development in agricultural sector.

3.         Post Colonial Stage: This was the time that Nigeria became a nation of their own and no longer under the control and directive of the British people.

Agriculture was recognized as one of the main source of Nigeria income, in the sense that, it provides for raw materials for industries and foreign exchange for the country’s import needs. Thus, the effort production of that the active farming population (small holder and families) constitute a central piece of the agric deliver credit programme s designed and implemented by NACRDB over the past decades.   

1.2       STATEMENT OF PROBLEM

With all the distance of NACARDB to farmers, numerous problems are still persisting, which are either caused by the farmers or the bank. On the farmers side some of the farmers hardly approach bank for loan, some do not have accounts with the at anytime needed. On the other hand, the bank refuse to grant loan to peasant farmers at the right time.  

Among the problems are listed below:

1. Inadequate Funding: The banks are finding it difficult to source their fund to meet the needs of the farmers.

1. Hardship in Recovery of Loan: The loans granted to farmers are paid in half or not even paid at all. Thus, discouraging the banks from granting loan to farmers.

1. Poor Interest Rate: NACRDB interest rate 21% is the approved rate before recent time. The difficulty is not on the side of serving the over head cost (as general administrative).

1.3       OBJECTIVES OF THE STUDY

The primary objective of this research work is to examine the role of bank credit facility on agricultural financing in Nigeria.          

1.4       RESEARCH METHODOLOGY

Research methodology refers to the difference approaches or methods used by the researchers in the collection of data. This method was equally carried out in the collection of data in respect of bank credit facilities in financing agriculture using NACRDB as a case study.

1.5       SCOPE OF THE STUDY

The scope of the work covers the NACRDB operation evolution and roles towards the development up to this year 2004.    

Despite the fact that there are other sources of finance to agriculture, this bank play a vital roles in agriculture credit facilities which boost maximum productivity among the other sources, loans from the NACRDB have been found to be easily attainable and less stringent than the sources.

Therefore, the study covers the workings NACRDB with regards of operation and organization.

It is very important to note that the research work does not see to have  covered all areas concerning NACRDB but effort have been made to cover as much as possible, the area of concerned studies with regard to NACRDB funding or agriculture.

1.6       SIGNIFICANCE OF THE STUDY

The important of the studies are:

1. It serves as sources of information to other future researcher.

1. To stimulate the interest of the farmer and the roles of NACRDB equally.    

1. it is a means of updating the knowledge of individuals farmers who are benefiting from the activities of NACRDB.

1. To bring to the notice of government and other finances of the bank on the need to improve on their present financing of the bank.

1.7       LIMITATION OF STUDY

This research work suppose to have contained more information than what we have gathered but due to the following:

1. Reluctance of must of the organization in providing the required information.

1. Inadequate time to enable us conduct an in-depth research into the subject matter of this study, have hindered the production of this research work.    

1. The financial constraints particularly at the initial stage of this project would have halted the successful completion of the study.

1. Non availability of sufficient literature review.

1. Despite the above problem mentioned, the researchers made use of his best luck by patronizing most of the bank, thereby dissenting most of the recommended factor mostly from NACRDB, for example on member of KABBA Branch rendered his maximum cooperation on this regard, regardless of the fact that they are not ready to disclose their secret to any researcher. I was opportune to get required information from a colleague who himself is ex-student of federal polytechnic, Idah

1.8       DEFINITION OF TERMS

Banking System: This comprises of those financial institutions that hare to do with the acceptance of deposit and giving of loans to customers. They include the central bank, the commercial banks, the merchant banks and the development banks. 

Collateral: It is an evidence, security property e.g sticks or bonds, pledge as security for repayment of a loan.

Credit: Is money borrowed from someone or from an institution by agreement with the intention or promise to pay it back at a later date, with or without interest.

To determine whether one needs credit or not some financial aspects must be looked into:

• Asset and liabilities (financial standing)

• Present and expected income (cash flow)

• Risks involved and

• How you plan to cover them

• Knowledge of the industry in which you want to get involved.

Finance: Is the management of money, especially controlled by a government, company or large organization.

Or to provide money especially a large amount of money to pay something; according to Longman Dictionary definition. Intensified in encouraging the production of coca, palm oil, rubber, cotton, groundnut etc. Rearing of cattle were also encouraged by the government.

In the first republic, some facilities were provided by the government in order to boost the output to the agricultural sector in the country.

Some of these facilities in the country.

• Federal Government appointed some officer to advice farmers on what to plant and how to plant.

• Provision of jobs by the government were made to help in preserving agricultural product.  

• Roads were constructed to give easy accessibility to areas where agricultural products are available for easy transport.