The Effect of Commercial Banks in Agricultural Financing in Nigeria
CHAPTER ONE
OBJECTIVES OF THE STUDY
The broad objectives of this research work is to examine varying 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 recommendation on Assessment of the Impact of Bank Credit on Agricultural Development.
CHAPTER TWO
REVIEWED OF RELATED LITER
The Concept of Agricultural Finance
Agricultural financing has suffered a great set back in Nigeria. Perhaps this is due to the fact that agricultural lending is considered to be more risky, problematic and unprofitable relative to other sectors (Enyim, Ewno and Okoro, 2013). To this end, the commercial banks which are the major conventional financial institutions have no kin interest in agricultural finance (Obilor 2013). In the days of sectoral allocation, the agricultural sector was favoured and banks complied because of the penalties involved of which some of the banks even preferred to pay than to comply (Gurdenson, 2003). Thus, the Nigerian agricultural sector which is significantly made up of peasant farmers relies more on the informal sources of fund for credit supply. These include: cooperatives, community development associations, thrift associations, family, friends and money lenders (Akinleye, Akanni and Oladoja, 2003). Nwankwo (2013) in his contribution asserted that the informal sources cannot meet the credit needs of the farmers adequately. Consequently, in order to enhance credit flow to the sector, the government established the Nigerian Agricultural Cooperative Bank (NACB) now the Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) in 1973 (Nwankwo, 2013). However, with the establishment of the NACRDB the challenge of poor credit supply to the agricultural sector was yet unbated. This is indication amongst others that the budgetary allocation of NACRDB was insufficient for the credit needs of the agricultural sector (Akinleye, Akanni and Oladoja, 2003). According to Zakaree (2014), in an attempt to address this issue, the government established the Agricultural Credit Guarantee Scheme (ACGS) in 1977 to encourage commercial banks to increase credit supply to the agricultural sector by providing guarantees against inherent risk in agricultural lending. Akinleye, Akanni and Oladoja (2013) asserted that despite several years of the establishment of the Agricultural Credit Guarantee Scheme (ACGS), the level of commercial bank involvement in credit distribution to the agricultural sector is yet uncertain. Nigeria as a country with highly diversified agro-ecological endowment, is yet relying on massive importation of basic food items and industrial raw materials, it is ironical.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Introduction
It is important to ascertain that the objective of this study was to ascertain the effect of commercial banks in agricultural financing in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the effect of commercial banks in agricultural financing in Nigeria
Summary
This study was on the effect of commercial banks in agricultural financing in Nigeria. Five objectives were raised which included: 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 and to proffer recommendation on Assessment of the Impact of Bank Credit on Agricultural Development. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from first bank plc in Lagos state. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The study has provided valuable insights into the effect of commercial banks in agricultural financing in Nigeria. It is evident that while commercial banks play a crucial role in providing financial support to the agricultural sector, there are various challenges that hinder their effectiveness. These challenges include inadequate loan accessibility, high interest rates, insufficient collateral requirements, and limited financial literacy among farmers. Despite these obstacles, commercial banks remain pivotal in driving agricultural development and economic growth in Nigeria.
Recommendations
Based on the findings of the study, the following recommendations are proposed to enhance the effectiveness of commercial banks in agricultural financing:
- Commercial banks should streamline loan application processes and reduce bureaucratic hurdles to enhance accessibility to agricultural financing. This could involve establishing specialized agricultural loan departments within banks to cater specifically to the needs of farmers.
- The government and regulatory authorities should collaborate with commercial banks to implement policies that lead to lower interest rates on agricultural loans. This could involve providing subsidies or incentives to banks to encourage them to offer loans at more affordable rates to farmers.
- Commercial banks should consider alternative forms of collateral beyond traditional land titles, such as warehouse receipts, crop insurance, or group guarantees, to make loans more accessible to smallholder farmers who may lack conventional assets.
- Banks should invest in financial literacy programs targeted at farmers to improve their understanding of financial products and services. This will empower farmers to make informed decisions regarding borrowing and investment, thereby reducing the risk of loan defaults.
- Enhanced collaboration between commercial banks, agricultural stakeholders, government agencies, and international organizations can facilitate the development of innovative financing mechanisms tailored to the specific needs of the agricultural sector in Nigeria.
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