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 (×²).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
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
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
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
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
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
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
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
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
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
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)