ABSTRACT
The
study attempted to examine the impact of deposit money bank credit or loans on
agricultural sector performance in Nigeria between 1982 -2016. The study
examined the effect of deposit money bank credits on crop production in
Nigeria, to find out the impact of deposit money bank credits on livestock
production in Nigeria, to ascertain the extent to which deposit money bank
credits has affected the overall agricultural sector in Nigeria. This research
adopted the econometric method of ordinary least square (OLS) techniques of
multiple regressions as the main analytic tool. This study obtained data from
secondary sources mainly the Central Bank of Nigeria (CBN) statistical
bulletin, National Bureau of statistics (NBS) the CBN’s annual reports and
financial statement. From our findings the result revealed positive and
insignificant impact of interest rate on agricultural output. The result also
established a positive and significant relationship between bank loan advances
and livestock, production. The general conclusion is that a deposit money bank
credit is paramount in promoting agricultural sector.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Finance is the wheel on which every
production activity anchors. The activities of the financial institution
especially the banks, determine the economic progress and or retardation of a
given nation. The banks are noted for playing the role of financial
intermediation, which involves channeling funds from the surplus unit to the
deficit unit of economy, thus transferring bank deposits into loans or credits.
The role of deposit money bank loans
in economic growth and development can be recognized in the sense that various
economic units use to meet their operational needs. For example, in the
agricultural sector firm’s bank loans to purchase machinery and equipment
buying seeds, fertilizers, erect various kinds of farm buildings (Adeniyi,
2006).
While highlighting the role of
deposit money bank loans, Ademu (2006) explained that credit can be used to
prevent an economic activity from total collapse in the event of natural
disaster, such as flood, drought, disease, or fire. The banking sector is at
the centre of making these credits available by mobilizing surplus funds from
servers who have no immediate need of such fund and thus channel it in form of
loans to investors who have brilliant ideas on how to create additional wealth
in the economy but lack the necessary capital to execute their ideas.
According to the CBN (2007), credit
or loans to the core private sector by the deposit money banks grew by 98.7%.
Outstanding credit to agriculture, solid minerals, export, and manufacturing in
2007 stood at 3.1%, 10.2%, 1.4% and 10.1% respectively. Credit flows to the
core private sector in 2007 amounted to N2, 289.2 billion. Adekanye (1986)
noted that in making credit available to the productive sectors such as
agriculture, manufacturing, real estate or housing etc, banks render a great
deal of service as production will be increased, capital investment expended
and higher standard of living realized.
Agricultural credit access has
important role it plays in the context of agricultural and rural development in
Nigeria. Rahji and Adeoti (2010) noted that some 70% of the population lives in
the rural areas with their main source of livelihood being agriculture.
Therefore, credit constants to farm household impose high cost on the society
in the areas pf rural unemployment, poverty, and distortion s of production
activities. Swinnen and Gow (1999) pointed out that access to agricultural
credit has been severally constrained the productivity of agriculture in the
developing countries. This is because of the imperfect and costly information
problems encountered in the financial markets.
Tawose (2012) observed that the rapid
growth of industrial production has increased the demand for bank credit on the
part of industrial firms. He noted that financial institutions such as bank of
agriculture and merchant banks have increasingly been proving finances for
industries, some of which are manage by rapidly growing number of indigenous
entrepreneurs.
Indeed, under the credit guideline
being prescribed by the CBN, the banks have been encouraged to reallocate
credit or loans and re-channel it to the productive sector, thereby boosting
their level of productivity and performance as well as increase the growth and
development of the domestic economy. It is against this background that this
study examines the impact of bank of agriculture loans on agricultural sector
performance in Nigeria from the period of 1982 to 2016.
1.2 Statement of the Problem
As pointed out earlier, loans or
credit facilities of bank of agriculture are the life blood of any given
economy. This is because credits available to the productive sector like
agriculture go a long way stimulating growth and boost the domestic economy.
Where bank loans or credits are insufficient to cater for the needs of this
sector, the domestic economy that is private sector led is doomed to failure.
In Nigeria, it will be recalled that
bank of agriculture credit guidelines of the government through its agency,
Central Bank of Nigeria (CBN), the productive sector especially agriculture
have suffered lack of access to credits for production purposes. For example,
Yunus (2011) observed that lack of access to bank credit on the part of the
poor was the key constraints on their economic progress. Rahji and Adeoti
(2010) also asserted that banks perceive agricultural credit as risky and seek
to channel credit to less risky sectors. The bank credit constraints to farmers
and other investors impose such problems as reduction in the level of output,
reduction in national income, level of unemployment, poverty, income inequality
etc.
Following these eminent problems
associated with poor or inadequate deposit money bank loans or credit access to
agricultural sector, this study seeks to address such questions as: what
factors are responsible for credit access to the agricultural sector of the
economy? What impact has it on the various economic problems of unemployment,
poverty, low level of national income, lower output, and inequality? What are
the responses to these problems in Nigeria?
1.3 Objective of the Study
The main objective of this study is
to examine the impact of bank of agriculture credits on the agricultural sector
performance in Nigeria. Specifically, this study seeks to achieve the following
objectives:
i.
To
examine the effect of bank of agriculture credits on crop production in
Nigeria;
ii.
To
find out the impact of bank of
agriculture credits on livestock production in Nigeria; and
iii.
To
discover the extent to which bank of agriculture credits has affected the
overall agricultural sector in Nigeria.
1.4 Significance of the Study
Available literature revealed that
the level of productivity is a direct function of capital and most of the loan
to the productive sectors of the economy comes from the banks. There are
insufficient studies carried out the deposit money bank loans on the
agricultural sector of the development nations including Nigeria. The need to
carry out this study becomes imperative as it bridges this apparent gap in the
literature.
The finding of this study is of great
importance to the industrialists, farmers, government and other researchers as
it will establish the relationship existing between bank of agriculture loans
and the agricultural sector performance in the country.
Finally, the study adds and
contributes to the existing body of knowledge in economic literature.
1.5 Research Hypotheses
This study intends to test the
following hypotheses:
HO1:
There is no significant relationship between bank of agriculture loans and crop production in Nigeria
HO2:
There is no significant relationship between bank of agriculture loans and livestock production in Nigeria
HO3:
there is no significant relationship between bank of agriculture loans and overall agricultural sector production in
Nigeria
1.6 Scope of the Study
This study seeks to examine the
impact of deposit money bank loans on the agricultural sector of the economy.
Also, the study covers how the deposit money bank loans or credits to the
productive sector affect the overall performance of the Nigerian economy. The
study spans between the periods of 1982 to 2016.
1.7 Organization of the Study
Organization is the structural
pattern of the study. This is organized in five chapters. Chapter one
considered the introduction which covers background of the study, statement of
the problem, objectives of the study, significance, hypotheses and scope of
study.
In chapter two, we considered the
review of related literature on the issues of deposit money bank loans or
credit and agricultural sector performance. Also, theoretical and empirical
literatures were presented here.
Chapter three presented the method of
study, which involves the research design, data required and sources, method of
data collection, and technique of data analysis as well as models
specifications.
Chapter four considered the
presentation of data and analysis as well as the discussion of findings.
Chapter five focused on the summary, conclusion and recommendations.
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Item Type: Project Material | Attribute: 70 pages | Chapters: 1-5
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