Agricultural Financing Of Rice Production In Nigeria

Agricultural Financing Of Rice Production In Nigeria
Abstract
This project work was carried out to investigate how rice production is financed in Edo State a case study of Owan East Local Government Area, Nigeria. This is due to the fact that rice is a widely consumed crop in Nigeria, in the view of farming, for farmers to carry out their farming operation, government and agricultural banks should give out loans to farmers. The results of the study confirmed that there is no significant preference in the extension of loans to Agricultural Cooperatives by banks and that there is a significant relationship in the factors affecting the performance of Agricultural Cooperatives and Non-Agricultural Cooperative. The study identified amongst others lack of credit facilities, loan default, lack of basic infrastructure, lack of securities, and technical expertise as the challenges of agricultural cooperatives financing in Nigeria.
Chapter One
Introduction
1.1 Background of the Study
Rice (Oriza Sativa) is an integral part of human being, it is the world’s only crop that was planted by emperors and kings offered to the gods and eaten by both the wealthiest and the poor. Rice is an annual crop and the most important stable food crop in tropic countries; commercially it is the most important cereal after wheat. It is widely consumed and there is hardly any country in the world where it is not utilized in one form or the other.
In Nigeria rice is one of the few food items whose consumption has no cultural, religious ethnic or geographical boundary. It is available in five stars hotels in the big city and towns as well as the “most local” of the eating places in the remotest villages throughout the country. It is highly priced and widely accepted for festivity. In some rural areas, it is so adored that if is eaten only on Sundays and sometimes on market days. But unfortunately, the cultivation and production of this highly priced and very important food crop is dwindling consequently, the price has gone beyond the reach of majority of Nigerian’s. In order to stem the decline in the number of rice farmers participating in rice farming and at the same time increase the production of all staple food crops, the Federal Government introduced a number of agricultural development programmes/project among wish are Operation Feed the Nation (OPN), Green, Revolution National Accelerated Food Production Programmes (NAFPP), Directorate of Food, Roads and Rural Infrastructures (DFRRT) and new Agricultural Development Programme (ADP), River in and Rural Development Authorities (RBRDA) and Nigeria Agricultural co-Operative and Rural Development Bank to mention but a few. Irrespective of these programmes/project and other schemes and improvement in infrastructural facilities, food crop (especially rice) productions have persistently remained below market demand.
Grower (1986) cited in CBN research report (1999) stated that the benefit of credit scheme enhances agricultural output. According to Beghin, Bureau and Park (2003) the Republic of Korea has supported its agricultural sector at a relatively high level compared to that of other member countries of the Organization for Economic Cooperation and Development (OECD). Bature (2003) in her scholarly contribution identifies the principal problems facing agricultural financing in Nigeria to include lack of credit facilities, lack of technological know-how, lack of basic infrastructures and lack of securities. Okuneye (2002) opined that interest rate should be worked out between government at various levels, the banks and the apex bodies of the rice farmers including cooperatives. Okongwu (1991) opined that to boost agriculture, bank interest on loans to agricultural enterprises should enjoy 100percent tax exemption. Balogun (1993) in his contribution stated that agriculture has important linkages and interrelationships with the rest of the economy as it provides important raw material for industries, food and fibre for the populace. Ogunwale e tal (1992) argue that high cost of administering fund, substantial payment of annual taxes preclude banks from extending facilities in the development of agronomic and pest/diseases control measures for the attainment of optimum yield and quality of crops and livestock, and preservation of soil quality. Ahmed (1985) opined that banks see agricultural enterprises as very risky ventures in which they should not commit depositor’s funds. Besides, dispersion of small and peasant rice farmers as well as low level of education among rice farmers; difficulties of acquiring land especially in the southern part of Nigeria and inadequate infrastructure constitute a bulwark to Agricultural Cooperative. In the light of the above, conscious and effective efforts will be made to thoroughly examine and study the production as well as the financing of this production processes of rice, the problems and the prospect of rice production in Nigeria a specified study of Owan East Local Government Area
1.2 Statement of the Problem
The problem that prompted this research work is the need to investigate the major knowledge attitude and bring to light and understanding after proper research, how the production of rice in Nigeria, Edo State and in the Owan Eastern region is been managed, the problems and the prospective involved. The following significant questions come to mind.
- The various sources of finance for rice.
- The basic problems faced by the processes of producing rice.
- How the climatic, biotic and abiotic factors in Edo State Owan East Local Government Area support the cultivation of rice there.
- How rice production in Edo State affects the distribution of rice in the country, Nigeria.
1.3 Objectives of the Study
- The examine the various source of finance for the cultivation and production of rice.
- To assess the basic problems associated with producing rice.
- To investigate if banks provide loans and financial supports to agricultural cooperatives in Nigeria.
- To create an understanding if the production of rice in Edo State, especially in Owan East L.G.A affects the distribution of rice in the country, Nigeria.
1.4 Research Questions
For the purpose of the research, the following research questions have been formulated to guide the study.
- What are the various source of finance for the cultivation and production of rice?
- What are the basic problems associated with producing rice?
- Do banks provide loans and financial supports to agricultural cooperatives in Nigeria?
- Does the production of rice in Edo State, especially in Owan East L.G.A affects the distribution of rice in the country, Nigeria?
1.5 Test of Hypotheses
The following Null hypotheses were tested:
- Banks in Nigeria do not give preference to agricultural cooperatives societies in the extension of loan.
- That there is no significant relationship between the data given by the officers (Agricultural Cooperatives/Non-Agricultural Cooperative) in their ranking of the ten factors affecting rice production in Nigeria.
1.6 Significance of the Study
In the world today, rice is one of the most important annual crop. This crop can be cultivated subsistent and both commercially, it can be planted and cultivated by the poor and also the rich, in a small scale of farmland or in a large scale of farmland. This study or research work should be of significance to students in enabling them (students) acquire every necessary knowledge, skills, values and information involved with producing rice.
It will also help already existing cultivators or rice farmers of rice to improve on their cultivation rice farmers wanting to endeavour in rice production, this research work will make available all the necessary information for the production of rice. This information will entail the method of cultivation, propagation, processing, planting, harvesting of rice etc.
The need to examine the agricultural financing can not be over-emphasized, this is because of the role agricultural sector plays in the economic development in Nigeria. Over the years production in this sector has been declining at a considerable rate and at the same time there is rapid increase in the population. In order to ensure the agricultural sector continuous to perform the role of economic transformation, it is necessary to ensure the continuous availability of fund to rice farmers for the purchase of better farm equipment, fertilizer and pay for labour to ease and improve their farm production.
This study is 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.
1.7 Scope the Study
The study covers mainly the role of banks in financing agricultural co-operatives societies. In this study, reference is made to rice farmers and commercial banks inOwan East L.G.A, Edo state.
1.8 Definition of Terms
Definition of some key operational terms used in the study and by commercial banks are as follows:
Commercial Bank
By definition, they refer to those organization 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.
Loan Recovery
Is a measure adopted by banks to recover the loans from customers.
Large Scale Rice farmers
These are rice farmers that engage principally in plantation such as tea, coffee, cotton, groundnuts, sugar and ruler. The acreage in moist cases is above twenty-five acres and in respect of livestock they keep thousands of chickens.
Small Scale Rice farmers
The Agricultural Finance Department of the CBN defined the small scale farmer as “a farmer whose unit of farm is limited to 25 (twenty-five) acres for crops while he also keeps between one to hundred chickens for livestock.
Rice: Rice is the seed of the grass species Oryza sativa (Asian rice) or Oryzaglaberrima (African rice). As a cereal grain, it is the most widely consumed staple food for a large part of the world’s human population, especially in Asia.
Chapter Five
Conclusion and Recommendations
5.1 Conclusion
The paper attempted to address the challenges and prospects of agricultural cooperative financing in the production of rice in Nigeria. The study identified amongst others lack of credit facilities, loan default, lack of basic infrastructure, lack of securities, and technical expertise as the challenges of agricultural cooperative financing rice production in Nigeria. Although the Federal Government made efforts in recent past to support the Agricultural Cooperatives, there are still some problems militating against the performance or progress of this sub-sector.
5.2 Recommendations
It is in view of this that we recommend the following:
- Agricultural credit should be issued after a thorough inquiry into legal title to land, fertility of land, suitability of rice crops and the borrowers finances.
- Agricultural loans should be mostly be given in kind and installment payment should be encouraged.
- There should be occasional inspection of the borrower’s agricultural project and refund of loans by installment deductions from the proceeds.
- The commodity exchange initiated by the present administration should step up plans for its full operation. This would help to guarantee price and income of cooperative rice farmers.
- The cooperatives law that restricts shareholding of members should be revised and interest rate on loans to cooperative rice farmers should be given at concessionary rate.
- Banks should develop a customized system to replace the present cumbersome and discriminatory collateral system.
- The government should encourage the private sector to provide storage facilities so as to improve supply during off-season, which will subsequently reduce prices.
- Cooperative rice farmers should be exposed to professional counseling and modern technology for production, storage and distribution of their production.
- Government should provide farm inputs such as fertilizer, pestiticides, and modern tools at subsidized rates to rice farmers in both rural and urban areas.
- Adequate infrastructural facilities like good roads; electricity, water, schools and medical centers should be provided in the rural areas by government.
- Government should compensate banks and support cooperate rice farmers according to their efforts, volume of coverage and loan recovery.


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