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THE ROLE OF MICROFINANCE BANK CREDIT ON AGRICULTURAL
DEVELOPMENT IN NIGERIA (1980-2010)
ABSTRACT
This research work tries to investigate the role of
microfinance bank on agricultural development in Nigeria using Nigeria as a
case study. Using ordinary least square method, data collected were secondary
data and the durbin-watson t-statistics were used in the regression analysis.
The study shows that Microfinance bank loans have a positive impact on
agricultural development in Nigeria. Based on these findings some
recommendations were made, interest rate should be reduce to encourage farmers
in borrowing and The federal government should give a directive through
microfinance bank that will encourage the farmers by giving them incentives.
This will automatically increase the efficiency of farmers and thereby attract
more youths to the agricultural sector.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Nigeria is endowed with natural resources, large fertile
farmland, wide range crops, and river amongst others. Despite its abundant
natural resources it is faced with poor food situation. The poor food situation
is traceable to the decline in the agricultural sector. The problem of feeding
and provision of natural resources is increasing by the day. However several
efforts are being made to improved the standard.
Prior to the discovery of petroleum in Nigeria agriculture
used to be the highest foreign exchange resources earner and contribution to
gross domestic product GDP has been estimated to about 62.63% in 1960, 48.08%
in 1970s, 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.
In spite of growing urbanization, Nigeria is known to be
predominantly rural in natural and majority of population is dependent directly
or indirectly on agriculture for their live hood. Credit delivery is perhaps
one of the most important roles of microfinance banks, as the loans extended
are used to expand existing businesses and in some cases to start new ones.
According to CBN (2008) microfinance loans granted to clients is increasing from
2007 to date and most of it goes to financing micro-enterprises in rural areas.
Ketu (2008) observed that Microfinance banks have disbursed
more than eight hundred million micro-credits to over 13,000 farmers across the
country to empower their productive capacities. As such it is expected that
agricultural output will increase with the increase in finding. The
entrepreneurial capacity of the farmers we thus improve.
1.2 STATEMENT OF RESEARCH PROBLEM
According to Anyanwu etal (1997:14) “the agricultural sector
has been recognized for a long time as an important sector to Nigeria economy
and development is one of the crucial requirements for the overall economic
growth.
He noted further that the declined 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
introduce programs such as national accelerated food production project
(NATPP), 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.
Based on these, a number of problems one facing the
agricultural sector and they are as following. Inadequate finance or credit
facilities, inadequate farms input, lack of storage facilities, lack of basic
amenities, Lack of technical know-how, lack of research and illiteracy of the
farmers.
The questions to which this research will provide answers to
one, is the credit advanced to farmers through microfinance adequate to have a
significant impact on agriculture? All these problems can be solved or rather
reduce when there is adequate financing.
1.3 RESEARCH QUESTIONS
This study revolved around the answering of the following
research question. What extent does microfinance loans influences the
agricultural output in Nigeria economy?
What policy actions can be implemented to boost the
agricultural productivity in Nigeria through microfinance?
1.4 OBJECTIVES OF THE STUDY
In this study therefore, the researcher hope to accomplish
the following objectives: To determine how microfinance loans/credit granted to
the farmers can influences the agricultural output in Nigeria economy. To
determine policy actions in which agricultural output can be improved through
microfinance bank credit.
1.5 HYPOTHESIS OF THE STUDY
Microfinance banks loans have no significant impact on
agricultural development in Nigeria.
1.6 SIGNIFICANCE OF STUDY
Microfinance services, particularly those sponsored by the
government have adopted a traditional supply led subsidized credit approach mainly
directed to the agricultural sector and other non-farming activities, but the
effect has short lived.
The Nigerian economy stands to derive lot of benefits if
concrete steps are taken to salvage the agricultural sector opinions are
divided as the actual benefit of microfinance policy, regulatory and
supervisory framework and how it can develop economy, most especially the
agricultural sector because it has grasps of the challenges facing agriculture.
To the researcher, this work will serve as an avenue to
broaden my knowledge, as it places a challenge that will expand my intellectual
horizon by and applying various economic tools analysis draw conclusion for
future analysis. It is also expected to serve as an impetus for further
researchers in this area of study. It should not be considered as an end to
research and policy making but as a guide taking into consideration of its
limitation.
To the government and its agencies, it looks at earlier
policies designed and why they failed. Therefore it is hoped that it will
provide a useful guide to policy makers in agriculture for steady and
consistent policies and programmes in terms of funding.
To the society, this researcher’s work will create awareness
of the microfinance services that enables them engage in economic activities to
be self-reliant, increase employment opportunities, wealth creation, growth and
development. Finally, the salient findings of the study will also make the
farmers to be more oriented in agriculture.
1.7 SCOPE OF THE STUDY
The scope of this research covers the period from 1980 to
2013. The period is significant because a lot of measures were adopted
following the advert of crude oil and its collapse. That is pre-sap and
implementation and role in financing the agricultural sector.
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