THE ROLE OF COMMERCIAL BANK IN AGRICULTURAL FINANCING

1.0   BACKGROUND OF THE STUDY
Agriculture contributes significantly to national food self-sufficiency by accounting for over 90% of total food consumption requirements; it helps to maintain a healthy and peaceful population and also a source of food and nutrition for households. Furthermore, the ultimate objective of interest of economists in productivity should be to find ways of increasing output per unit of input and attaining desirable inter-firm, intra3firm and inter-sector transfers of population resources thereby providing the means of raising the standard of living. According to Oji-Okoro (2011), agriculture has been an important sector in the Nigerian economy in the past decades, and is still a major sector despite the oil boom; it provides employment opportunities for the teeming population, eradicates poverty and contributes to the growth of the economy. The oil boom of the 1980s led Nigeria to neglect its strong agricultural sector in favour of an unhealthy dependence on crude oil.
Agriculture is an indispensable sector of the Nigerian economy. It has been aptly described as the mainstay or backbone of the national economy since it provides employment and means of livelihood to about 75 percent of the country’s labour force. Agriculture also provides the stable food requirements of our teeming population as well as the local raw materials needs of the industrial sector. Before the advent of the crude petroleum oil boom era of late 1970s, agriculture’s contributions to Gross Domestic Product (GDP) of Nigeria were quite significant. For example between 1960 and 1969, the share of agriculture in the GDP averaged about 560 percent. However, following the discovery of crude petroleum in commercial quantities in Nigeria, the share of agriculture in the GDP declined considerably averaging only about 24 percent between 1970 and 1979. The continued slow growth rate of agricultural production has been accompanied by the importation of agricultural commodities, including those food items in which the country has traditionally been self-sufficient.
There are also a growing number of rural dwellers who have neither land to grow food crops nor the necessary incomes to purchase food from an increasingly expensive market. There is also a dearth of capital for the procurement of improved farm inputs. These factors are pointers to the urgent need to promote the transformation of the agricultural sector in Nigeria. In realization of the role agriculture plays in the national economy, successive past governments had embarked on one form of rural development programme or the other in order to stimulate domestic agricultural production notably, there were the National Accelerated Food Production Programme (NAFPP) of 1973, Operation Feed the Nation (OFN) of 1977, The Green Revolution of 1980 and the Directorate of Foods, Roads and Rural Infrastructure. All these programmes have achieved little or no success due to their political conception and poor implementation strategies.
Successive governments have only succeeded in changing the names of these programmes while no bold steps were taken to actually get to the root of the problem. In most cases attention was never focused on the small and medium scale farmers who are the actual producers. Whatever technological innovation introduced to improve agriculture and even if it is accepted by the farmers, its adoption will, to a large extent, be dependent on the farmers’ ability to finance the innovation. Because of his low income, the peasant farmer can hardly finance adoption of any new technology or innovation on his own. The factors militating against agricultural development in Nigeria are varied and complex. However, capital has been identified as one of the most crucial factors around which all others revolve. (Adeniyi 1987). It has been asserted that most small scale farmers are unable to accumulate capital due to their low margins of savings. Consequently they are caught up in a vicious circle of poverty from which many farmers cannot escape without a decisive injection of necessary capital “outside”. The need has, therefore, arisen for government to continuously address the issue of adequate financing for the agricultural sector in the national development plants.
1.1         STATEMENT OF THE PROBLEM
The study arose from the quest to achieve self-sufficiency in food production which is the greatest and highest priority area facing most of the world’s people today. Apart from the role of oil economy today, agriculture still remains the major stay of the Nigeria Economy as it provides majority of the populace with employment, income and food. As a business venture, it cannot be executed extensively unless funds is available for replacement and capital equipment procurement to enhance a quicker, clearer and more comprehensive of the important of this study.
Presently in Nigeria with her vast expanse of rich soil, a sizable number of her citizens suffer from hunger and starvation as a result of neglect of agriculture. Few agro-industries around depend greatly on importation of necessary raw materials in their production and many of the Nigerian youths roam about unemployed. It is of note that various policies have been made to solve these problems in which the banks have been targeted to provide the pivotal roles in the area of funding through provision of credits. However, the facts remains that the banks precisely the commercial banks have not come to grapple with the problem as much has not been felt in the area of credits to agriculture. The accusation was that commercial banks prefer granting credit to commerce or trading to agriculture and where the credit was allowed, the interest payable seems outrageous with some tight securities, which place restrictions and scare many prospective farmers.
1.2      OBJECTIVE OF THE STUDY
The general objective of this study is to access the role of commercial banks in agricultural financing in Enugu state. Other objectives include;
·    To determine the impact of bank credit on agricultural development in Enugu state.
·      To access the problems associated with financing agriculture in Enugu state
·      To access the level of awareness of farmers on the availability of bank loans
·      To determine the level of accessibility of agricultural loans to farmers.
1.3      RESEARCH HYPOTHESES
Hypotheses One
Ho: Bank credit loans have no impact on agricultural development in Enugu state.
Hi: Bank credit loans have an impact on agricultural development in Enugu state.
Hypotheses Two
Ho: Bank Credit loans are not accessible to farmers
Hi: Bank Credit loans are accessible to farmers
1.5        SIGNIFICANCE OF THE STUDY
This study may be significant in the sense that the outcome of the research will motivate other researchers on the subject matter especially since agriculture provides the foundation of the Nigerian economy. Therefore, it is necessary that more research should be made in the near future to improve the output of the agricultural products.
1.6 SCOPE AND LIMITATION OF THE STUDY
This study is primarily concerned with the role of commercial banks in agricultural financing in Enugu state. This study covers First Bank Enugu branch. The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following.
a) Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study
b) Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
1.7 DEFINITION OF TERMS
Commercial Bank: By definition, they refer to those organizations able to provide bank money that is checkable demand deposits that are conveniently unable as a medium of exchange and which also help to manufacture and transfer long, medium and short term credits for businesses and families.
Credit Terms: Conditions stipulated by the bank when giving out loans to its customers.
Credit Standard: Refers to the target giving out to customers in order for the customer to value the loan obtained.
Collateral Security: Is a kind of provision given to the banks by the customer.
Disbursement: Is paying out money to customers who have been given loans approvals.
Defaulters: When a customer fails to abide by the agreement or conditions of the loan and the loan is overdue for payment.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows:
Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study