PROBLEMS AND
PROSPECTS OF LENDING TO SMALL SCALE AGRICULTURAL PRODUCERS IN BANK OF
AGRICULTURE OF NIGERIA
ABSTRACT
The
research work on “The Problems and Prospects of Lending to Small Scale
Agricultural Producers in Bank of Agriculture. For the research work to be
adequately understood, the researcher introduced the subject matter
highlighting the statement of general problem. This project also touched on the
research objectives, scope of study and significance of the study, the research
went further to review related literatures on the subject matter. Due to time
constraints, the researcher has only highlighted the major aspects of the
agricultural credit schemes and repayment of loans. In a way it could still
provide for an input to deeper analysis of the subject matter in this part of
the Bank (B.O.A) and other in the commercial process of banks in general in
carrying out this work. However, this dissertation has been grouped into five
chapters.
TABLE OF CONTENTS
TITLE PAGE – – – – – – – – – i
DECLARATION – – – – – – – – – ii
APPROVAL PAGE – – – – – – – – – iii
DEDICATION – – – – – – – – – iv
ACKNOWLEDGEMENT – – – – – – – – v
ABSTRACT – – – – – – – – – – vi
TABLE OF CONTENTS – – – – – – – – viii
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY – – – – – 1
1.2 STATEMENT
OF THE PROBLEM – – – – – 7
1.3 OBJECTIVES
OF THE STUDY – – – – – – 8
1.4 RESEARCH
QUESTIONS – – – – – – 8
1.5 SIGNIFICANCE
OF THE STUDY – – – – – 9
1.6 SCOPE
OF THE STUDY – – – – – – – 10
1.7 LIMITATION
OF THE STUDY – – – – – – 11
CHAPTER TWO
2.0
LITERATURE
REVIEW – – – – – – 12
2.1
ROLE OF CREDIT IN
AGRICULTURAL DEVELOPMENT – 13
2.2 CHANNELS AVAILABLE FOR FINANCING TO SMALL
SCALE FARMERS IN NIGERIA – – – – – – – 14
2.3 LOAN
PROCEDURES IN BANK OF AGRICULTURE – – 16
2.4 SMALL
SCALE FARMERS IN NIGERIA – – – – 18
2.5 PROBLEMS IN ACCESSING AND REPAYMENT OF
LOANS BY SMALL SCALE FARMERS – – – – – – 20
2.6 PROSPECTS
OF LOAN FINANCING TO AGRICULTURAL SECTOR PARTICULARLY SMALL SCALE FARMERS – – – 21
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION – – – – – – – – 26
3.1 RESEARCH
DESIGN – – – – – – – 26
3.2 AREA
OF STUDY – – – – – – – – 27
3.3 POPULATION
OF THE STUDY – – – – – 27
3.4 SAMPLE
SIZE AND SAMPLING TECHNIQUE – – – 27
3.5 RESEARCH
INSTRUMENT USED – – – – – 27
3.6 AMDINISTRATION
OF THE INSTRUMENT – – – 28
3.7 TECHNIQUES
USED FOR DATA ANALYSIS – – – 28
CHAPTER FOUR
DATA
PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 INTRODUCTION – – – – – – – – 29
4.2 DATA
PRESENTATION – – – – – – – 29
4.3 DATA
ANALYSIS – – – – – – – – 30
4.4 ANALYSIS
OF DATA COLLECTION – – – – – 36
4.5 SUMMARY
OF FINDINGS – – – – – – 36
CHAPTER FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY – – – – – – – – – 38
5.2 CONCLUSION – – – – – – – – 39
5.3 RECOMMENDATIONS – – – – – – – 41
BIBLIOGRAPHY – – – – – – – – – 43
APPENDIX I – – – – – – – – – 45
APPENDIX II – – – – – – – – – 46
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Nigeria has been endowed with abundant human
and material resources. Yet, imports bills for good and agricultural raw
materials have been on the increase over the years.
Prior to political
independence and immediately after the country got its independence, it was not
only sufficient in food production and agricultural raw materials, but was
generally having surplus for export.
Statistics from the
Central Bank of Nigeria
indicates that the agricultural sectors share of the gross domestic product
G.D.P was as high as 65 percent in the sixties but has been on the decline
since then. In 1973, it contributed 31 percent, while only 23 percent in the
1990s At the same time, food importation has been on the increase.
Concerted efforts
have been made by government, federal, state and local government and by
organizations and co-operative union towards improving the delivering
agricultural output.
More than 80 percent
of the Nigerian agricultural producers are peasant farmers who are low-income
earners. Lack of credit facilities to these categories of farmers is greatly
happening the needed change from subsistence farming to large-scale mechanized
farming. Inadequate or lack of credit facilities is one of the most important
factors that make it difficult for peasant farmers to innovate new methods of
farming and implementation of research finding cannot be adopted if access to
financial resources is restricted or not in existence.
For the expected
transformation to take place in the rural sector, the technology and technique
of agricultural cultivation, the quality of seeds planted, storage and
marketing facilities must be improved to enable such improvements to take
place. Financial resources through rural credit must be adequate it is quite
obvious that most peasant farmers do not possess enough resources of their own
to acquire such basic implements like tractors and animals driver ploughs,
spraying equipments and pay for fertilizers and other inputs which are usually
very expensive.
There are quite a
number of sources of agricultural credits available to farmers these are
categorized into two mainly institutional credits in Nigeria are obtained from
commercial banks, cooperative societies, bank of agriculture, while the
non-institutional sources of credits includes money lenders, landlords,
shopkeepers relations and friends, which are more assessable to the peasant
farmers.
For peasant crops
like cocoa and palm trees as opposed to food crops, long term credit is required
which is obtainable only from banks. The nationwide network of branches of
various banks is not doubt a great advantage and importantly no doubt
facilitate flow of funds to the grass root. However, this has not been achieved
due to a number of problems. Which are:
i.
Natural
hazards which are rampant these days e.g. flood and diseases to live stocks.
ii.
Untimely
approval of loans
iii.
Lack
of adequate supervision by the extension workers in charge of the scheme. Most
of these farmers need supervision to ensure the right usage of the funds and to
discuss problems with them.
iv.
Most
importantly amongst the problems is that of inadequate funds which the banks
are battling to overcome.
The birth of Bank of
Agriculture B.O.A formerly known as Nigeria Agricultural Cooperative and Rural
Development Bank [NACRDB] limited as the single largest development finance
institution in Nigeria followed the successful merger of the former People’s
Bank of Nigeria [PBN], the defunct Nigerian Agricultural and Cooperative Bank
which is now Bank of Agriculture and the risk assets of the Family Economic
Advancement Programme [FEAP] in October, 2000. Thus; Bank of Agriculture [B.O.A]
is dedicated primarily to agricultural financing of small and medium levels, as
well as micro financing of small and medium scale enterprises.
In October 2010, the
name was changed from Nigeria Agricultural Cooperative and Rural Development
Bank [NACRDB] limited to Bank of Agriculture Limited. The bank is a registered
limited liability company that is wholly owned by the Government of the Federal
Republic of Nigeria with the share capital fully subscribed by the Federal
Ministry of Finance corporate 60% and the Central Bank of Nigeria 40%.
The Bank’s broad mandate encompasses saving mobilization and the timely
delivery of affordable credit to meet the funding requirements of the teeming
Nigerian population in the agricultural and non-agricultural sectors of the
national economy.
Bank of Agriculture (B.O.A)
was established as a national credit institution on November 24, 1972 and went
into operate in March 6, 1973. Today’s Bank of Agriculture Limited, actually
took its new name at the instance of the Nigeria Government. This is in the
government’s view was to reflect more vividly, the Bank’s commitment to
agricultural development through the promotion and financing of cooperatives.
Prior to the
establishment of (B.O.A) as an institutional lender to farmers, the financing
of the Nigeria Agricultural sector was essentially being handed by a variety of
public institutions. These include the fund for Agricultural and Industrial
Development, the regional local government Boards, development corporation and
the regional marketing Boards.
The general
consensus however was that these credit financing institutions failed due to
some factors. Agricultural experts say these factors range form “political
interference, inefficient project appraisal, monitoring and supervision” to law
courage of the farming population inadequate funding. Adoption of excessively
rigid and time consuming procedure for processing loan applications, low loan
recovery and untimely loan disbursement.
Thus the bank of
Agriculture is today a welcome relief to the Nigerian farmers. The Bank’s
inauguration marked an important landmark in the history of nation’s
agricultural development and it has continued to serve as a national financial
institution devoted entirely to investing in all aspect of the agricultural
industry.
1.2 STATEMENT OF THE PROBLEM
The main objective
of banking of agriculture is to finance agricultural production both at large
and small scale special grants and large sums of funds is apportioned to the
bank by the government on annual basis for disbursement to farmers. However,
the output from agricultural sector continue to be on the downside year after
year. Despite the country’s past fertile land and abundant labour, large
percentage of the country’s import is in food majored in rice, wheat, maize and
other agricultural raw-materials, which were produced and imported in the past
story of agricultural productivity in Nigeria.
It is against this
background that the researcher intends to study the problems and prospects of
lending to small scale farmers by the Bank of Agriculture (B.O.A) limited.
1.3 OBJECTIVES OF THE STUDY
The research aimed
at discovering the problems and prospect of lending to small scale farmers via
the bank of Agriculture. The research therefore intends to achieve the
following objectives:
1.
To
find out the terms and conditions for agricultural loans.
2.
To
understand the procedures involved in the lending process by the Bank.
3.
To
find out the constraints faced by the bank in disbursement and repayment of
loans by small scale farmers.
4.
To
assess the prospects of lending to small farmers by the bank of agriculture.
1.4 RESEARCH QUESTIONS
The
research question put forward are as follows:
i.
What
is the nature and extend of lending to small scale farmers?
ii.
What
is the problems of lending to small scale farmers
iii.
Are
there bright futures to agricultural financing in Nigeria?
iv.
Do
small farmers have access to finance offered by the bank of agriculture.
1.5 SIGNIFICANCE OF THE STUDY
The importance and
significance of this study cannot be over emphasized. The research will gain
in-depth knowledge about the activities of bank of agriculture in financing
agricultural production, in addition, the public too will find this project
very informative and useful.
Secondly, this study
will serve as an important reference material for student in future that will
be faced with the task of project working in similar area. The finding of this
project will provide adequate information for their project writing.
Lastly, it will go a
long way in assisting the government in Agricultural policies concerning
agricultural-lending schemes.
1.6 SCOPE OF THE STUDY
The researcher work
is restricted within Bank of Agriculture (B.O.A) limited. And only in the small
scale agricultural producers (farmers) lending scheme. The researcher wish the
projects is designed to be carried out on all the banks operated schemes but,
this cannot be achieved due to a lot of constraint ranging from lack of
comprehensive report on all the scheme the bank operated in the head offices.
This can only be found in the branch offices who operate the schemes. Financial
constraints and time factors contributes as to why the researcher could not
travel far and wide in order to obtain the date for the research work.
The inaccessibility
to some relevant data classified as “confidential” created a set back to this
work. The researcher also encountered problems of poor response from management
staff who complained they are not in position to comment.
1.7 LIMITATION OF THE STUDY
Lending is a
complicated case that is likely to tarnish the image and integrity of the
affected bank. Because of this, affected banks do not always willingly give out
information about the case study. Therefore getting information about the
problems and prospect of lending to small scale producers on the bank is
proving more difficult as expected.