CREDIT FACILITIES AND PERFORMANCE OF SMALL SCALE FARMERS IN NIGERIA: A CASE STUDY OF UGHELLI NORTH LOCAL GOVERNMENT AREA.

CREDIT FACILITIES AND PERFORMANCE OF SMALL SCALE FARMERS IN NIGERIA: A CASE STUDY OF UGHELLI NORTH LOCAL GOVERNMENT AREA.

ABSTRACT

This research work critically examines credit facilities and performance of small scale farmers in Nigeria using Ughelli North Local Government Area of Delta State as a case study. Inadequate support in terms of credit facilities from the government and financial institutions have been identified as one of the major problems affecting farming operations particularly that of the small scale farmers in Ughelli North Local Government Area of Delta State and Nigeria at large. Questionnaires were used to source the data used in carrying out this research. The research design employed for this study was a descriptive survey design, in order to achieve an accurate representation of the entire population. The study makes use of simple random sampling technique as the method of data analysis. However, one strong outcome of this study is that the poor state of credit facilities to small scale farmers in Nigeria has drastically affected farming operation, thus, reduction in agricultural output, leading to importation of Agricultural product. Credit facilities therefore plays a crucial role in the operation of small scale farming, this ensures the derived output which sustain the growth and development of the economy.

TABLE OF CONTENTS

Cover Page - - - - - - - i

Title Page - - - - - - - ii

Certification - - - - - - - iii

Dedication - - - - - - - iv

Acknowledgements - - - - - - v

Table of Contents - - - - - - - vi-vii

Abstract - - - - - - - - viii

CHAPTER ONE: Introduction

1.1 Background of study - - - - - 1

1.2 Statement of problem - - - - - 3

1.3 Objectives of study - - - - - 3

1.4 Research Hypotheses - - - - - 4

1.5 Scope of study - - - - - - 4

1.6 Significance of study - - - - - 4

1.7 Organization of Study - - - - - 5

CHAPTER TWO: Literature Review and Theoretical Framework

 2.0 Introduction - - - - - - 6

2.1 Conceptual Issues - - - - - - 7

2.2 Overview of Credit Scheme to Farmers in Nigeria - 8

 2.3 Empirical Literature Review - - - - 34

 2.4 Summary - - - - - - - 35

CHAPTER THREE: Research Method

3.1 Research Design - - - - - - 37

3.2 Population of the Study - - - - - 38

3.3 Sampling Technique - - - - - 38

3.4 Sample Size - - - - - - 38

3.5 Method of Data Collection - - - - 38

3.6 Method of Analysis - - - - - 39

CHAPTER FOUR: Data Analysis and Presentation of Result

4.0 Introduction - - - - - - 40

4.1 Demographic Data - - - - - 40

4.2 Presentation of selected variable based on Descriptive

Statistics - - - - - - - 43

4.3 Testing of Hypothesis - - - - - 45

CHAPTER FIVE: Summary, Conclusion and Recommendations

5.1 Summary - - - - - - - 50

5.2 Conclusion - - - - - - - 50

5.3 Recommendations - - - - - 51

References - - - - - - - 54-57

Appendix - - - - - - - 58-61

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

Agriculture according to Longman Dictionary of Contemporary English (New Edition) is the science or practice of farming. Agriculture has a key role to play in the economic development of Nigeria, it is a leading sector in any meaningful economic development being carried out by any nation such as ours. Agriculture as its output tends to contribute significantly in the areas like employment opportunities, provision of food to the increasing population, contribution to GDP where the country is able to earn foreign exchange, also the provision of raw materials to our local industries particularly the agro-allied industries for further production.

An overview of Nigerian agricultural sector during 1960’s revealed that agricultural sector was the most important to the economy. In fact, the generation of this period can still remember those days when the pyramid of groundnut was the pride to the northern region and cocoa production areas of the west also boosted the foreign earning from cocoa exports. Today, the nation is still not independent in terms of agriculture providing food for its people to feed on. Credit is an important instrument for improving the welfare of the poor directly through consumption smoothening that reduces their vulnerability to short-term income. It also enhances productive capacity of the poor through financing investment in their human and physical capital. The demand for credit for productive investments usually comes from the poor who are less risk-averse and it enables them to overcome liquidity constraints, making it possible to undertake investments that can boost production, employment and income. Financial intermediaries have not been able to accommodate small-scale farmers because it is risky and a different task associated with high transaction costs. Lack of information prevented large formal leaders who had capacity to serve the small-scale farmers and the poor from doing so. It is undisputable that small-scale farmers have always had a problem of access to credit facilities (Biswanger et al, 1993: Agbor, 2004).

To improve the access, improvements need to be made in the provision of financial services. In order to implore financial services, leaders need to consider the preferences and socio-economic condition of clients. This contributes to both regulatory process as well as product development – thus, an understanding of characteristics influencing farmers’ decision to use agricultural credit could assist policy formulation that could enhance welfare of the poor or those excluded from access to credit facilities. The poor performance of Nigerian agriculture and its attendant effect prompted government to seek and reverse the situation which was demonstrated in the policies and practice such as National Accelerated food production programme (NAFPP), Operation Feed the Nation (OFN), Green Revolution Programme (GRP), Accelerated Crops Production Programme Scheme (ACPS) and international organization like the World Bank. This includes some of the steps taken by the Federal Government of Nigeria to assist farmers to boost agricultural production in the country.

1.2 Statement of Problem

In spite of the remarkable contribution of the agricultural sector to the GDP, findings over the years here shown that government subsidies directed at the agricultural sector have drastically reduced and as such the dwindling fall in agricultural productivities and by extension agricultural development. In Nigeria, as in most developing countries, “lack of credit facilities has been regarded as the major constraint farmers face when they try to improve economic activities and/or living conditions”. Even when available, access to credit facilities is difficult to access by farmers in the rural area. Despite the fact that it is an essential input in production. This could be adduced to lack of information and collateral securities among farmers (FARM, 2006).

Furthermore, the behaviours of financial institutions set up to finance agriculture revealed that funds necessary to induce agricultural productivity has not been geared toward agricultural sector. Commercial banks in particular are skeptical towards financing agricultural activities and in most cases do not offer friendly interest rate to encourage farmers to acquire loans. This research study shall examine the analysis of credit facilities to small scale farmers in Nigeria.

1.3 Objectives of Study

The objective of the study is as follows;

i. To analyze the impact of credit facilities to the operation of small scale farmers in Nigeria.

ii. To identify and analyze the socio-economic characteristics that may influence farmer’s decision about whether or not to use credit.

iii. To examine the probability that non-borrowers can borrow given that socio-economic characteristics are increased.

1.4 Research Hypotheses

Given the nature of this research work, the hypotheses of the study are as follows:

1. Ho: There is no positive significant relationship between credit availability and performance of small scale farmers in Nigeria.

Hi: There is a positive significant relationship between credit availability and performance of small scale farmers in Nigeria.

2. Ho: Credit facilities are not significant in the operation of small scale farmers in Nigeria.

Hi: Credit facilities are significant in the operation of small scale farmers in Nigeria.

1.5 Scope of Study

The scope of this study covers credit facilities and the performance small scale farmers in Nigeria using Ughelli North Local Government Area as case study. This study shall encompass the nature, the structure of availability of each facility as well as measurement of relative accessibility to small scale farmers in Ughelli North Local Government Area.

1.6 Significance of Study

1. The concern of credit facilities as a factor input has been amplified by different experts and government itself has the potentials of opening new doors of opportunities in the development of small-scale farming in Nigeria.

2. There are few studies on the subject of small scale farm credit and how their socio-economic characteristics influence their decision about whether or not to take credit. The development of the sector is not feasible if an avenue of credit facilities is not provided.

3. Therefore, this research work is directed at providing insight into this less studied dimension in agriculture by eliciting and analyzing small scale farmers’ socio-economic factors that affect their decision about credit facilities, and also to evaluate the nature, structure and pattern of credit facilities to small scale farmers in Ughelli North Local Government Area.

1.7 Organization of Study

The organization of study is divided into five chapters. Chapter one contains the introduction of the study, chapter two deals with the review of relevant literature and theoretical framework, while chapter three presents the research methodology which embodies specification of estimating techniques. Chapter four reveals the presentation and discussion of results and findings, while summary of findings, conclusion and recommendation are provided in chapter five. 

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