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THE ROLE OF CENTRAL BANK OF NIGERIA IN AGRICULTURAL FINANCE
DEVELOPMENT, PROBLEMS AND PROSPECTS
THE ROLE OF CENTRAL BANK OF NIGERIA IN AGRICULTURAL FINANCE
DEVELOPMENT, PROBLEMS AND PROSPECTS
TABLE OF CONTENT.
Title page ii
Approval page iii
Dedication iv
Proposal v
Acknowledgement vii
Abstract viii
Table of content. ix
CHAPTER ONE
Introduction 1
1.1 Background of the study 1
1.2 State of problems 7
1.3 Objectives of the study 9
1.4 Significance of the study 10
1.5 Hypothesis 11
1.6 Scope and limitation of the study 11
1.7 Definition of terms. 12
CHAPTER TWO
Review of Related Literature 16
2.1 Historical overview of Agriculture financing in Nigeria
17
2.2 The importance of Agriculture 19
2.3 Problems of Agriculture financing in Nigeria 20
2.4 The establishment of Central bank in Nigeria 22
2.5 The Major development programs and policies of
C.B.N in relation to Agricultural financing 26
2.6 The C.B.N and its objectives and functions. 39
2.7 The organizational structure of C.B.N
and its Agricultural finance development. 44
CHAPTER THREE
Research Design and Methodology 48
3.1 Research methodology 48
3.2 Research Design 48
3.3 Area of study 48
3.4 Sources of data 49
3.5 Method of investigation 50
3.6 Method of data analysis 51
CHAPTER FOUR
Data Presentation and Analysis 52
4.1 Introduction 52
4.2 Analysis of responses to questionnaires 52
4.3 Testing of Hypothesis 58
CHAPTER FIVE
Summary of Findings, Recommendation and Conclusion64
5.1 Summary of findings 64
5.2 Recommendation 66
5.3 Conclusions 67
Bibliography 68
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Agriculture is defined as “the cultivation of land for the
purpose of producing food for man, feed for animal and fibre or raw material
for industrial companies. It also
includes the processing marketing of crops.
In other words, it embraces all activities involved in the primary and
controlled production of plant and animals, such as fishing, forestry, farming,
livestock, poultry and small scale industries connected with processing of
agricultural products.
The agricultural sector forms the background of Nigeria
economy despite concerted effort in industralisation. Agriculture occupies the pride place as the
source of livelihood for over 70 percent of the population. It is recognized as a pre-requisite to
economic development. With large scale
dependence on agriculture for food, raw-material for industries etc, one would
expect production to increase, rather it is disheartening to note that this is
not the case. Agriculture has suffered
some neglect due to lack of investment since the inception of oil boom in
1970. In fact, Nigeria is experiencing a
decline in the space of agricultural production in general, this situation is
causing a great concern to the government.
Throughout the 1960s, Agriculture contributed 61.5%. in the 1970s, it declined miserably be
2.3%. This decline may be attributed to
the domination of the nations export by oil since 1970 which accounted for
57.6% of total export income and rose steadily, attaining an overwhelming
proportion of 98% in 1981. As a result
there was an absolute neglect in agriculture to both God (Gross Domestic
Product) and export earnings which has been the major factor dictating the need
to reactivate our agricultural products.
The need for this re-activity and in effort to revamp this sector has
been the reason for raising budgetary allocation in recent years to it. It rose from 6% in 1970s to 22% in 1984. this increase acts as incentive and
motivation to farmers, but these farmers while engaging in these agricultural
ventures are exposed to a lot of problem like diseases and pest attacks, fire
destructions, industrial pollution, machinery breakdown and other
problems. To these problems, the farmers
need some aids in solving or minimizing them.
Finance has been one of the most significant problems in the
expansion of agricultural production.
This was as a result of the neglect of the agricultural sector following
the oil boom of 1970s, when the oil sector become a major aspect of the
Nigerian’s foreign exchange earning.
This contributed to the inadequate funding of the agricultural sector
unlike before the boom. Also the
establishment of industries in the urban areas during the 1990 – 1994 National
Development plan to boast industrialization drew the rural populace with
constitute the farming population to urban cities for search of white color
jobs. A stage has reached, that average
Nigerians are now underfed. In the words
of or P.N.C. Akimbo in 1990 “The average Nigerian consumed on the average, some
20.23 calories per day and 56.46 grammes of protein per day compared to the
food and agricultural organization (FAO)minimum of 21.91 calaries and 53.8 grammes of protein. The average Nigerian was and still, is among
the worst fed in the world.
As a result of these situations; the successive Nigerian
Governments showed concern over the decline situation of Agricultural
production through policies and programmes aimed at revamping the agricultural
production in attempt to encourage increase food production “The federal
Government in 1993 tried the National Accelerated food production in programme
(NAFPP) during the General Yakulu Gowon’s regime; Under the leadership of
General Obasanjo, the Operation feed the Nation programme “(OFN) in 1976; Green
Revolution came up under President Shehu Shagari and Directorate of food Road
and Rural infrastructure under the regime of General Basangida regime.
Neither of these measures halted the Agricultural decline or
any lasting effect on food production.
This is because “little or no meaningful attempt has been made to change
the under developed status of the rural dwellers notwithstanding that these
people constitute about 95 percent of the total population engaged in
Agricultural in Nigeria.
It has been attributed that inadequate funding of
agricultural project and programme has contributed in large measures to the
government low production of Agriculture in Nigeria, and the government and
other financial institutions forms the major sources of finance for Agriculture
though policies and programmes.
Then what role and impact has the central Bank of Nigeria
(CBN) as the bank at the apex of Nigeria Banking system, (Bank of last resort,
bank to the government and Banker to other banks)” played to reinforce the government
policies or revamp the agricultural sector of the economy. The under – developed characteristic of the
Nigerian economy has made the central Bank of Nigeria to be activity involved
in the promotion of rapid economic development of other sector especially
agriculture through its development roles unlike in developed economics where
the role of central Bank is restricted to development of the financial system.
According to Dr Belshaw in his book entitled “Agricultural
credit in economically under-developed countries he wrote that “in respect of
agricultural credit, a central Bank has an important part to play by helping to
establish, strengthen and promote the extension of commercial banking
facilities and agricultural credit institutions.
Professor G. Nwankwo also wrote “it for instance mistaken to
think and believe that only the function of a central Bank is to control or
regulate the financial system; it was not conoinced nor thought to be an
appropriate function that a central Bank also has to the task of developing the
financial system if non existed and of organizing and mobilization of resources
for development.
To this end, the central Bank of Nigeria embarked on some
programmes and policies to curb the under economic development and low trend in
agricultural production. These policies
include the following :
i. The provision of credit to marketing board for the
purchase of some agricultural produce for export. This has become the sole responsibility of
the central Bank of Nigeria since May 1968, when the commercial financial still
was abolished by the federal Government.
ii. The establishment of the Nigeria Agricultural Bank (NAB)
in 1976, this Nigerian Agricultural co-operative societies, improve
agricultural production and storage facilities and promote marketing of
agricultural products through liberal credits to farmers at softer terms. The bank started with a capital of #6 million
which has increased to #250 million in 1991 with the CBN contributing 40
percent while the Federal Government has 60 percent share. The functions of the banks includes: grant in
of loans to small and medium scale farmers.
iii. The CBM also used another instrument in financing of
agriculture, this is through its credit guidelines contained in its monetary
and fiscal policies circulars which required the commercial banks to give
preferential treatment to Agriculture.
iv. The establishment of Agricultural credit Guarantee scheme
fund (ACGSF) in 1977 by both the federal Government and the central Bank of Nigeria. The Act provided #100 million subscribed by
the federal government, and the CBN at the ration of 60 percent or #60 million
to the federal Government, 40 percent or #40 million to CBN. This is to grantee for loan default made by
commercial banks to farmers for Agricultural purposes to the time of 75% of the
default. The CBN was also appointed the
managing agent of the fund.
1.2 STATEMENT OF PROBLEMS
Despite the various policies and programmes mapped out
annually for the economic development of Nigeria with emphasis on Agriculture,
the agricultural production level remained very low and recently on the
decline.
Finance has been traced to be the major handicap to the
typical Nigeria farmer, inadequacy of modern farming equipment, inputs, basic
infrastructure and storage facilities, marketing and distribution system. Then the central Bank of Nigeria – the apex
bank has been mandated by the federal Government of Nigeria to find a solution
to these problems.
Consequently, the central bank of Nigeria through its
agencies grant credit for the purpose of agriculture. But was faced with the following problems.
- Inadequate public enlightenment
- Mismanagement
- Technological constraints
- Poor land tenure system
- Environmental constraints
- Above all financial constraints.
Identifying financial constraints as the major handicap to
increase agricultural production. The
federal government increased its spending on agriculture by 12.7 percent in
1981 as against 6.5 percent in 1970’s. a
total of #8 million was allocated to agriculture during the five years National
Development plan 1981 – 85. still not
much has been achieved in food production.
To this end, the federal Government through the CBN policies and
programmes aimed at adequate financing to increase agricultural productivity,
for a nation that can not feed herself is said to be economically undeveloped.
1.3 OBJECTIVE OF THE STUDY
The major objective of this study is to determine and
appraise the performance of the central Bank of Nigeria and its agencies to
agricultural finance and development.
This involves:
i. To identify the central Bank of Nigeria policies in
relation to Nigeria Agriculture.
ii. To evaluate various measures introduced to boost
agricultural production and agricultural financing and how this affected the
realization of the agricultural goals and
iii. To identify the problems associated with the
implementation of these policies and suggest solution so as to improve
agricultural production.
1.4 SIGNIFICANCE OF THE STUDY
Unless the cause of a problem is found, any attempt at
solving the problem would likely be effort in futility. But when the basic causes of a problem are
identified, solution would be easily found.
This research work on the impact of central bank of Nigeria policies in
relation to Nigeria agriculture would be of immense importance to the policy
and credit guideline makers in ascertaining the efficiency of these policies on
agriculture in particular and the economy in general. Also from the recommendations and
suggestions, the problems and causes of failures in implementation would be
taken care of. As the policies involves many financial and other
credit institution the research would be of great worth to these institution,
for instance, It would help in assessing
the performance and cause of default in credit extension under the Agricultural
credit Guarantee scheme fund (ACGSF), the Nigerian Agricultural co-operative
bank (NACB) Credit and loan system. The
research work when completed will be of use to the following:
-The farmers and Agriculturist
-The central bank of Nigeria (Federal Government).
-The entire economy
-Finally, this work will serve as an addition to the already
existing literature and references in the area of policies of central Bank of
Nigeria agricultural financing, monetary economics and finance in general.
1.5 LIMITATION OF THE STUDY
The major source of some very vital data on the work of
course is the central bank of Nigeria but because of its own policies, the
major information areas are not accessible to the public. To this regard, the research has selected the
salient roles of the central bank necessary for the research and finically
examined and evaluated the effects of these policies in relation to
agriculture. It is also very pertinent
to state that the scope of this work generally is restricted to the programmes
of agricultural financing that are directly under the supervision and control
of the central bank of Nigeria.
1.6 STATEMENT OF HYPOTHESIS
The central bank of Nigeria (CBN) through its policies and
programmes has made remarkable impact in Agricultural financing in Nigeria.
The central bank of Nigeria (CBN) through its policies and
programmes has made no impact in Agriculture financing in Nigeria.
The Central Bank of Nigeria (CBN) through its polices and
programmes has evaluated various measures introduce to boost agricultural
production.
The Central Bank of Nigeria (CBN) through its policies and
programmes has made no remarkable measure to boost agricultural production.
1.7 DEFINITION OF TERMS
It is necessary here to introduce operational definition of
some concept to be commonly used in this study for better understanding of the
study. These terms are as follows.
Development: this means the process of sustained increase in
both per capital income and total income accompanied by structural modification
of the social economic and political environment.
Economic growth: This
refers to the steady process by which the productive capacity of the economy is
increased over time to bring about rising levels of national income.
Economic Development: This can be known as nothing less than
“The upward movement of the entire social system or it many be interpreted as
the attainment of a number of ideas of modernization such as a rise in
productivity, social and economic equal section. Modern knowledge, improved institutions and
attitudes and a traditionally co-ordinate systems of policy measures that can
remove the host of undesirable conditions in the social system that have
perpetuated a state of under development”.
Financial Institution:
These are institutions either private or public that channels loanable
funds from savers to borrowers. Example
commercial banks and development banks.
Policy: This is a cause oaf action pursed by the government
to achieve some development is also a source of raw materials for the teaming
industries the product for which modern man has virtually become over dependent
on”.
Butterssing these parts.
Enikanselu (1985) stated thus” agriculture besides providing food for
the people contributes positively to capital accumulation for the purpose of
financing the industrial sector”. He
maintained that the role of Agriculture in the economic development of a nation
includes providing an initial stage of development, the purchasing power for
the industrialization of the economy by supplying the necessary raw – materials
for industries.
Uka (1986) in his own opinion on the importance of
Agriculture to Nigeria economy assert that “Food is a basic necessity of life;
and it is only on a firm basis of food production that virile economy can be
founded. Besides, dependent on external
sources of food supply has grave instability consequence because it ties the
nations independence to the international policies. Writing on the importance of Agriculture and
the preferential treatment given to it by the central bank of Nigeria in policy
consider eration and allocation, Egba (1978) Stressed that “since 1969 when the
first circular was issued to banks, the CBN has consistently given preferential
treatment to agriculture which was included in the broad sector refered to as
production”. This preferential treatment
covers both the volume of loans allocated to the sector and the interest rate
chargeable on such loans.
Agriculture provides the greatest avenue for employment,
income and food for Nigerian populace.
Also the position of agriculture as a source of raw-materials for key
industries and a major foreign exchange earner.
Thus the government has given such priority to agricultural production
because of its realization of the numerous contributions. A highly developed agricultural sector could
make to the development of the Nigerian economy Olayade (1986) said “the
agricultural sector provides employment for about 67% of the active population
in the country. It is abundantly clear
therefore that this sector has constituted the back bone of our economy until
only recently.
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