This research was designed to study the effect of credit acquisition and repayment on Agricultural production in Cross River State. The major objective is to study the effect of credit acquisition and repayment on agricultural production in the state. Specific objectives included: determination of credit disbursement and recovery strategies of agricultural credit institutions, determining and comparing agricultural production among beneficiaries and non-beneficiaries of credit schemes, identifying factors that affect credit acquisition and repayment and to compare agricultural production among credit defaulters and non-defaulters.

The analysis was done with sample drawn from 120 farmers, 60 beneficiaries and 60 non-beneficiaries and credit officers in Cross River State, by the use of a multistage sampling technique and structured questionnaire, which felicitated information on farmers credit use, repayment rate, agricultural production of credit beneficiaries and non-beneficiaries, credits administration etc. Analytical tools used were descriptive statistics such as percentages, mean, frequencies, etc. to show the socio economic factors influencing credit acquisition and repayment in the state, multiple regression analysis was used to estimate the production function of both credit beneficiaries and non-beneficiaries and the chow test to determine the magnitude of the coefficient obtained from the two samples.

Cassava was used for the analysis of the production output of beneficiaries and non beneficiaries of credit because it is cultivated in the 3 agricultural zones and a staple food of the people. The mean output of the crop for both farmers taken from 3ha of land is 1520kg and 967.50kg respectively. The chow test result was 8.920 showing that the marginal effects of the regressors on the regressants vary. Findings showed that agricultural production is still of minimal output. Among other factors, the socio-economic characteristics of credit beneficiaries influence rate of repayment and for non-beneficiaries influence the acquisition of credit.

The study recommended among others that credit should be released to farmers during planting or stocking, Credit officers should reduce bureaucratic processes to encourage farmers to borrow credit and my key recommendations based on the study were:

-    Reduction of interest rate to at most 5 percent to get more farmers to borrow.

⦁    Long gestation periods of up to two years should be given to allow the farmers prepare for repayment.

⦁    Increase in the credit amount because of the inflationary era we are into.


Title page        -    -    -    -    -    -    -    -    i

Certification-    -    -    -    -    -    -    -    -    ii

Dedication         -    -    -    -    -    -    -    -    iii

Acknowledgment    -    -    -    -    -    -    -    -    iv

Abstract        -    -    -    -    -    -    -    -    vi

Table of Contents    -    -    -    -    -    -    -    -    viii

List of tables     -    -    -    -    -    -    -    -    xii

List of Appendices        -    -    -    -    -    -    -    xiii


1.1    Background information    -    -    -    -    -    -    1

1.2    Statement of problem.    -    -    -    -    -    -    3

1.3    Research Objectives    -    -    -    -    -    -    5

1.4    Research Hypotheses    -    -    -    -    -    -    5

1.5    Significance of study    -    -    -    -    -    -    5


2.1 Agricultural Development    -    -    -    -    -    -    7

2.2 Concept of credit     -    -    -    -    -    -    -    8   

2.3 Socio-Economic Characteristics of Farmers in Nigeria    -    14 2.4      Nigeria’s Agricultural Credit Policy    -    -    - 15

2.5 Agricultural Productivity Among Beneficiaries and Non-    -    Beneficiaries of Credit    -    -    -    16   

2.6 Problems of Agricultural Credit Acquisition    -    -    -    17

2.7 Approaches to Evaluation of Impact    -    -    -    -    19   

2.8 Measurement of Impact    -    -    -    -    -    -    19

2.8.1 Regression Analysis    -    -    -    -    -    -    20

2.8.2 Chow’s Test        -    -    -    -    -    -    -    21

2.9 Theoretical framework    -    -    -    -    -    -    21

2.10 Analytical frame work    -    -    -    -    -    -    22


3.1 Study Area    -    -    -    -    -    -    -    -    23

3.2 Sampling Procedure    -    -    -    -    -        -    23

3.3 Data Collection    -    -    -    -    -    -    -    24

3.4 Data Analysis    -    -    -    -    -    -    -    -    24

3.5 Model Specification    -    -    -    -    -    -    -    25

3.6 Hypotheses Testing     -    -    -    -    -     -    -    28

CHAPTER FOUR:     RESULTS AND DISCUSSIONS    -    -    -    -    -    29

4.1 Socio-economic Characteristics        -    -    -    -    29

4.1.1 Age    -    -    -    -    -    -    -    -    -    29

4.1.2 Household Size-    -    -    -    -    -    -    -    30

4.2.3 Educational Qualifications -    -    -    -    -    -    31

4.1.4 Farm Size    -    -    -    -    -    -    -    -     32

4.1.5 Farming Experience     -    -    -    -    -    -    33

4.1.6 Income    -    -    -    -    -    -    -    -      34

4.2  Section 2

4.2.1 Source of Credit -    -    -    -    -    -    -    -    35

4.2.2 Distance from possible Source of Credit-    -    -    -    36

4.2.3 Size of Credit -    -    -    -    -    -         -         -        37   

4.2.4 Uses of Credit    -    -    -    -    -    -    -    38

4.3 Conditions for Agricultural Credit lending -    -    -    -    39

4.3.1 Categories of Agricultural Credit    -    -    -    -    39

4.3.2 Criteria for lending         -    -    -    -    -    -    40

4.3.3 Short-term Credit         -    -    -    -    -    -    41

4.3.4 Medium-term Credit    -    -    -    -    -    -   

4.4 Factors Affecting  Demand for Credit  and Repayment-   --      42

4.4.1 Factors that Affect  Demand for Credit        -    -    -    42

4.4.2 Factors that Affect Credit Repayment        -    -    -    44

Section 3            -    -    -    -    -    -    -    45


 5.1 Summary    -    -    -    -    -    -    -    -    53

5.2 Conclusion     -    -    -    -    -    -    -    -    54

5.3 Recommendations     -    -    -    -    -    -    -    55

References         -    -    -    -    -    -    -    57

Appendices         -    -        -    -    -    -    7



1.1 Background Information

In spite of the fact that oil still accounts for our major revenue (gearing toward 80percent) and almost 100percent of our export earnings (C.B.N,2003), agriculture especially farming, forestry, livestock and fishing is shown to be the major activity of Nigerians (Chigbu, 2004). Regrettably, the trend performance has declined over the years. The sector growth remained at 5.8percent between 1990-1993, falling to 3.5percent between1997-1998 and worse still declining to an abysmal 1.8percent during the 1999-2001 periods (C.B.N, 2003). The agricultural sector is expected to have a growth rate of between 7percnt to 10percent, in order to have any meaningful effect on poverty reduction (Ekpo, 2004).

This ugly situation is attributed to poor and less resources utilization, as a result of lack of financial supportive measures like loans, subsidies, grants, etc toward agriculture (Chigbu, 2004). The contribution of agriculture to the gross domestic product (G.D.P.) shows an average growth rate of 2.6percent (C.B.N, 2003), a development not good enough for a sector employing about 70percent to 80percnt of Nigerians. Food supply situation is not favorable equally; it has been reported by the food and agricultural organization (FAO, 1994), that there is an average food deficit of 1.2percent, while the demand and supply of food stand at 3.7percent and 5percent respectively. This is why the World Bank (2003) data showed that more than 70percent of Nigerians live below poverty line, a situation that can be reversed through agricultural development.  

The World Bank’s statement about Nigeria’s poverty level has not gone down well for a nation with abundant agricultural resources: different varieties of livestock and wildlife, an agricultural friendly climate, coastal and marine resources of over 960m shoreline and a large consumer market.

In Nigeria, agriculture is not practiced in a purposeful and enterprising manner. It is practiced more as a survival strategy, rather than as a business venture. This is attributed to low-income status of farmers, which makes them seldom able to accumulate capital goods required for purposeful and sustainable agriculture, causing their level of capacity utilization to be very low.

Availability of credit to farmers has been observed as one sure way of increasing agricultural output, through the improvement of efficiency and the expansion of production. Credit to farmers according to Olatumbode (1990) would assist in the following ways:

Procure new improved technology in agriculture, purchase high yielding and disease resistant crops, put more land into cultivation and organize the farm better and more purposeful.

Insufficient extension of production credit to farmers according to Meyer (1986), is the more critical factor responsible for the declining agricultural production. There is a big gap between the demand for and supply of credit to farmers for agricultural activities. Problems faced by farmers in raising money for agricultural production is colossal, because according to Chidebelu (1983), commercial and merchant banks are reluctant to give money for agricultural production. The reluctance is due largely to the fact that agriculture is biological in nature, hence prone to risk.

The establishment of several credit schemes in Nigeria is intended to solve the problem of lack of credit to the agricultural sector. Efforts to encourage farmers in Nigeria with credit and other agricultural incentives have only given individuals with political loyalty to the reigning government access to exploiting the ordinary farmers. Such incentives usually get to the false farmers who use it for other non-agricultural activities.

Repayment of credit by farmers is a pathetic story; there is a general tendency of farmers not to repay credit. F.A.O (1994) asserted that the inability of small-scale farmers in developing countries to repay credit could be traced to imperfection of the delivery system, a host of institutional factors and to the farmers themselves. Some of these factors include: inadequate supervision and quality of supervisory staff, poor market outlets, poor management ability of the borrowers, poor selling prices, unsuitable disbursement procedures, wrong attitude of farmers towards credit (regarded as gift from government), natural disasters, etc. Problems of repayment also stifle further credit to farmers, since most agricultural credit recycles.

Small-scale farmers are supposedly potential beneficiaries of agricultural credit in Nigeria, but are hampered by their small peasant holdings found over wide remote areas which makes supervision by credit officers difficult (Eze, 1997). To reap the benefits of credit, information relating to sources of credit is required by farmers. Such information may include names of lenders, location and types of existing credit. They also need information on the terms of credit such as interest rate, credit amount and mode of repayment.

Credit institutions are the major source through which small-scale farmers can gain access to formal credit (Klonner, 2003); but the farmers are constrained by high interest rate and collateral. This development has informed successive Nigeria governments to initiate programmes and policies that would ensure adequate transfer of cheap credit to small-scale farmers (Nweze, 2001).   These programmes and policies have over the years given rise to.

(a)    The Agriculture Credit Guarantee Scheme Fund (A.C.G.S.F) in April, 1978.

(b)    The community Bank of Nigeria (C.B.N) in 1990

(c)    The Family Economic Advancement Programme (F.E.A.P) 1997

(d)    Nigeria Agricultural, Co-operative and Rural Development Bank (NACRDB), which is the most recent.

 1.2 Statement of Problem

The performance of the agricultural sector in Nigeria, as in most other developing countries is low. According to Oliseh (1990) the problem of productivity in agriculture is majorly the unavailability of credit to farmers, which would have enhanced production. This is as a result of inaccessibility to credit facilities by small-scale farmers, who form the bulk of farmers in the country. The Cross River State government has over the years had as a policy thrust financial intermediation in agriculture. This has given rise to medium and soft loans, subsidies, grants, etc to farmers in the state, to aid farmers boost agricultural production (C.R.S News Bulletin, 2005). But the result of these financial intermediations is poor as agricultural production in the state is still marked by low output. How can farmers avail themselves of agricultural credit to facilitate taking advantage of developing entrepreneurship in farming?. Nwanna (2002) noted non-provision of financial services as one of the major constraints to small-scale enterprise development, particularly to increasing investment, production activities, etc.

Where financial institutions are found, there are always remotely located to the rural/small-scale farmers. The extension of credit facilities to farmers can only be done on provision of adequate and acceptable security. Farmers are constrained using their farmlands as security, because the land does not belong to a single individual, by the nature of land tenure system practiced, but by the whole community.

Repayment patterns by previous beneficiaries constitute another problem to credit acquisition. Problems of credit repayment are rampant among individual smallholder borrowers. This situation is exacerbated by the fact that government policies often exempt small credits from collateral (Arene, 1992). Low credit acquisition by farmers can also be attributable to high interest rate. Berger (1989) noted that high interest rate charged by formal and informal sources of finance scare farmers. A good lending policy of government is that which is capable of giving sufficient credit for the need of farmers and at affordable rates, for increased agricultural production. High interest rates often make farmers to divert credit to other non-agricultural uses, which they believe would give quick returns to investment.

Red-tapism in acquiring credit discourages small-scale farmers. Credit application forms are expected to pass through many tables and stages before final approval is given. Farmers are expected to provide guarantors, tax clearance receipts, passports initial deposit, etc, as well as the inspection of the security and claims by the credit officer, before the form is finally sent to the headquarters for approval. The process is rather cumbersome to the rural farmers, who may not be patient enough to wait for all these stages.

Repayment when due or non-repayment as a whole, causes lenders net returns to be low, hence affecting institutional growth, which often causes financial distress of such institutions. The result is that further credit disbursement to these institutions becomes discouraging.

Many research works have been carried out over the years about credit and farmers: Eneh (1996) worked on credit use, access and repayment. Credit needs, sources and uses was done by Ozougwu (2001), Ochai (2003) studied loan repayment and technical aid among farmers, etc. in all these works and many others related to this research problem, the aspect of how credit can be obtained and used efficiently, so that agreed repayment can be met for increased agricultural production, is either omitted or poorly stressed. The research study is prompted by these gaps, which it hopes to fill.

1.3 Research Objectives

The broad objective of this research is to study the effect of credit acquisition and repayment on agricultural production.

Specifically the study is designed to:

i.    Determine credit disbursement and recovery strategies of agricultural credit institutions.

ii.    Access and compare agricultural production among beneficiaries and non beneficiaries of credit schemes.

iii.    Identify the factors that affect loan acquisition by farmers.

iv.    Identify the factors that affect loan repayment by farmers.

v.    Compare agricultural production among loan defaulters and non-defaulters.

vi.    Make policy recommendations based on the result of the findings.

    1.4 Research Hypotheses

Based on the study objectives, the following null hypotheses will be tested.

1.    Loan disbursement and recovery strategies do not affect loan             acquisition.

2.    There is no significant difference in output between farmers who use agricultural loan and those who do not use agricultural loan.

3.    Factors that affect credit acquisition do not affect agricultural production.

4.    There is no significance difference in output between credit defaulters and non-defaulters.

5.    Socio-economic factors do not significantly affect credit acquisition and repayment.

1.5    Significance of The Study

Credit to farmers in Nigeria where it is available for the purpose of increasing their agricultural output is a very difficult task. Eboh (1998) asserted that financial market failure also causes impediment in credit disbursement.

    Credit repayment is the most important index of a credit scheme. This is because it ensures the continuity of the scheme. Credit repayment problems have significantly affected credit acquisition. Diversion of credit to non-agricultural activities and the biological nature of farming activities are identified by Murray (1994) as responsible for the default in credit repayment.

    Research conducted to study the effect of credit acquisition and repayment on agricultural production in Cross River State, Nigeria would help formal and informal lenders know how and to whom credit should be disbursed. Farmers would also benefit from the study on how best to utilize agricultural credit.

    Finally, the findings of this study will form a source of reference to students and researchers and a basis for further studies on related subjects.





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