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THE ROLE OF FINANCIAL INSTITUTIONS IN AGRICULTURAL
DEVELOPMENT (1990-2015) A CASE STUDY OF NIGERIA
Abstract
This study examined the role of financial
institutions in agricultural development.( A case study of Nigeria Agricultural
Cooperative and Rural Development Bank) with a view to make useful suggestions
and recommendations as way of enhancing the development of agricultural sector.
The population of the study includes large and small scale farmers and the
sampling method adopted for the study is the stratified random sampling in
order to ensure adequate representation of the population. In order to achieve
the objective of making useful suggestions that would improve the agricultural
sector, a number of hypotheses were made and tested. Samples of one hundred and
eighty responses were collected and analyzed using the chi-square (ײ).It was
discovered that bank credit loan scheme is making some impacts in lending loans
to farmers. The result also showed that farmers prefer informal to the formal
sources of finance mostly because of the demand of formal institutions that
farmers most present collateral security. Finally, the study also indicated
that the problems facing agricultural financing.
CHAPTER ONE
INTRODUCTION
1.1 Background
to the study.
Nigeria
is endowed with natural resources, large fertile arable land, wide range of
crops, and abundant water resources amongst others. Despite its abundant
natural resources it is faced with a poor food situation. The poor food situation
is traceable to the decline in the agricultural sector. The problem of feeding
is increasing by the day. However, several efforts are being made to improve
the standard of living.
Prior
to the discovery of petroleum in Nigeria agriculture used to be the highest
foreign exchange resource earner and its contribution to gross domestic product
GDP has been estimated to about 62.63% in 1960, 48.08% in 1970, and 20.63% in
1980. Recently due to the growing awareness of the role of agriculture, the
various governments have intensified efforts aimed at transforming from its
present subsistence level to a market oriented production. One of those efforts
was the ban made on importation of agricultural products like palm oil, maize
and rice. This was done to encourage improvements on our production standard.
Due to the fall in the level of production from decade to decade, the country
could no longer feed the large population, provide raw material for domestic
industries, engage in export of agricultural produce and employ the labor force
of the country despite the abundance of human and material resources.
the
population is dependent directly or indirectly on agriculture for their
livelihood. Though, the Nigerian agriculture is characterized by low farm
income, low level capacity to satisfy the food In spite of growing
urbanization, Nigeria is known to be predominantly rural in nature and majority
of needs of the country, due to the outdated and primitive techniques of
production, it is still the mainstay of the nation’s economy.
Measures
and program setup to upgrade the Agricultural sector involve the construction
and reformation of the whole structure of the agricultural sector by the
creation of appropriate institutions and public services. This would help strengthen
the economic position of the dependent farmers. Examples of such measures are
National Accelerated Food Production Project (NAFPP), Structural Adjustment
Program (SAP), Nigeria Agricultural Cooperation and Rural Development Bank
(NACRDB).
1.2 Statement of Research Problem.
According
to Anyanwu et al (1997) the agricultural sector has been recognized for a long
time as an important sector to Nigerian economy and development is one of the
crucial requirements for the overall economic growth. He noted further that the
decline in agricultural activities might appear natural in any development
process; it is obvious that in Nigeria, agricultural activities would remain
the most important single sector for some time to come. He emphasized that in the
past, development planners have introduced programs such as National
Accelerated Food Production Project (NAFPP), Green Revolution Programs (GRP),
in search for all appropriate technique in order to increase farm output and
productivity and such program have at one time been implemented.
1.3 Research Questions
In
recognition of the aforementioned the attempt is made in this study to provide
answers or
solution
to the research questions below
1.
What are the reasons for continuous fall or decline in the production level of
the agricultural sectors of the Nigerian economy?2. What actions can be taken
to upgrade the current production level of the agricultural sector?
3.
What effect does the decline in agricultural sector have on the human resources
of the economy?
4
What measures have been taken in the past to redress the perceived slow growth
rate of the agricultural sector?
5
How and to what extent does the performance and commitment exhibited by
financial institution in general, Nigeria agricultural cooperation and rural
development bank (NACRDB) in particular in terms of providing financial support
influenced the activities of agricultural sector?
1.4 Objectives of A Study.
The
general objective of the study is to determine the role of financial institution
in agricultural development in
Nigeria. The specific objectives include
1.
To examine and evaluate the agricultural credit it granted the farmers in
recent years.
2.
To ascertain the effectiveness of credit granted by Nigeria agricultural
cooperation and rural deve3lopment bank (NACRDB) in the achievements of the
pre-planned objectives of the agricultural sector.
3.
To analyze the measures and programs set by the government in a bid to
enhancing the agricultural sector.
4.
To determine the influence of these measures in accelerating the growth rate of
the agricultural sector.
5.
To establish and verify ways by which the agricultural sector can be improved
in the future.
1.5 Statement of the Research Hypothesis.
This
study would be guided by the following hypothesis;
i.
Ho: the agricultural down drain cannot be curbed through effective bank credit.
Hi
: the agricultural down drain can be curbed through effective bank credit.
ii.
Ho: bank credit and financial facilities are not made available by development
bank to farmer.
Hi:
bank credit and finance facilities are made available by development bank to
farmers.
iii.
Ho: bank credit facilities have been ineffective due to their policies
formulated and not their implementations and utilization.
Hi:
bank credit facilities have been ineffective due to their improper
implementations and utilization and not due to the policies formulated
1.6 Scope of A Study.
With
the aim of examining how the financial institutions influence the activities of
agricultural sector, through their credit policies and farm credit system,
programs that have been established to review the agricultural sector would be
analyzed. A lot of sources for farm credit have been and a number of them have
failed to perform their pre-planned functions. An example of such scheme is the
Nigeria local development board (NLDB).
Our
point of focus in examining institution program and scheme setup to upgrade the
agricultural sector would be on Nigeria agricultural co-operative and rural
development bank (NACRCD).
1.7 Significance of A Study.
The
agricultural sector of the Nigeria economy like any other sector of the economy
cannot function without fund. Unlike the other sectors of the economy,
agricultural sector can guarantee repayment of loan borrowed or collected only
after a long period of time. This is because of the slow nature of the
production process. However, this has acted as a hindering factor to giving out
loan to the agricultural sector by financial institutions. If this continues in
its current path, the continuous lack of fund would lead to the eventual
collapse of agricultural activities.
The
problem of lack of fund and credit facilities in the agricultural sector has
been chosen because the persistent shortage of fund would lead to a fall in the
production level of the agricultural sector, whose importance cannot be
over-stated.
Nevertheless,
there would be some beneficiaries in this study which will include the
government, financial institutions, large and small scale farmers as well as
the general public.
1.8
Limitation of the Study.
Some
factors may limit the level of accuracy and reliability of this study. Such
factors include.
i.
Difficulty in obtaining data.
ii.
Low response rate from involved parties.
In
the absence of the above mentioned limitations, all other errors and omissions
are entirely those of the researcher.
1.9 Definition of Terms
i.
Agriculture: This can be defined as the growing of crops and rearing of animals
for human consumption. Agriculture involves live stock, forestry, wide life and
fisheries as well as the production of crops like cocoa, palm product,
groundnut, cotton and rubber. Historically, the Nigerian agriculture can be
categorized into three. They are: Subsistence type, diversified type,
plantation type.
The
subsistence type is the production done mainly for human consumption with
little or no surface.
The
diversified type is the production type that is done beyond individual
consumption or domestic level.
The
plantation type although have not made any impact in the Nigeria agriculture,
it accounts for a small amount of total Nigeria agricultural output. It
involves the use of improved modern techniques and it is run in the state by
their development cooperation.
ii.
Agricultural Sector: The agricultural sector is one of the sectors of Nigeria
economy. it is the sector responsible for the provision of food supply and raw
materials for domestic and foreign industries.
iii.
Financial Institution: These are organization owned either by individual, group
or persons, state or country as a whole. Financial institutions are established
mainly for saving money (deposit) for their customers and providing for such
deposit and when needed and also the granting of credit facilities to their
customers based on the credit worthiness of such customers.
iv.
Nigeria Agricultural Cooperative and Rural Development Bank (NACRDB): It is a
body charged with the duty of granting credit facilities to individual farmers
as well as the group farmers for the purpose of fueling their farming
activities. It was previously known as Nigeria agricultural cooperative bank
(NACB) and became Nigeria agricultural cooperative and rural development bank
(NACRDB) after merging.
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