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
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
REVIEW - - - - - - 12
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
OF LOAN FINANCING TO AGRICULTURAL SECTOR PARTICULARLY SMALL SCALE FARMERS - - - 21
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
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
SUMMARY, CONCLUSION AND
5.1 SUMMARY - - - - - - - - - 38
5.2 CONCLUSION - - - - - - - - 39
5.3 RECOMMENDATIONS - - - - - - - 41
BIBLIOGRAPHY - - - - - - - - - 43
I - - - - - - - - - 45
II - - - - - - - - - 46
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
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
hazards which are rampant these days e.g. flood and diseases to live stocks.
approval of loans
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.
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
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
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
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
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:
To find out
the terms and conditions for agricultural loans.
the procedures involved in the lending process by the Bank.
To find out
the constraints faced by the bank in disbursement and repayment of loans by small
To assess the
prospects of lending to small farmers by the bank of agriculture.
1.4 RESEARCH QUESTIONS
research question put forward are as follows:
What is the
nature and extend of lending to small scale farmers?
What is the
problems of lending to small scale farmers
bright futures to agricultural financing in Nigeria?
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.