ASSESSMENT OF THE IMPACT OF BANK CREDIT ON AGRICULTURAL DEVELOPMENT (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)


ASSESSMENT OF THE IMPACT OF BANK CREDIT ON AGRICULTURAL DEVELOPMENT (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

ABSTRACT:   

The study is an investigation into the impact of Bank Credit on Agricultural Development with emphasis on First Bank of Nigeria Plc.

Specifically, I examined the effect of Central Bank of Nigeria credit guidelines and other financial bodies  on Agricultural Development, also examined the relationship of bank lending policies in Nigeria, and to what extent there credit facilities are effectively been utilized by the farmers.

Two major statistical tools were adopted, while a time-series analysis was conducted to observe the movement of the loans and advances against the years loans were utilized by small and large scale farmers.

Some of the major findings of these tests confirm that bank credit has a significant impact in Agricultural Development for the small and large scale farmers.

Further investigation shows that the highest agricultural loan was granted in 2009 with over One Hundred and Seventy Five Million Naira the loan granted in 2010 and 2011 decreased drastically by 20 percent which was basically due to the global financial meltdown.

Based on these results, some of the major recommendations are that Federal Government should increase the banks share and credit base in order for the bank to cope with increasing loans demand.

Finally, for credit to be more effective, other sector of the economy should asked to corporate with the bank in providing the relevant service to support the scheme the bank in its bid to relive farmers other predicaments.

TABLE OF CONTENTS

Content                                            Page

Title page    -    -    -    -    -    -    -    -    -    -    i

Approval    -    -    -    -    -    -    -    -    -    -    ii

Dedication    -    -    -    -    -    -    -    -    -    -    iii

Acknowledgement    -    -    -    -    -    -    -    -    -    iv

Abstract    -    -    -    -    -    -    -    -    -    -    v

CHAPTER ONE: INTRODUCTION

1.1    Background of the Study       

1.2    Statement of the Problems        

1.3    Objectives of the Study        

1.4    Research Questions        

1.5    Research Hypotheses            

1.6    Significance of the Study   

1.7    Scope of the Study        

1.8    Limitation of the Study    

1.9    Definition of Terms    

CHAPTER TWO: LITERATURE REVIEW

2.0    Introduction           

2.1    Conceptual Framework   

2.2    The Nigeria Agricultural History   

2.2.1    Agricultural Sector in the Pre Independent Era

2.2.2    Agricultural Sector in the Post Independent Era   

2.3    Credit And Its Role Agriculture        

2.4    Sources of Agricultural Credit    

2.5    Agricultural Finance        

2.6    The Role of Financial Institution in Agricultural Financing

2.6.1     Central Bank of Nigeria Role   

2.6.2     Commercial Bank’s Role            

2.6.3     Development Bank’s Role    

2.6.4        Merchant Bank’s Role    

2.7     Terms of Agricultural Credit Repayment

2.8    Rural Banking and Agricultural Extension

2.8.1  Problems of Rural Banking

2.9     First Bank Agricultural Scheme

2.9.1 The First bank Farm Settlement Scheme

2.9.2 Guaranteed Fund Credit (GFC)    

2.9.3 Multi-Channels Agricultural Finance Scheme (Multi-CAFS)   

2.9.4 First bank Agricultural Credit To Schools (Facts)    

2.9.5 National Agro Dealer Scheme (NADS)        

2.9.6 GSM 102                   

2.9.7 Commercial Agriculture Credit Scheme    

2.10    First Bank Nigeria Plc Finance Operation and Evaluation   

2.11      Problems of Agricultural Credit Repayment in Nigeria

2.11.1  Farmer Related Problem        

2.11.2  Bank Related Problems

2.11.3  Government Related Problems

2.12        Problems of Agriculture        

CHAPTER THREE: RESEARCH METHODOLOGY

3.0    Introduction                    

3.1     Sources of Data                

3.2    Population of the Study       

3.3     Sample Size and Sampling Techniques       

3.4    Restatement of Research Hypotheses   

3.5    Method of Analysis                   

3.6    Assumption to Questionnaire           

3.7    Validity of the Research Instrument   

3.8    Reliability of the Research Instrument

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1    Introduction                       

4.2    Personal Characteristics of the Respondent

4.3    Response of Respondents to the Problem Areas.

4.4    Testing and Interpretation of the Hypotheses

4.4.1     Analysis of Hypothesis One   

4.4.2    Analysis of Hypothesis Two   

4.5    Presentation of Secondary Data       

4.6    Discussion of Result        

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.0    Introduction               

5.1    Summary of Findings        

5.2    Conclusion            

5.3    Recommendation

5.3.1    Recommendation for the Government

5.3.2    Policy Recommendation for the Bank

5.3.3    Policy Recommendation for Farmers    

Bibliography                   

Appendix I           

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Like many other African countries, Nigeria is primarily agrarian with its abundant land and water resources. Despite the rapid growth of the oil industry over the years, agriculture still accounts for 40% of GDP and provides employment (both formal and informal) for about 60% of Nigerian’s 150 million people. Nigeria’s agriculture remains largely subsistence-based with about 80% of agricultural output coming from rural farmers living on less than a dollar per day, earned from farming less than one hectare (2.47 acres). Nigeria has diverse agro-ecological conditions that can support a variety of farming models to create its own green revolution.

However, successive administrations neglected agriculture over the years and failed to diversify the economy away from overdependence on the capital-intensive oil sector. Nigeria was once a large net exporter of agricultural products and the sector was the major foreign exchange earner before the advent of oil in 1970s. Nigeria is currently a huge net importer of agricultural products, with such imports exceeding $3 billion in 2010. The country has the potential to return to its previous position if adequate attention is given to agricultural growth policies, finance and provision of rural infrastructure.

The fact of the matter is most of the smallholder farmers lack access to capital to acquire the needed inputs to increase their productivity and incomes and reduce their poverty. Farmers require credit to purchase seeds, fertilizers, herbicides, and buy or rent mechanized equipment and related services.

Nigerian agricultural policy recognizes the vital role of agriculture finance in attaining the much desired green revolution. A major focus of the policy is to establish a system of sustainable agricultural financing schemes, programs and institutions that could provide micro and macro credit facilities for the small, medium and large-scale producers, processors and marketers. However, public expenditure on agriculture which serves as the bedrock of financing for the sector has consistently fallen short of recommendations. It is therefore not surprising that these policies have failed to achieve the set goals of food self-sufficiency, self reliance, poverty reduction and rural development. Importantly, Nigeria agriculture is abysmally under-financed. At a public forum in early 2011, the Governor of the Central Bank of Nigeria (CBN) was quoted to have said “currently agriculture accounts for 40 percent of the GDP, yet it receives only one percent of total commercial bank loans.” This is significantly below the level of other developing countries, e.g. Kenya and Brazil which reportedly registers 6 percent and 18 percent, respectively.

Nigeria's agricultural development is constrained by the lack of access to credit for the predominantly smallholder farmers. Efforts by successive governments to address the problem have been largely unsuccessful. Commercial banks in the country perceive agricultural finance to be high-risk. The Central Bank of Nigeria is making efforts to de-risk the sector and encourage banks to lend to farmers.

This research work tends to asses the impact of bank credit on agricultural development with special reference to First bank Nigeria Plc. The role of the Central bank of Nigeria (CBN) and some other commercial banks will also be examined.

1.2    STATEMENT OF THE PROBLEMS

It is important to note that in the early 70s when the oil price increased, the agricultural sector suffered a serious neglect as the focus and concern of the nation’s economic activities and government revenue shifted to the industry. Consequently, price fell in the world market.

The Nigerian food import bill assumed an unprecedented level of about N1.5billion while the traditional agricultural exports were progressively declining. The need then arose for re-engineering the agricultural sector and a fundamental restructuring of the economy towards self-sustaining growth and development.  After the post independent, the CBN established some agricultural agency like Credit Guarantee Loan Scheme (1972) to address the problem of agriculture by granting loan and advances to agricultural sector, but this scheme was not properly implemented.

1971, an agricultural reform was established called “Operation Feed the Nation”. Poor assessment and implementation of the programme could not allow the government to achieve its objectives.1989, the government came up with a reform called Structural Adjustment Programme, the programme was also with a wrong motive.

The Bank reform 2005 by CBN resulted in the growth of the banks with new branches springing up everywhere across the major cities, and was celebrated by self-deluded bourgeois ideologues. The banks were given a clean bill of health, and they were said to be poised to finance the critical sector of the economy. Rather than invest in the real sector of the economy like agriculture, manufacturing, iron and steel, etc that will bring about improved productivity in the economy, the banks went into the oil whose price has now crashed at the international market. In addition, they also invested colossal sums of money in the casino market, where they speculated wrongly in anticipation for quick returns, but the stock market has now crashed, and the banks have lost over 900 billion naira invested in shares.

First Bank Plc currently has a loan scheme called Farmers First, which started in 2008. Under this scheme purportedly meant for all categories of farmers, the individuals or group of farmers who want to access the loan (N1million minimum) are expected to meet the following requirements before they are eligible: own an existing farm for some time; open and run current account for a period of six months; deposit 25 per cent of the total sums intended to borrow; six months moratoria; agriculture insurance; and other sundry charges. These hurdles notwithstanding, many poor farmers who have scaled it are still denied the loans on flimsy excuses, grounds for the rich farmers.

Nigeria's agricultural development is constrained by the lack of access to credit for the predominantly smallholder farmers. Commercial banks in the country perceive agricultural finance to be high-risk making it difficult to grant predominant farmers loan.

The researcher tends to examine the impact of commercial banks to these problems and proffer suggestions and recommendation that could limit these challenges.

1.9    OBJECTIVES OF THE STUDY

The broad objectives of this research work is to examine the impact of bank credit on agricultural development. Other specific objectives include;

·    To examine the effect of CBN Credit guidelines and other financial bodies on Agricultural development.

·    To examine the relationship of bank lending policies in Nigeria as the relate to Agricultural development.

·    To examine how effective or defective are these credit policies on the preferred Sector of an economy.

·     To examine factors that are responsible for only few individuals and small-scale agriculture industries benefiting from such polices.

·    To proffer recommendationson Assessment of the Impact of Bank Credit on Agricultural Development.   

1.10    RESEARCH QUESTIONS

For the purpose achieving the objectives of this research study, the following research questions were asked.

·    Does any relationship exist between the CBN credit guidelines on agriculture and agricultural development in Nigeria?

·    Is there any significant difference between the loan repayment of small and large-scale farmers?

·    Is there any Relationship between the type of borrower and loan repayment?

·    Is there any significant relationship between gender and loan repayment patters of farmers?

·    Is there any significant relationship between the types of security pledges and repayment patterns?

·    Is there any significant relationship between the educations of farmers’ and loan repayment?

·    What are the banks lending policies in Nigeria as they relate to agricultural development? 

·    What factors are responsible for only few individuals and small scale agriculture industries benefiting from such policies?

1.11    RESEARCH HYPOTHESES

Hypothesis is a tentative answer to a research question. It is a conjectural statement about the relationships that exist between two or more variables which needs to be tested empirically before they can be accepted or rejected. In a research work, hypotheses are never proved or disproved, they are either supported (i.e. accepted) or rejected. To provide answer to the research questions arising from this study, the following hypotheses are postulated.

HYPOTHESIS 1

Ho:    There is no significant relationship between the CBN credit guidelines on agriculture and agricultural development in Nigeria.

Hi:    There is significant relationship between the CBN credit guidelines on agriculture and agricultural development in Nigeria.

Hypothesis 2:

Ho:    There is no significant relationship between the type of borrower and there repayment patterns.

Hi:    There is significant relationship between the type of borrower and their repayment patterns.

1.12    SIGNIFICANCE OF THE STUDY

This research study focus on the assessment of bank credit on agriculture and how effectively this credits utilization enhances the agricultural development.

In essence, the study will be useful to the managers of economy if there is a significant improvement in the area of agriculture with the justification of effective utilization of funds which lead to sustainable in the area of economy development.

The work will contribute to already existing works in the field of economy and agricultural performance in Nigeria.

1.13    SCOPE OF THE STUDY

The research would focuson the activities of First Bank Nigeria Plc., towards the financing and development of agriculture in Nigeria. Emphasis would be on operational schemes of the bank, condition and pre-requisites for borrowing, financing procedures, sources and application of funds, evaluation financing. The study would cover a definite period to enable us have a clear vision of the role of First Bank Nigeria Plc. in relation to agricultural credit in Nigeria. The study uses data on agriculture loan and advancement extracted from First bank annual journal, 2012 that covers  2000-2011

1.14    LIMITATION OF THE STUDY

In the course of conducting this research work it is expected that the following will constitute impediments to the effective conduct of the study

a)    Time constraint within which the study must be completed.

b)    Financial constraint

c)    Inaccessible and inadequate data

Nevertheless, I believe the above limitations will in no way affect the reliability and validity of the research study.

1.15    DEFINITION OF TERMS

CREDIT OR LOAN: Used interchangeably. It refers to the cash or goods or services granted by the financial institution (e.g. bank) to a beneficiary (borrower) to use in the present with a pledge to pay back at a future date.

LOAN REPAYMENT: This is the fulfillment of a loan obligation

COLLATERAL SECURITY:Is an asset pledge against the performance of a loan.

LOAN DISBURSEMENT LAG: Gives an indication to the timeliness of a loan delivery. This is measured by the number of days between application and disbursement.

LOAN DELINQUENCY:Loan default or non-performing loan means the same. It is a failure to fulfill loan obligation. A loan becomes defaulted if the interests is ninety days over due and not enhance or extended.

SOCIO ECONOMIC STATION:Is determined by the farmers’ asset structure which defines his/her standard of living. The assets include: Type of House, Radio, Wrist Watch, Motor Cycle, Bicycle, Car, Television, Farm Produce Processor.

.

ASSESSMENT OF THE IMPACT OF BANK CREDIT ON AGRICULTURAL DEVELOPMENT (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)



TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.NET

Researchwap.net is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.net guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.net is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.net" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.