EVALUATION
OF THE EFFECT OF CREDIT USE ON THE PRODUCTIVITY OF SMALL SCALE COWPEA FARMERS
DEPARTMENT: EDUCATION
CHAPTER
ONE
1.0 INTRODUCTION
1.1
Background
to the Study
Agriculture plays a significant role in the growth of
Nigeria’s economy especially, as it contributes over 20.89 percent of the
nation’s Gross Domestic Product (GDP), offers 66 percent employment to her
populace, accounts for 50 percent of the sources of raw materials required by
industries for further production, provides 80 percent food for man and market
for other industrial goods as well as export earnings (NBS, 2014). Despite
these, agricultural production in Nigeria is subsistence, as a result of low
utilization of modern inputs by farmers, unavailability and inaccessibility of
farm land as well as low mechanized nature of the prevailing agricultural
production system. Therefore, to improve the national economy, farmers should
be supported to expand their scale of production through financial resource,
such as credit (Akpokodje and Olomola, 2000).
Okurut,
Banga and Mukuga (2004) affirmed that associated with mechanization and
acquisition of agricultural inputs is the issue of credit without which the
envisaged agricultural production and development will be a mirage. Inadequate
access to credit by the smallholder farmers has been identified as one of the
contributing factors to poverty. Credit allows farmers to satisfy their cash
needs induced by the production cycle which characterizes agricultural
production.
Credit
supply to farmers is widely perceived as an effective strategy for enhancing
increase in agricultural productivity and transformation of rural economy
(Philip, Ephrain, and Omobowale, 2008). According to Mahmood, Okpara,
Rahji and Ogwumike (2009), the introduction of easy access and low interest
rate credit is the quickest way for boosting agricultural production. The
argument is that the agricultural
sector depends more on credit than any other sector of the economy
because of the seasonal variation in the farmer’s returns and requirement in
transformation of subsistence to commercial farming.The provision of credit as
noted by Rosemary (2001) has increasingly been regarded as an important tool
for raising the income of the rural populace, mainly by mobilizing resources to
more productive uses.
Cowpea is
an important major staple food crop in sub-sahara Africa, especially in
Nigeria. The seeds are major source of plant protein and vitamins to man and
feed for animals. The young leaves and immature pods are eaten as vegetables.
The sale of cowpea seeds and fodder earns income to the farmers. In Nigeria, farmers
who cut and store cowpea fodder for sale at the peak of dry season have been
found to obtain as much as 25% of their annual income by this means. Cowpea
also plays an important role in providing nitrogen to the soil when included in
crop rotation system (Okunmadewa, 2009).
In Nigeria,
the greatest production comes from northern region with about 1.7million tonnes
from 4 hectares. This represents over 60 percent of total production. The
producing areas are Niger, Kano, Sokoto, Kaduna, Zamfara and Gombe State. Despite that cowpea yield is very low, grain
yield range between 100-300kg/ha. This is due to several constraints such as
weather, parasitic weeds, insect-pests and diseases (Olamola, 2009). In Niger
State, cowpea production is rain fed, usually planted between the months of
April-May for early variety and July-August for late variety. It is worth
noting that cowpea production is dominated by small scale producers in the
state who employ traditional practices and inadequate techniques with resultant
negligible outputs and low supply of commodity despite its high demand (Adrew,
2012). Low production efficiency and inaccessibility of credit have been
implicated as some of the culprits leading to low outputs.
1.2 Problem
Statement
Against the backdrop of increased
advocacy and policy efforts geared towards agricultural transformation, the
injection of credit facility holds the potential and propensity of breaking the
vicious cycle of poverty by enhancing farm incomes and developing market opportunities
for producers and processors along the value chain.
More often than not, producers
over rely on the usage of meager household resources which limit economies of
scale and expansionary motives which credit has the propensity to resolve.
Poverty level
is high among the small scale farmers who keep large family sizes, high level
of non-literacy and strict adherence to traditional methods, low crop yields
and low levels of income. This makes it difficult for them to meet their
financial needs for agricultural production from personal savings. Hence, seeking for other sources of input
becomes necessary in order to meet up with their agricultural demand. High cost
of risks involved in agriculture as well as high default rate among small scale
cowpea farmers has been identified as major constraints as to why commercial
banks are unwilling to grant credit facility to small scale farmers (Okpara,
2010). In the same vein, untimely disbursement of agricultural loans, high
level of office bureaucratic protocols involved in credit acquisition among
others from formal sources have also been implicated, while high interest
rates, small size of loan and short time duration for loan repayment had been identified in the case of informal
sources of credit.
Non availability
of adequate credit needs of small scale agricultural producers can constitute a
hindrance towards the attainment of high levels of production. The Federal
Government of Nigeria (FGN) had made provision of credit a major thrust of its
agricultural policy since the 1970s when it introduced the Agricultural Credit
Guarantee Scheme Fund (ACGSF) managed by the Central Bank of Nigeria. Under
this scheme, Commercial Banks made available to small scale farmers small
loans, which are guaranteed by the Federal Government. Also, banks were
mandated to allocate a certain proportion of credit portfolios to agriculture.
However, mandatory allocation of credit to agriculture was discontinued. This
had far-reaching implications. The FGN as a follow-up cushioning measure
recapitalized and repositioned the Bank of Agriculture (BOA) for better
performance (Okunmadewa, 2009)
According
to Miller (2012), lack of credit and other interventions were the major
constraints haunting agricultural development and stressed the need for
increasing the amount of capital in agriculture through the use of credit.
Small holder farmers need credit for several purposes. The production of cowpea
requires the adoption of improved production practices credit facility is
therefore needed to purchase improved seeds, agrochemicals, fertilizers and to
hire labour to ensure timeliness of farm operations. Despite the critical roles
credit play in agricultural development however, the abuse and misuse of credit
meant for agricultural purposes by farmers have been reported. The consequence
is the non-realization of the objective credit was meant to achieve. This calls
for an investigation in the study area with a view to enhancing credit
utilization for intended purposes. Credit is also hard to come by for the poor
resource farmers and even when available, it had been politicized whereby only
farmers who are connected to politicians get access to soft loans which they
divert to other ventures other than crop production (Okurut et al., 2004)
On the basis
of the foregoing, the following research questions are pertinent:
i.
What
are the socio-economic characteristics of the small holder cowpea producers who
are credit beneficiaries and non-beneficiaries in the study area?
ii.
What
are the sources of credit available to the small scale cowpea farmers in the
study area?
iii.
What
effect did credit exert on cowpea productivity in the study area?
iv.
What
is the relative technical efficiency of credit beneficiaries and
non-beneficiaries in production of cowpea in the study area?
v.
What
are factors limiting small holder cowpea farmers access to credit in the study
area?
1.3 Objectives of the Study
The broad
objective of this study is to evaluate the effect of credit use on the
productivity of small scale cowpea farmers in selected Local Government Areas
in Niger State, Nigeria. The specific objectives of the study are to:
i.
describe
the socio-economic characteristics of small scale cowpea farmers in the study
area;
ii.
identify
the various sources of credit available to small scale cowpea farmers in the
study area;
iii.
analyze
the effect of credit on small scale cowpea production in the study area;
iv.
estimate
the relative technical efficiency in cowpea production of credit beneficiaries
and non-beneficiaries in the study area and
v.
identify
the problems limiting small scale cowpea farmer’s access to credit in the study
area.
1.4 Hypothesis
Ho: There
is no significant difference between productivity of small scale cowpea farmer
credit beneficiaries and non credit beneficiaries in the study area.
1.5 Justification for the study
The idea of
alleviating poverty in Nigeria, especially among the grass root farmers through
government credit policy is a welcome development for sustainable agriculture,
particularly in cowpea production. Small scale farmers need credit in order to
adopt new technologies and to procure production inputs. According to Tanko and
Jirgi (2008), modernizing agriculture in Nigeria requires optimal infusion of
funds to finance the purchase of inputs such as fertilizer, improved seeds,
insecticides and additional labour. The outcomes of this research will be of
tremendous benefit particularly to the small scale cowpea farmers in study
area.
The
research output will also be relevant to several other stake holders in credit
delivery programmes that will enchance productivity of the small scale farmers.
It will also serve as a guide for future credit policy formulation,
implementation and evaluation. Moreove, the output of this study will enable
the policy makers, financial lending institutions to reappraise past policies
and formulate realistic agricultural credit policies that will assist the
farmers to increase their production. The findings of this research study will
also guide credit beneficiaries to select the most effective and efficient ways
to utilize their loan in order to boost agricultural productivity especially,
in cowpea production.
The
findings may also be used by extension agents in their teaching and
demonstration contents as it identified factors significantly affecting the
technical efficiency of contact farmers they interact with.