THE IMPACT OF AGRICULTURAL LOAN SCHEME TOWARDS THE NATIONAL ECONOMIC GROWTH

ABSTRACT

Financing Agriculture has been a disturbing phenomenon for a long period in the Nigerian economy. Various measures were taken by governments of the Federation to help fill the wide gap of the need of financing and the availability of the finance through credit.

One of the known bold efforts was the establishment of Nigerian Agricultural and Co-operative Bank (NACB), in November, 24^th 1972 which was inaugurated and started operations in March, 6^th 1973.

A further step towards this financing is the transformation of the Nigerian Agricultural and Co-operative Bank (NACB), into Nigerian Agricultural, Co-operative and Rural Development Bank (NACRDB).

This was after merging the former Peoples Bank of Nigeria (PBN), the risk assets of the Family Economic Advancement Programme (FEAP). This is said to be the biggest development finance institution in Nigeria, fully owned and subscribed to for its shares by Federal Ministry of Finance incorporated 60%, and the Central Bank of Nigeria, 40%.

The merger that brought about the emergence of the new outfit, brought about ex branch network expansion and by the year 2002, the Zaria branch of the bank was established.

The objective of this study therefore is to find out the impact of the gamut of financing scheme meant for the agricultural industry with particular reference to the branch’s area of coverage, in Zaria.

TABLE OF CONTENTS

CHAPTER ONE

INTRODUCTION

1.1)     BACKGROUND OF THE STUDY

In Nigeria, like any other country of the world, the agricultural sector plays a very important role in the economy. The sector provides massive employments; it generates basic raw materials to the economy, it provides food to the populace, it generates foreign exchange and largely provides security and stability in the polity.

However, the main stakeholders in the sector, that is to say the farmers are faced with many problems among them are poor pricing, high cost of fertilizers/ insecticides, low education and the most important being lack of adequate capital that would enable them tackle these problems for their benefits and for the benefit of the society generally. One way to do this is for the farmers to get a window of financial palliative. Many attempts had been put in place to make financing available to the farmers one of which was the establishment of Nigerian Agricultural and Cooperative Bank (N.A.C.B) in November 24^th, 1972, which commenced operations March 6^th, 1973.  The Nigeria Agricultural and Cooperative     Bank (N.A.C.B)   has    now   been  transformed          into Nigerian

Agricultural Cooperative and Rural Development Bank (N.A.C.R.D) in October 2000.

The aims and objectives of Nigerian Agricultural Cooperative and Rural Development Bank, and its predecessor, Nigerian Agricultural and Cooperative Bank seem to be the same. If that is the case what has been its impact in Agricultural financing?

1.2)     STATEMENT OF THE PROBLEM

Zaria is a renowned city with long tradition of farming. It was estimated that every family in Zaria and its environs is involved in one aspect of agricultural activity or the other, and since lack of adequate agricultural financing is certain to affect the farmers in Zaria, this explains the reason why the Nigerian Agricultural and Cooperative Bank now Nigerian Agricultural Cooperative and Rural Development Bank had to open its Branch in Zaria in the year 2002 to close this financing gap.

The researcher is aware of this fact and wants to find out what has been the impact of the Bank in Zaria. Has the bank been able to assist the Zaria farmers in closing or reducing the multiple financing problems that they face like their other counter parts all over the country? If yes, how were they able to do it? If no, why and where did they fail? What can be done to make them do it more effectively?

Lawan, 2001 p.2 opined however that agricultural financing has “not been a very successful story because of the problems of loan recovery, some view it as their own national cake”. She further said that “sometimes it is not easy obtaining a loan from the Bank due to undue procedures by the Bank which…….the farmers must go through”. Then, what is the impact of the Bank in Zaria?

1.3)     OBJECTIVES OF THE STUDY

The objectives of the study therefore are:

i)                   To find out why the Nigerian Agricultural cooperative and Rural Development Bank was established in Zaria.

ii)                To identify the quantum of loan given out to farmers by the Bank.

iii)              To find out if the loans given by the Bank have made any impact on agriculture in the area of coverage of the Branch.

iv)              To find out the requirements of obtaining loan from the Bank generally and Zaria Bank in particular.

v)                To find out if the Bank also encounter any problems with the farmers before loan is granted and even after granting the loan.

vi)              To suggest solutions to the problem identified so that the Zaria Branch can make more positive impact in its area of coverage.

1.4)     SIGNIFICANCE OF THE STUDY

It is a known fact that agriculture is important in any economy but that of Nigeria seems to be witnessing a dismal growth due mainly to lack of adequate financing. Fadeke (1999) observed that “the level of capital involvement in agricultural production processes is a clear index of the magnitude of its growth and development” the significance of this study is mainly to find out the relevance of this assertion with particular reference to the Zaria Branch of Nigeria Agricultural cooperative and Rural Development Bank, so that at the end both the farmers and the Bank can benefit.

Finally, the study intends to also elicit further study by other researchers to contribute to knowledge on the subject.

1.5)   SCOPE OF THE STUDY

This study is only trying to find out the Impact of Agricultural loan scheme towards National Economic Growth, but with particular reference to what Nigeria Agricultural cooperative and Rural Development Bank, is doing or has done in Zaria Branch since it was established in May, 2002 only.

1.6)        LIMITATIONS OF THE STUDY

This study like others before it is limited due to many factors; the biggest limiting factor is the shortage of relevant data. Time is another limiting factor, because the study can’t be on indefinitely. Furthermore, the researcher was engaged in other things when the research was going on. Financing the project is also another limiting factor to pay for what is considered necessary for the project.

Another limiting factor is the authority of management of the branch to provide relevant and available data to the researcher, which they claimed must be sanctioned by their Head office.

1.6)     DEFINITION OF RELEVANT TERMS

i)                   AGRICULTURE: It is the art of cultivating the land and rearing of animals to provide food and shelter for the growing population.

ii)                AGRICULTURAL FINANCING: It is the provision of money (fund) for agricultural purposes.

iii)              FARMERS: Those who engage in farming.

iv)              ADVANCE: Loan and overdraft to farmers.

v)                COLLATERAL: Personal or real property pledged as security for an obligation (loan).

vi)              LOAN: A credit business transaction between the legal entities, whereby one party is known as the “lender” agrees to “lend” fund to the second party known as the “borrower” payable with interest either on short, medium or long duration.

vii)           N.A.C.B: Nigeria Agricultural Cooperative Bank.

viii)         N.A.C.R.D.B: Nigeria Agricultural Cooperative and Rural Development Bank.

ix)              NON-RECOVERY: Loan that cannot be recovered from the farmers or beneficiaries.

x)                ON LENDING: As the name implies, this scheme involves lending to farmers through established and recognized institutions known as on lending agencies.

xi)              DEVELOPMENT: The act or action of developing or the state of gradual unfolding.

xii)           ZARIA BRANCH: The area of coverage of N.A.C.R.D.B of Zaria L.G.A, Makarfi L.G.A, Sabon Gari L.G.A, Giwa L.G.A, Soba L.G.A, and Kudan L.G.A.

xiii)     C.B.N: Central Bank of Nigeria.

1.7)   SUMMARY

Financing agriculture is very important if farmers are to produce on a scale that will improve their lot. It will also facilitate increased agricultural output and help towards poverty alleviation.

The Nigerian Agricultural Cooperative and Rural Development Bank (N.A.C.R.D.B) Ltd, has a major task of ensuring the placement of funds into profitable and development activities that will not only guarantee their recovery, but also some adequate returns for owners of the funds.

Since agriculture is a sector of economic activity which provides the community with some of its most basic needs, financing it is a major concern to the farmers and the government. And that is why the Nigerian Agricultural Cooperative and Rural Development Bank (N.A.C.R.D.B) Ltd, was established in October 2000, by the federal government solely for the purpose of providing loan to farmers.