Impact Of The Commercial Agriculture Credit Scheme On The Performance Of Beneficiaries

Project and Seminar Material for Agricultural Economics and Extension

Impact Of The Commercial Agriculture Credit Scheme On The Performance Of Beneficiaries


The study examined the impact of Commercial Agriculture credit scheme on the performance of beneficiaries in Abia State, Nigeria. Simple random sampling technique was applied in selection of respondents for the study. The sample was drawn from members of All Farmers Association of Nigeria (AFAN). AFAN has a total of470 members, out of this member 230 of them have so far benefited from the scheme while 240are yet to benefit. Thus from 230 beneficiaries, 200 were randomly selected. The data were analyzed using simple frequency and percentages. Results of the data analysis showed that personal saving and cooperatives were their major source of credit. The result of the analysis further shows that the farmers accepted the lack of awareness and access to the scheme due to delays as well as stringent measures by participating banks, collateral requirements and farmers education levels were the major problems encountered by the farmers but agreed weakly to lack of awareness as a problem encountered by farmers in accessing the scheme.

Chapter One


1.1 Background of the Study

Agriculture contributes immensely to the Nigerian economy in many ways, namely; in the provision of food for the increasing population, supply of adequate raw materials to growing industries, a major source of employment generation, foreign exchange earning; and provision of market for the products of industrial sector (FAO, 2006). Over the years, the inability of this sector to expand and as well contribute meaningfully to the growth of the Nigerian economy may be due to inadequate financing. Also the problem of rapid agricultural development in Nigeria indicates that efforts directed at achieving expanded economic base for farmers were frustrated by scarcity of and restrictive access to loanable fund (Nwankwor, 2013). One of the reasons for the decline in the contribution of agriculture to the economy is formal national credit policy that can assist farmers (CBN, 2010).

Agriculture, as a sector, depends more on credit than any other sector of the economy because of the seasonal variations in the farmer`s returns and a changing trend from subsistence to commercial farming (Mahmood, Khalid & kouser, 2009). This is in view of the fact that credit plays an important role in enhancing agricultural productivity, especially in developing countries (Iqbal, Munir & Abbas, 2003). The unpredictable and risky nature of agricultural production, the importance of agriculture to the national economy, the urge to provide additional incentives to further enhance the demand by lending institutions for appropriate risk aversion measures in agricultural lending provide justification for the establishment of the Commercial Agriculture Credit Scheme.

Consequently provision of appropriate financial policies and enabling institutional finance for commercial agriculture is capable of facilitating agricultural development with a view to enhancing the contribution of the sector in the generation of employment, income and foreign exchange (Olomola, 1997). Although some specialized development schemes and intervention programmes were initiated and implemented to boost agricultural development in the last decades, (both in the deregulated and regulated era), notably, National Accelerated Food Production Programme (NAFPP), River Basin and Rural Development Authorities, Green Revolution Programme, Agricultural Development Programme (ADP), and credit Guarantee scheme, the performance of the sector is still sub-optimal. Currently, agriculture is still dominated by small holder farmers with low production capacity and more than 90% of agricultural output is accounted for by households with less than two hectares under cropping (Federal Ministry of Agriculture and Natural Resources, 2008). At the current growth rate of the population of 3.0% per annum, the population is expected to double from 140 million to 240 million by 2030, farming can never meet the need for adequate quantities of food, for the teeming population.

Therefore in order to promote Commercial Agriculture in Nigeria, the Federal Ministry of Agriculture and Natural Resource, in collaboration with the Central Bank of Nigeria (CBN) introduced the Commercial Agricultural Credit Scheme (CACS) in 2009. The main aim of the fund is to complement other special initiatives of the Central Bank of Nigeria in providing concessionary funding for agriculture such as the Agricultural Credit Guarantee Scheme (ACGS) which is mostly for small scale farmers, Interest Draw Back Scheme, Agricultural Credit Support Scheme, etc.
The key agricultural commodities to be covered under the scheme are cultivation of target crops (rice, cassava, cotton, oil palm, wheat, rubber, sugar cane, jatropha carcus, fruits and vegetable), livestock (dairy, poultry, and piggery), and fisheries. Credit support to the target commodities shall be administered along the entire value chain of production, storage, processing, market and enterprise development. For the purpose of this scheme, a commercial enterprise, according to the CBN (2009), is any farm or agro- based enterprise with agricultural assets (excluding land) of not less than N350 million for an integrated farm with prospects of growing the assets of N500 million within the next three years and N200 million for non-integrated farms/agro-enterprise. This however, does not apply to loans obtained by state governments for on-lending. The Central Bank of Nigeria selects through a competitive process, the banks that will participate in the scheme with adequate considerations for the bank’s capacity, assets, branch network, liquidity, experience in agricultural lending, credit risk exposures, etc. The banks bear the credit risk of the loans.

The Central Bank of Nigeria (CBN) has put the total amount disbursed to beneficiaries under the Commercial Agriculture Credit Scheme (CACS) as at the end of the first quarter 2014 at N228.093 billion. The CACS was established to finance large ticket projects along the agriculture value chain. The scheme is being administered at a single digit rate of nine per cent to beneficiaries for a period of seven years. State governments, including the FCT can access a maximum of N1 billion each for on lending to farmers’ cooperatives or other areas of agricultural intervention.

A breakdown of the amount showed that it comprised N199.831 billion released from the CACS receivable account for 273 projects and the sum of N28.262 billion released from repayment account. It also showed that 30 state governments and the Federal Capital Territory accessed the sum of N39 billion from CACS fund from inception to March, 2014, while N1.304 billion was recorded as repayments by four banks in respect of five projects during the period under review, bringing the total fund repaid to N32.928 billion in respect of 68 expired projects. Therefore, the balance of CACS receivable account fund as at the end of March, 2014 was N169 million, while the balance in the CACS repayment account stood at N4.665 billion.

From inception in 2009 to March 2014, 165,510 jobs were created; two out of the 269 private projects are owned and managed by women. Analysis of CACS performance by value chain showed that out of the 274 CACS private sector sponsored projects (from both receivable and Repayment Accounts), production dominated the activities funded with 50.73 percent, followed by processing which accounted for 38.59 percent, while marketing, storage and Input supplies accounted for 5.47 percent, 4.74 percent and 0.36 percent respectively. In terms of the volume of funds released, processing accounted for 50.2 percent, followed by production which accounted for 34.8 percent. Marketing, storage and input supplies accounted for 10.6 percent 4.2 percent and 0.3 percent respectively.

1.2 Statement of the Problem

Lack of access to adequate formal production credit in Nigeria has continued to impair the harnessing of the economic potential of the productive sector, particularly the agricultural sector and hence its contribution to growth and development. One of the main challenges facing the country today is the need to devise appropriate mechanism for enhanced flow of credit and indeed, other financial services to empower the agricultural sector of the economy to better the lives of people and contribute to development of the nation. As part of efforts to further enhance credit supply to the agricultural sector, the Central Bank of Nigeria (CBN) has approved the extension of the terminal date of the Commercial Agriculture Credit Scheme (CACS) from September 30, 2016 to September 30, 2025. Considering that this policy became effective from May 14, 2014 and that the CBN has disbursed N228.093 billion as at the end of the first quarter 2014, it is expedient to assess the impact of the scheme. This is because with growing use of result-based management by government, determining whether goals have been attained and convincingly linking changes to specific programs have become increasingly critical. It is equally important to note, however, that it will never be sufficient merely to give out loans or credit facilities, it is important to ensure that the welfare increases as expected due to such intervention is achieved. It has also been noted that non-adherence to CACS guidelines by banks, and poor monitoring of projects by some participating banks is a major challenge of the scheme. This study, therefore determines the impact of CACS in Nigeria with Abia State as a case study.

1.3 Objective of the Study

The broad objective of this study was to analyze the impact of the commercial agriculture credit scheme (CACS) on the performance of the beneficiaries in Abia State, Nigeria.

To achieve this, the specific objectives were to:

  1. Describe the socioeconomic characteristics of the farmers
  2. Analyze the use of the loan by farmers
  3. Determine the impact of the scheme on the beneficiaries
  4. Determine the factors that influence the repayment performance of the borrowers
  5. Determine the problems encountered by the farmers in the scheme and they could be solved.

1.4 Research Hypotheses

Hypotheses One
  • Ho: Commercial Agriculture Credit scheme has no significant impact on farmers agricultural output.
  • Hi: Commercial Agriculture Credit scheme has a significant impact on farmers agricultural output.
Hypotheses Two
  • Ho: Socioeconomic Characteristics do not significantly influence repayment performance of farmers who accessed agricultural credit scheme.
  • Hi: Socioeconomic Characteristics significantly influences repayment performance of farmers who accessed agricultural credit scheme.

1.5 Significance of the Study

The development of the commercial agricultural enterprise can help stabilize and make agriculture more lucrative and create employment opportunities both at the production and marketing stages. The broad – based development of agro – products will improve both the social and physical infrastructure of Nigeria. Since it would cause diversification and commercialization of agriculture, it will thus enhance the incomes of commercial farmers and create food surpluses (FAO, 2010). The agro – processing sector occupies a significant position in the overall turnover and value added in developing countries (UNIDO, 2005). The development potential of a value chain in the agro – enterprise is defined by the extent it is able to contribute to increased income, employment and poverty reduction as well as the food security at household level (UNIDO, 2005). It is a well-recognized fact across the world, particularly in the context of industrial development, importance of agro – enterprises is relative to agriculture increases as the economy develops (Olugbeni, 2008). It should be emphasized that food is not just produced. Food encompasses a wide variety of processed products. It is in this sense that the agro – enterprise is an important and vital part of the manufacturing sector in developing countries. Agriculture as a percentage of the total GDP is typically high in low income countries, sometimes accounting for above 50% of the nation’s GDP, however, most of poor live in rural areas; this is true especially Africa (IFAD, 2008).

The CBN had in 2009 instituted a N200 billion commercial agriculture credit scheme (CACS), to improve agricultural production. Access to the CBN commercial agriculture credit scheme by commercial farmers has already started impacting on the economy of Nigeria positively (CBN, 2013). The results of this study are expected to give direction to policy makers to be able to assess the impact of the CBN commercial agriculture credit scheme in Abia State. In specific terms, this study will form basis of the data the researchers on this area of study will use. From this study commercial farmers will be able to know the performance of CACS in their area and be able to offer remedies to the challenges that might arise in trying to assess the credit. The result of these findings will enable AFAN Abia state chapter to compare the income of those that benefitted and those that have not benefitted from the scheme.

The nation will benefit in as much this particular study will contribute to the CBN existing knowledge and attitude towards the credit intervention programme. Most Nigerian governments, in the recent past have emphasized the need for effective agricultural sector. The performance of Commercial Agriculture Credit Scheme has enabled the farmers in the country to diversify their economic activities and optimize their gains (Odidison, 2012). They used the credit to procure agricultural inputs and food processing equipment (Odidison, 2011).

1.6 Scope and Limitation of the Study

This study is primarily concerned with impact of the commercial agriculture credit scheme on the performance of beneficiaries. This study covers Abia State. 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


Agriculture is the process of producing food, feed, fiber and many other desired products by the cultivation of certain plants and the raising of domesticated animals (livestock)

Credit Scheme:

This facility was established by the CBN and Federal Ministry of Agriculture to fast track the development of the agricultural sector in Nigeria by giving loans support to businesses


The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.


A person or thing that receives help or an advantage from something: one that benefits from something

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

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to have a critical analysis of impact of the commercial agriculture credit scheme on the performance of beneficiaries.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations are made, which in the opinion of the researcher will be of benefit in addressing the challenges of Agricultural Credit Scheme.

5.2 Summary

This study aimed at having a critical analysis of impact of the commercial agriculture credit scheme on the performance of the beneficiary. The study developed five objectives to guide the study and the objectives were structured in such a way that it would capture: the socio-economic characteristics of the farmers, the use of the loan by the farmers, the impact of the scheme on beneficiaries output, factors that influence the repayment performance of the borrower and the problems encountered by the farmers in the scheme.

The result of the analysis showed that male farmers were more than female farmers in the study. Also, the study discovered that most of the respondents have household members of 5 and below. Most of the farmers in the study were aged 41 to 60 years while, tertiary education pulled the highest frequency in the highest education level of the respondent. On the other hand, 99.2 percent of the sampled farmers own bank account while, 66.8 percent of them were married. Furthermore, farmers who had just 5 years and below farming experience had the highest proportion of respondents while farmers with 10 hectares and below equally had the highest percentage of farmers sampled. In the same way, farmers with capital base of 10 Million Naira and below were most, just as farmers who need credit in their farm have the highest percentage of the respondent. More so, most use only personal savings as their only credit source, just as farmers who use human labour were more.

5.3 Conclusion

Based on the above findings pertaining to the objectives of the study the following conclusions are drawn.
This study looked at the impact of commercial agricultural credit scheme on the beneficiaries in Abia state of Nigeria. From the result of the analysis in this study and the summary of findings, the study concludes that, most of the farmers in the area were mostly male of the age bracket of 41 to 60 years and household size and highest education level of 5 and below and tertiary respectively. In the same way, the study discovered that most of the farmers in the area have bank account and requires credit for their farm activities. Also, most of the farmers in the area were married and most of them have farmed for 5 years and below even as most of them own farm size and capital base of 10 hectares and below and 10 million Naira and below respectively. Majority of the farmers in the area does not source for credit as personal savings was identified as their major source of credit and they most often use human labour for their production.

The study further submits that the scheme improved the output of the beneficiaries greatly and most of the farmers who accessed the scheme used the money in majorly crop production and livestock farming. On the other hand, the study submit that an increase in profit of the farmer after accessing CACS, amount received by the farmer in the scheme, capital base of the farmer, farm size of the farmer, years the farmer has spent on formal education and farming and output of the farmer after accessing the scheme increased farmers ability to repay the loan. Furthermore, the study equally conclude that lack of awareness and access to the scheme due to delay, stringent measures by the participating banks, collateral requirement and farmers’ education levels were the problems encountered by farmers in accessing the scheme. .

5.4 Recommendation

The farmers could be utilized by the government to boost agricultural productivity in the state and Nigeria at large considering their level of exposure and enlightenment.

The analysis the government can utilize this yearning from these farmers to assist them with different classes of credits and motivations to boost their productivity.

The government needs to device a means of encouraging these farmers with incentives and credits with low interest requirement which should equally be spread so that the farmers would be able to pay the loan and interest irrespective of what effect climate change could cause.

The government should give these farmers tax holiday to encourage them. This could equally have a multiplier effect as many of the Farmers have not been farming for long, so incentives such as this could propel them to exploit every available means to boost their productivity which will lead to food security achievement.

Most of the farmers in the state still use only human labour in their production process. This shows that most of the farms in the area were low scaled who could not afford mechanized equipment for their production activities. The government should provide farm implements to the farmers at hire purchase with no additional payment on the real value of the equipment. In doing this the government can equally focus such equipment into areas that farmers have not exploited such as feed milling and storage. Gestures such as this can make farmers who would ordinarily wish to expand their businesses but were handicapped by finance and such equipment supplier contacts the opportunity to own and use such equipment to realize the expectations.

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