Table of Contents vi-viii
List of Tables ix
Background of the Study 1-3
Problem Statement 3-5
Objectives of the Study 5
Justification of the Study 5-6
Plan of the Study 6
2.0 Theoretical Background and Literature
2.1. Concepts of Savings 7-9
2.1.1. Factor Affecting Saving among Rural
Agro-processing Households 9-10
2.1.2. Type of Saving 10
2.2. Concept of Investment 11-13
2.2.2. Types of Investment 13-14
2.2.3. Factors Determining Investment 14-15
2.3. Household Savings 15-16
2.4. Rural Informal Savings 16-18
Management in Developing Countries 18
of Savings Mobilization 18-20
Affecting Rural Investment 20-21
the Obstacles of Investment in Rural Areas 21-22
and Deterrents of Savings and Investment Among Agro-processing
2.9. Empirical Review 24-25
Research Methodology 26
Area of the Study 26
Data and Methods of Data Collection 26-27
Sampling Technique 27
Methods of Data Analysis 27
Socio-economic Characteristics of the Cassava Processors 27
Investment Pattern of the Cassava Processors 27
Income Level of the Cassava Processors 27
3.4.4. Determinants of
the Saving Rate of the Cassava Processors 28
Determinants of Savings and Investment among the Cassava Processors 28-30
4.0. Resultsand Discussion 31
Socio-Economic Characteristics of the
Cassava Processors 31-32
4.2 Saving Pattern of the Cassava Processors 32-33
Analysis of Income Level of the Cassava Processors
Analysis Results 33-34
4.4 The Determinants of the
Savings Rate among Cassava Processors 34-35
Determinants ofSavingsand Investmentin the Study Area 35
4.5.1 Determinants of Savings among the Cassava
4.5.2 Determinants of Investment among the Cassava
Conclusion and Recommendation 37
5.1 Summary 37
5.2. Conclusion 37-38
1.1. BACKGROUND OF THE STUDY
Nigeria, agriculture has remained the largest sector of the economy. It
generates employment for about 70% of the population and contributes about 40%
to the Gross Domestic Product (GDP) with crop accounting for 80%, livestock
13%, forestry 3% and fishery 4%. Agriculture accounts for over 70% of the
non-oil export and provides over 80% of the food needs of the country (Adegboye,2004).
Nigeria has a total land area of 98.3milion hectares, but at present, only
about 34 million hectares or 48% are under cultivation. Agriculture in Nigeria
is practiced at subsistent level and is characterized by numerous farmers
operating several scattered small and fragmented plots of land using
traditional methods such as land rotation, bush burning with the use of crude
implements like hoes and cutlasses.
to Olawepo (2010), the majority of the rural populace in Nigeria either depends
entirely on farming and farming activities for survival and generation of
income, or depends on other non-farming activities to supplement their main
source of income. Over 90% of the country’s local food production comes from
small-scale farms. About 60% of the population earnstheir living from these
small farms which are usually of the size of about 0.10-5.99 hectares
(Olawepo,2010). It could then be seen that most farmers have limited resources,
a factor that limits their productivity, income, savings and investment. In the
midst of all these, farmers have resulted to a number of means to enhance their
production and also to improve their well-being socio-economically. These
options includes pooling their resources and working together as members of
cooperative societies, through the use of loan and other services from
microfinance or community banks; making daily, weekly or monthly contributions
through the formation of small savings and thrift groups like Ajo-dida and
Esusu or employing the method of risk diversification by engaging in the
trading of other non-agricultural goods or in processing or value addition of
agricultural produceinto finished goods with longer shelf-life as agro-processors – those into the
process of producing or sourcing for agricultural produce and converting them
into finished goods for consumption.
Nigeria, where rural farmers account for over 80% of the farmers in the country
and produce 95% of the domestic food production in the country (Olashore,1998; Yusuf,2000),
majority of rural households are small-scale farmers and as such, a significant
part of their non-farm income comes from small and medium enterprises (SMEs).
Rural entrepreneurs are characterized by poor access to credit, poor savings
rate, risk and uncertainty, poor weather condition, focusing of information on
technology and not on pricing. The inability of rural entrepreneurs to access
credit has restricted their potential to expand their enterprises especially in
diversifying into non-farm activities and end up with low income and hence,
poor savings (Albu and Scott,2001). This has led to low standard of living and
inability to break the vicious cycle of poverty for the rural dwellers.
is normally considered in economics as disposable income minus personal
consumption expenditure. It could also be regarded as income that is not
consumedimmediately by the purchase of goods and services. According to Azhar
(1995),savings may be made in kind such as jewelry, land, livestock or dowry.
It may still be in the form of currency notes deposited in banks or more often
be hoarded. Savings are very imperative for supporting and developing rural
industries. They provide several benefits for households. Directly, saving
could be used for investment. Indirectly, saving indicates repayment ability,
also increase credit rating and as collateral in the credit market
(Brata,1999). Savings is both a risk management strategy and determinant of
magnitude of investment but itsdeterminants and mobilization strategy are
controversial issues in literature (Mkpado and Arene,2010). Ayanwale and Bamire(2000)
claimed that saving behaviours of farmers in developing countries is less
dependent on the absolute level of aggregate income, but more dependent on
other factors on the relationship between current and expected income, the
nature of business, household size, wealth and demographic factors like age.
Adeyemo and Akala(1992),for instance, showed that there is a high degree of responsiveness
of savings to change among fishermen in the riverine areas of Nigeria.
the other hand, investment could be considered as an act of laying out money in
return for a future financial reward or the sacrifice of something now for the
prospect of later benefits (Ajayi,1998). According to Olofin (2001), investment
is any form of producer durable that is capable of contributing to the
production of goods and services. Investment spending or expenditure to him
would be any form of outlay, either by individuals or corporate units as firms
or institutions such as government, for the purchase of such durables.
Therefore, investment in their context refers to the purchase of real tangible
assets such as machines, factories or stock of goods and services for further
use as opposed to present consumption. Investment is a process of exchanging
income for assets or converting forms into productive economic unit based for
higher return or higher rate of economic value in future period for the purpose
of gaining income.Odoemenem(1991),however, was of the view that small scale
farmers invested their savings in two major areas; the agricultural and
non-agricultural sectors. Investment in the agricultural sector or farm
activity includes the purchase of fertilizer and chemicals hired labour and
buying more land for farming while non-agricultural sector are mainly centered
on education, trade expansion, building houses, dowry obligation and purchase
of durable assets.
line with the above concepts, savings and investment in the rural economy
appear to be in monetized and non-monetized forms. This could be attributed to
the subsistent nature of the economy. This further implies that for any
meaningful investment to be obtained, a sound saving mobilization has to be
pursued. Although, when the increments and funds are spent on household
expenditure, farming economy and economy growth tend to be jeopardized,adequate
integration of savings and investment programmes into development strategies
are capable of improving resource allocation, promoting equitable distribution
of income and reducing credit delivery and recovering cost. The government,
armed with the awareness of the contribution of savings and investment
strategies among farmer cooperatives, agro-processors and SMEs to the economy,
have been encouraged to establish programmes involved in loan schemes such as
Family Economic Advancement Programme (FEAP), Cooperative Federation of Nigeria
(CFN), Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB)
1.2. PROBLEM STATEMENT
There are several problems that affect
the level of savings and investment strategies of agro-processors. While
acknowledging that socio-economic characteristics of the agro-processorsmay
vary from one occupation to another, recent studies like Adeyemo and Bamire
(2005) suggest that socio-economic characteristics such as age, sex, farming
experience, household size…etc, affect the level of savings and investment
strategies among agro-processors.
of the problems confronting the development of the agricultural sector in
Nigeria could be attributed to inadequate savings and investment by the small
scale farmers (and agro-processors). Despite this problem, policy makers have
not really drawn up adequate and comprehensive rural savings scheme that will
ginger the farmers to invest their capital productively (Ogwanighie,1997).
farmers (andagro-processors) in Nigeria have not been able to finance their
businesses due to poor access to credit, poor savings rate, risk and
uncertainty, poor weather condition among other difficulties, thereby resulting
to other means of mobilizing savings and funds for investment such as
cooperatives and other informal financial institutions. Odoemenem, et al. (2005) observed that farmers make
use of informal financial sectors to mobilize savings to develop their rural
communities. They further observed that rural farmers make use of informal
financial institutions because they give them access to loans they cannot get
from formal financial institutions due to lack of collateral. Though, this
sector has its own prevalent problems such as inadequate capital base for
operation, poor record keeping, crude accounting system, gross mismanagement;
farmers still prefer them to banks.
there has been an upsurge of interest among development economists, governments
and international donor organizations to increase financial savings in developing
countries, particularly in rural areas and among poor households. However, a
large number of developing countries are unable to mobilize the potential
savings of the non-corporate sector because the structure of their financial
institutions, financial instruments and financial policies are not sound
view of this, with major focus on cassava processors (those into fufu
production), the questions of interest in this study are;
What are the socio-economic
characteristics of the cassava processors in the study area?
is the investment pattern of the cassava processors in the study area?
are the existing income levels of the cassava processors in the study area?
is the savings rate of the cassava processors in the study area?
are the determinants of savings and investment among the cassava processors in
the study area?
study attempts to provide answers to the questions identified.
1.3. OBJECTIVES OF THE STUDY
broad objective of this study is to analyze or assess the savings and investment
strategies of cassava processors using Yewa North Local Government Area as a
study case. The specific objectives are to;
describethe socio-economic characteristics
of the cassava processors in the study area.
the investment pattern of the cassava processors.
income level of the cassava processors.
savings rate among the respondents.
determinants of savings and investment strategies among the respondents.
1.4. JUSTIFICATION OF THE STUDY
justification of this study is centered on the importance of savings and
investment and also the essence of savings and investment strategies as it
concerns the cassava processors’ businesses. In developing countries,
especially Nigeria, investments in agricultural production and its related
activities have not been given expected priority, even among the farmers who
come together as a group to assist each other, either through cooperatives or other
informal means; and this can be attributed to some factors.
and Bamire (2000) claimed that the saving behavior of cooperative farmers
(cassava processors inclusive) in developing countries is less dependent on the
absolute level of aggregate income and more dependent on the relationship
between current and expected income, the nature of the business, household
size, wealth and demographic variables among other related factors. However,
Adeyemo and Bamire (2005) examined the pattern of savings and investment among
cooperative farmers (or cassava processors in this case) in Southwestern
Nigeria and reported that income, loan repayment and amount of money borrowed
are significant variables that influenced saving pattern. This research study
is set to help clear the air on savings and investment among farmers as well as
cassava processors and also the determinants of the savings and investment
strategies with regards to the available infrastructure on the study.
from this research study on the analysis of savings and investment strategies
among cassava processors could help policy makers and credit agencies for
effective and efficient credit services delivery of loan schemes that could
increase the production of agricultural produce and value-added finished goods
as well as the general well-being of the cassava processors.
OF THE STUDY
research study was divided into five chapters, with each chapter for a definite
purpose. Chapter One consisted of the introduction which includes the
background of the study, problem statement and research questions, objectives
of the study, justification of the study and plan of the study respectively.
Chapter Two covered the literature review and theoretical background. Chapter
Three entailed the methodology and procedures that was involved in carrying out
the research study. Chapter Four involved the empirical findings and the
results of the findings. Chapter Five featured the summary of the findings, conclusion