Problems And Prospects Of Lending To Small Scale Agricultural Producers In Bank Of Agriculture Of Nigeria
The research work on “The Problems and Prospects of Lending to Small Scale Agricultural Producers in Bank of Agriculture. For the research work to be adequately understood, the researcher introduced the subject matter highlighting the statement of general problem. This project also touched on the research objectives, scope of study and significance of the study, the research went further to review related literatures on the subject matter. Due to time constraints, the researcher has only highlighted the major aspects of the agricultural credit schemes and repayment of loans. In a way it could still provide for an input to deeper analysis of the subject matter in this part of the Bank (B.O.A) and other in the commercial process of banks in general in carrying out this work. However, this dissertation has been grouped into five chapters.
1.1 Background of the Study
Nigeria has been endowed with abundant human and material resources. Yet, imports bills for good and agricultural raw materials have been on the increase over the years.
Prior to political independence and immediately after the country got its independence, it was not only sufficient in food production and agricultural raw materials, but was generally having surplus for export.
Statistics from the Central Bank of Nigeria indicates that the agricultural sectors share of the gross domestic product G.D.P was as high as 65 percent in the sixties but has been on the decline since then. In 1973, it contributed 31 percent, while only 23 percent in the 1990s At the same time, food importation has been on the increase.
Concerted efforts have been made by government, federal, state and local government and by organizations and co-operative union towards improving the delivering agricultural output.
More than 80 percent of the Nigerian agricultural producers are peasant farmers who are low-income earners. Lack of credit facilities to these categories of farmers is greatly happening the needed change from subsistence farming to large-scale mechanized farming. Inadequate or lack of credit facilities is one of the most important factors that make it difficult for peasant farmers to innovate new methods of farming and implementation of research finding cannot be adopted if access to financial resources is restricted or not in existence.
For the expected transformation to take place in the rural sector, the technology and technique of agricultural cultivation, the quality of seeds planted, storage and marketing facilities must be improved to enable such improvements to take place. Financial resources through rural credit must be adequate it is quite obvious that most peasant farmers do not possess enough resources of their own to acquire such basic implements like tractors and animals driver ploughs, spraying equipments and pay for fertilizers and other inputs which are usually very expensive.
There are quite a number of sources of agricultural credits available to farmers these are categorized into two mainly institutional credits in Nigeria are obtained from commercial banks, cooperative societies, bank of agriculture, while the non-institutional sources of credits includes money lenders, landlords, shopkeepers relations and friends, which are more assessable to the peasant farmers.
For peasant crops like cocoa and palm trees as opposed to food crops, long term credit is required which is obtainable only from banks. The nationwide network of branches of various banks is not doubt a great advantage and importantly no doubt facilitate flow of funds to the grass root. However, this has not been achieved due to a number of problems. Which are:
- Natural hazards which are rampant these days e.g. flood and diseases to live stocks.
- Untimely approval of loans
- Lack of adequate supervision by the extension workers in charge of the scheme. Most of these farmers need supervision to ensure the right usage of the funds and to discuss problems with them.
- Most importantly amongst the problems is that of inadequate funds which the banks are battling to overcome.
The birth of Bank of Agriculture B.O.A formerly known as Nigeria Agricultural Cooperative and Rural Development Bank [NACRDB] limited as the single largest development finance institution in Nigeria followed the successful merger of the former People’s Bank of Nigeria [PBN], the defunct Nigerian Agricultural and Cooperative Bank which is now Bank of Agriculture and the risk assets of the Family Economic Advancement Programme [FEAP] in October, 2000. Thus; Bank of Agriculture [B.O.A] is dedicated primarily to agricultural financing of small and medium levels, as well as micro financing of small and medium scale enterprises.
In October 2010, the name was changed from Nigeria Agricultural Cooperative and Rural Development Bank [NACRDB] limited to Bank of Agriculture Limited. The bank is a registered limited liability company that is wholly owned by the Government of the Federal Republic of Nigeria with the share capital fully subscribed by the Federal Ministry of Finance corporate 60% and the Central Bank of Nigeria 40%. The Bank’s broad mandate encompasses saving mobilization and the timely delivery of affordable credit to meet the funding requirements of the teeming Nigerian population in the agricultural and non-agricultural sectors of the national economy.
Bank of Agriculture (B.O.A) was established as a national credit institution on November 24, 1972 and went into operate in March 6, 1973. Today’s Bank of Agriculture Limited, actually took its new name at the instance of the Nigeria Government. This is in the government’s view was to reflect more vividly, the Bank’s commitment to agricultural development through the promotion and financing of cooperatives.
Prior to the establishment of (B.O.A) as an institutional lender to farmers, the financing of the Nigeria Agricultural sector was essentially being handed by a variety of public institutions. These include the fund for Agricultural and Industrial Development, the regional local government Boards, development corporation and the regional marketing Boards.
The general consensus however was that these credit financing institutions failed due to some factors. Agricultural experts say these factors range form “political interference, inefficient project appraisal, monitoring and supervision” to law courage of the farming population inadequate funding. Adoption of excessively rigid and time consuming procedure for processing loan applications, low loan recovery and untimely loan disbursement.
Thus the bank of Agriculture is today a welcome relief to the Nigerian farmers. The Bank’s inauguration marked an important landmark in the history of nation’s agricultural development and it has continued to serve as a national financial institution devoted entirely to investing in all aspect of the agricultural industry.
1.2 Statement of the Problem
The main objective of banking of agriculture is to finance agricultural production both at large and small scale special grants and large sums of funds is apportioned to the bank by the government on annual basis for disbursement to farmers. However, the output from agricultural sector continue to be on the downside year after year. Despite the country’s past fertile land and abundant labour, large percentage of the country’s import is in food majored in rice, wheat, maize and other agricultural raw-materials, which were produced and imported in the past story of agricultural productivity in Nigeria.
It is against this background that the researcher intends to study the problems and prospects of lending to small scale farmers by the Bank of Agriculture (B.O.A) limited.
1.3 Objectives of the Study
The research aimed at discovering the problems and prospect of lending to small scale farmers via the bank of Agriculture.
The research therefore intends to achieve the following objectives:
- To find out the terms and conditions for agricultural loans.
- To understand the procedures involved in the lending process by the Bank.
- To find out the constraints faced by the bank in disbursement and repayment of loans by small scale farmers.
- To assess the prospects of lending to small farmers by the bank of agriculture.
1.4 Research Questions
The research question put forward are as follows:
- What is the nature and extend of lending to small scale farmers?
- What is the problems of lending to small scale farmers
- Are there bright futures to agricultural financing in Nigeria?
- Do small farmers have access to finance offered by the bank of agriculture.
1.5 Significance of the Study
The importance and significance of this study cannot be over emphasized. The research will gain in-depth knowledge about the activities of bank of agriculture in financing agricultural production, in addition, the public too will find this project very informative and useful.
Secondly, this study will serve as an important reference material for student in future that will be faced with the task of project working in similar area. The finding of this project will provide adequate information for their project writing.
Lastly, it will go a long way in assisting the government in Agricultural policies concerning agricultural-lending schemes.
1.6 Scope of the Study
The researcher work is restricted within Bank of Agriculture (B.O.A) limited. And only in the small scale agricultural producers (farmers) lending scheme. The researcher wish the projects is designed to be carried out on all the banks operated schemes but, this cannot be achieved due to a lot of constraint ranging from lack of comprehensive report on all the scheme the bank operated in the head offices. This can only be found in the branch offices who operate the schemes. Financial constraints and time factors contributes as to why the researcher could not travel far and wide in order to obtain the date for the research work.
The inaccessibility to some relevant data classified as “confidential” created a set back to this work. The researcher also encountered problems of poor response from management staff who complained they are not in position to comment.
1.7 Limitation of the Study
Lending is a complicated case that is likely to tarnish the image and integrity of the affected bank. Because of this, affected banks do not always willingly give out information about the case study. Therefore getting information about the problems and prospect of lending to small scale producers on the bank is proving more difficult as expected.
Summary, Conclusion and Recommendations
The research work “problems and prospect of lending to small scale agricultural producers” has been directed towards determining from lending process by the bank under study. The bank of agriculture has played a vital role in the disbursement of funds to individual, it has grown from fledging institutions to a household name in Nigeria agricultural sector. However, there is an increase in allocation of loans credit to all parts of Agricultural sector which is done with the compliance of the federal government directives
Therefore the attempt was made to review efforts. So far, made by the federal government and other in providing the peasant farmer. In particular with necessary capital at affordable cost as step towards minimizing the problem of low output agricultural production staring at the nation in the face for sometime now.
Finally, the problems of lending to small scale farmers which the bank is facing is lack of loan repayment and this has hindered the effective utilization of the bank, it is in the view of this problem that this project tried to highlight suggested solutions to these problems and further adequate recommendations.
Based on the findings of this study, the research can safely conclude that lending credit to small scale producers has problems and prospect and some of the problems are:
- Natural Hazards: Which is rampant these days e.g. flood and diseases of livestock.
- Untimely Approval of Loans: Some of the facilities are give off-season, lending to wrong or different usage of the funds.
- Lack of Adequate Supervision by the Extension Workers in charge of the Scheme: Some of these farmers need supervision to ensure the right usage of the funds and to discuss their problems with them.
- Most importantly amongst the problem is that of inadequate funds which the bank is battling to overcome.
- Another problem is the inadequacy of staff and high cost of administering the loans.
Irrespective of these problems, the B.O.A has seen some prospects in the small holder scheme and this includes:
- It stands out as a prime solution to the nation’s food problem especially if given the solid backing it deserves from other financial institutions.
- Emphasis is to be place on group related approaches so that farmers benefit more.
- Allocation is now higher for the small scale producers than that of the large scale with all indication one can conveniently conclude that with more innovative ideas the B.O.A small holder scheme is set to significantly make both agricultural and industrial sectors of the economy better.
From the foregoing, it is apparent and conclusive that B.O.A is by virtues of its national responsibility, seriousness and constant dynamism used. The small holder scheme to place Nigerian peasant farmers on the centre stage of the national recognition. This has greatly improved their income and quality of life, had a multiple effect on their environments. This lending scheme has led to the creation of more job and agricultural facilities. It is hoped that with the assistance of other finance houses, Government and individuals, further pursuance that one day Nigeria will realize its dream of becoming a good sufficient nation.
In order to improve the lending schemes to small scale farmers by the bank of agriculture, the researcher recommend the following:
- Federal government should create market for farm product.
- Bank of Agriculture should train personnel for maintaining tractors, and also reduction of input price.
- The bank should as much facilitate the disbursement of loan because if loans are given off season, farmers tend to use them for other purposes, like getting married or buying television sets etc.
- The organization should employ staff who will communicate and supervise the farmers. This is t ensure that the money is used properly and for the purpose intended and also to communicate any innovations or advice in respect to their individual projects and needs.
- There is need for the organization to group these farmers, since majority are not educated and have virtually nothing to offer. Under this arrangement, the group could be made to sign a credit register so that in event of default they will be held responsible. When this arrangement is adopted with some modification, the rate of defaulters will be greatly educated.
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