Impact Of Loan Acquisition On Agriculture

Project and Seminar Material for Agricultural Engineering AE

Impact Of Loan Acquisition On Agriculture


This study is on impact of loan acquisition on agriculture. The total population for the study is 200 farmers from Khana local government of Cross rivers state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made married men,married women, youths andfarmers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

Chapter One


1.1 Background to the Study

Agriculture is still regarded as one of the main stay of Nigerian economy, before and after independence with the production of food for vast teaming population. It contributes immensely to the production of raw materials which has translated into increased foreign exchange earnings, better social life and higher standard of living of people. For instance it has constituted about 70% of the country’s gross domestic product (GDP), provides increased food surplus (raw material) to the rapidly expansion of Nigerian industrial sector and account for the bulk of the non-oil export (Eke 1997). Therefore wise nations all over the globe make agriculture a priority by developing and exploiting this sector for the survival of the nation. This is done by formulating policies by the government of different countries.

The term agriculture is derived from the Latin word “Ager” (field) and “cultura” (cultivation). This means field cultivation. This is not a complete definition of agriculture since agriculture has to do with animal production. Therefore agriculture can be defined as the art and science of cultivating the soil, producing livestock, preparing livestock feed, processing crops and livestock products for man and the process of selling excess crops and livestock. Agriculture may also mean just the production of crops, rearing of animals and general management of the soil. Agriculture also involves the science of preparing soil for the production of crops and rearing of animals for human use. It also embraces various preparations and processing of plant and animal products as well as the disposals of these produce through marketing (Cheghu 2004) observed that the sector generates employment for the teeming population over the years, the agricultural production has witnessed a drastic decline in productivity. This could be due to low impact on loan acquisition, lack of credit availability, lack of adoption of new technology and land fragmentation among other constraints to agricultural development (Nyong, 1993).

Recently, due to current decline in the world oil market price and economic down turn which has also affected the oil sector in Nigeria; there is a realization of the importance of agricultural sector to get its former pride of place. Therefore, there is need for efficient credit facilities and a great impact of the acquisition of loan for increased productivity in the sector, since agriculture development require amongst other things increased used in modern input. Such as fertilizer, tractors, increased seeds (Ajakaiye, 1990). General impression about the agricultural sector opined that, local farmers as small scale operation characterized by low productivity and low income due to their capital formation. The inability to purchase the modern requisites needs to be supplied with loans from banks and other credit facilities which will be used to increase production. These facts have often led the Nigerian government to promote and support the supply of credits (loans) to farmers and make loan acquisition easy enough for farmers hence, enhance or increase agricultural productivity at a large scale.

In the past years, the Nigerian government has lent financial intermediation through the establishment of lending agencies in addition to formal credit sources such as banks. This was done in the hope that such programs would have led to an effective supply of financial services in advances of demand for them from the sector. In spite of all these intermediations by the government, the impact of loan acquisition is still low and the demand for credit is still higher than the supply (Ago 2002).

The problem of low impact of loan acquisition in agriculture seem to be a common feature of the public credit scheme to finance agricultural sector because of the problem of low productivity associated with low impact of loan acquisition and situations where individuals engage in business other than farming because of quick return and relative high degree of certainty (Okon and Nyienakuna, 2002).

The impact of loan acquisition and other problems associated with agricultural financing reduce the funds available and requires disproportionate amount of administrative cost and time to recover the loan, thus profitability is reduced. These problems have persistently plagued the agricultural sector of loan and credit to the agricultural sector all to improve agricultural productivity.

The shortages in the supply of loans and farm credit in Nigeria are caused by the inability of farmers to produce collateral to enable them collect loans for enhancement of their agricultural production and the relevance of commercial banks to release loans to farmers. Therefore farmers now depend on informal sources to agricultural financing which result in the ability of the farmers to accumulate enough capital. So it is argued that, if loans were made available to these farmers, the agricultural sector would develop more rapidly (Nwagbo 1981).

Therefore, federal government of Nigeria initiated programs and established institution to serve as a strategy to increasing productivity as well as raising the income of farmers through:

The Nigerian agriculture and co-operative bank (NACB 1973) now named Nigerian agricultural and co-operative rural development bank (NACRDB) through merger of defunct Nigerian agriculture and co-operative bank and defunct people bank of Nigeria by the decree 22 of 1990.

Agricultural credit guarantee scheme (ACGS, 1978), operation feed the nation (OFN, 1976) and non-governmental organization (NGO). To make loans and credit available to farmers at a cheaper rate in all aspect of agricultural production, processing and marketing.

1.2 Statement of the Problem

Farmers in Khana L.G.A are operating in the subsistent level due to lack of application of modern /heavy farm machineries and small sizes of farm holding. Also farmers are faced with problem of inadequate finance and restriction on formal source of finance.

Over the years, advocacies have been made in increasing the access of farmers to agricultural productivity of rural farmers. They are believed to be indigenously efficient in their crop/soil management practices (Mathew 2002 and Ajayi 20005). Thus access to loans would ensure high productivity. In the study area, agriculture is still subsistent, it is perceived to be generally characterized by low productivity which is due to low impact of loan acquisition towards agriculture. Could it be true that if farmers have access to loans and credits their level of productivity would guarantee the repayment of such loans. Therefore, this study sought to ascertain the relationship between the impact of loan acquisition on agriculture and the level of agricultural productivity of the beneficiaries among other factors that could affect agriculture loan.

1.3 Objectives of the Study

The general objective of the study is to ascertain the impact of loan acquisition on agriculture (crop production) in Rivers state (Khana L.G.A). However, in order to achieve these principal objectives, the specific objectives are to:

  1. Identify the socio-economic characteristics of the farmers.
  2. Problems faced by farmers in acquiring loans
  3. Assess repayment performance of the farmer.
  4. Determine those factors affecting farmers’ repayment capacity.
  5. Compare the productivity of beneficiaries and non beneficiaries of loan.

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: there are no socio-economic characteristics of the farmers.
    H1: there are socio-economic characteristics of the farmers.
  2. H02: there are no Problems faced by farmers in acquiring loans
    H2: there are Problems faced by farmers in acquiring loans

1.5 Significance of the Study

The inability to payback agricultural loans has become a major source of concern towards sustainable financing of agricultural activities (Okon and Nyienakuna, 2000). This study considers it expedient to find out significant determinants that can be used as elements for reduction of low impact of loan acquisition among rural and peri-urban farmers by finance experts and will reveal a lot of knowledge on the circumstances surrounding loan acquisition by farmers.

1.6 Scope and Limitation of the Study

The scope of the study covers impact of loan acquisition on agriculture. The researcher encounters some constrain which limited the scope of the study;

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.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities

1.5 Definition of Terms

Agric Loan:

This refers to the amount of money collected from any sources for agricultural purposes.

Repayment Performance:

This refers to a proportion of loan that a beneficiary was able to repay at the end of the loan repayment duration. Since the source of loans were from different sectors i.e. private but informal, public but formal and informal sector, with short repayment duration.

Agric Production:

Refers to the level of technical efficiency index of a farmer based on the transformation of four primary input (labour (manday), land (hectare), seeding (kg) and fertilizer (kg) to output (kg)) in the course of utilization of the loan for agric production.)

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  1. Chapter one is concern 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.
  2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. 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 on impact of loan acquisition on agriculture. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges appraisal of impact of loan acquisition on agriculture

5.2 Summary

This study was on impact of loan acquisition on agriculture. Five objectives were raised which included:To identify the socio-economic characteristics of the farmers, to ascertain Problems faced by farmers in acquiring loans, to assess repayment performance of the farmer, to determine those factors affecting farmers’ repayment capacity, to compare the productivity of beneficiaries and non beneficiaries of loan.In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 farmers from Khana local government of Cross rivers state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made married men,married women, youths andfarmers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

5.3 Conclusion

Findings showed that agricultural production is still of minimal output in the study area. This is because most farmers do not obtain credit for agriculture, either out of their own making or the credit institutions and government policies. Even for those who acquired and use credit, their production output is still not commendable because of imperfections in the delivery system and the problems emanating from the farmers themselves. Findings further showed that among other factors, the socio-economic characteristics of credit beneficiaries influenced the rate of repayment and for non-credit beneficiaries influenced the acquisition of credit. Also there is significant difference in output between farmers who use credit for farming and those who do not. Finally, if the problem of acquisition of credit is addressed, more credits would be available to many farmers and in sufficient amount, which would enhance agricultural production.

5.4 Recommendation

  1. This study also showed that farmers with basic education can purposefully engage agricultural credit. With this education they are aware of innovations in agriculture which they can channel this loan to. Hence this category of farmers should be considered in loan extension for increased agricultural production and repayment.
  2. The government should review the present land tenure system (the communal land tenure system) which does not accord enough farm lands for purposeful agriculture and agricultural credit collateral. Free title system is recommended, which can ensure enough land for agriculture and collateral, for increase output and for security of credit respectively.
  3. Consideration should be given to farmers with more years of farming experience in extension of agriculture credit. It has been shown by this study that more years of farming experience, affords the farmer the wherewithal to meet the requirement for credit acquisition: guarantors, security, initial deposit, etc.
  4. Agricultural credit institutions like the NACRDB, ADP, and ACGSF etc. should be overhauled and repositioned to make adequate credit available. This study showed that there is more flexibility in these institutions than other sources of agricultural finance like the commercial banks, private lenders, etc.

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