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THE ROLE OF
FINANCIAL INSTITUTIONS IN AGRICULTURAL DEVELOPMENT (1990-2015)
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)
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