AN ANALYTICAL STUDY OF CREDIT FACILITIES TO SMALL SCALE FARMERS IN NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

This is an analytical study of credit facilities to small scale farmers in Nigeria. Agriculture is the science or practice of farming, according to the Longman Dictionary of Contemporary English (New Edition).

Agriculture plays a critical role in Nigeria’s economic growth; it is a key sector in any serious economic development effort undertaken by a country like ours. Agriculture, as a result of its output, tends to contribute significantly in areas such as job creation, food provision for an expanding population, contribution to GDP, which allows the country to earn foreign exchange, and the provision of raw materials to our local industries, particularly agro-allied industries, for further production.

During the 1960s, an examination of Nigeria’s agricultural sector indicated that it was the most significant to the economy. In actuality, this period’s generation

The country is still not self-sufficient in terms of agriculture, which provides food for its citizens.

Credit is a key tool for enhancing the poor’s well-being directly by smoothing their spending and reducing their reliance on short-term income. It also improves the poor’s productive capacity by funding investments in their human and physical resources. Credit for productive investments is typically sought by the poor, who are less risk averse, and it allows them to overcome liquidity constraints, allowing them to invest in ways that increase production, employment, and income. Because it is a risky and different task with significant transaction costs, financial institutions have been unable to accommodate small-scale farmers. Large formal gatherings were hampered by a lack of information.

An analytical study of credit facilities to small scale farmers in Nigeria

It is undeniable that small-scale farmers have traditionally had difficulty obtaining loans. Improvements in the supply of financial services are required to improve access. In order to persuade clients to use financial services, leaders must consider their preferences and socioeconomic circumstances. This helps with both the regulatory process and product development; for example, knowing what factors influence farmers’ decisions to use agricultural finance can help policymakers formulate policies that improve the welfare of the poor and those who are unable to obtain credit.

The poor performance of Nigerian agriculture and its consequences caused the government to endeavor to remedy the problem, as seen by policies and practices such as the National Accelerated Food Production Program (NAFPP), Operation Food Security, and others.

STATEMENT OF PROBLEM

Despite the agricultural industry’s significant contribution to GDP, results over the years have indicated that government subsidies to the agricultural sector have substantially decreased, resulting in a decline in agricultural productivity and, by extension, agricultural development. “Lack of financial facilities has been recognized as the biggest obstacle farmers face when they strive to increase economic activity and/or living conditions” in Nigeria, as in most developing countries (Britain, 1986: Biswanger et al, 1993: Agbor, 2004). Despite the fact that credit is a crucial input in production, access to credit is difficult for farmers in rural areas, even when it is available (FARM, 2006). It’s possible that this is due to a lack of information and collateral among farmers.

OBJECTIVES OF THE STUDY

The analysis of financing facilities for small-scale farmers has the following specific goals:

The purpose of this study is to examine the impact of credit facilities on the operations of small-scale farmers in Nigeria.

To discover and study the socioeconomic factors that can impact a farmer’s decision to use credit or not.

Examine the likelihood of non-borrowers being able to borrow as their socioeconomic parameters improve.

RESEARCH QUESTIONS

What effect do loan facilities have on small-scale farmers’ operations in Nigeria?
What socioeconomic factors might impact a farmer’s decision to use credit or not?
What are the chances that non-borrowers will be able to borrow if their socioeconomic features improve?

RESEARCH HYPOTHESIS

Given the nature of this research, a reasonable hypothesis must be developed:

H0: In Nigeria, loan facilities are insignificant in the operation of small-scale farmers.

H1: In Nigeria, credit facilities are important in the functioning of small-scale farmers.

SCOPE OF THE STUDY

The purpose of this research is to look into the role of loan facilities for small-scale farmers in the Ohaofia LGA in Abia state. The type, structure, and availability of each facility, as well as the measurement of relative accessibility to small scale farmers in Nigeria, will be covered in this study.

JUSTIFICATION OF THE STUDY

Different experts have raised concerns about financial facilities as a factor input, and the government itself has the ability to offer new doors of opportunity in the growth of small-scale farming in Nigeria.

There are limited research on small-scale agricultural credit and how socioeconomic factors influence whether or not they take credit. If financing facilities are not available, the sector’s development will be impossible. As a result, the goal of this study is to gain insight into this understudied aspect of agriculture by eliciting and analyzing the socio-economic factors that influence small-scale farmers’ credit decisions, as well as evaluating the nature, structure, and pattern of credit facilities available to small-scale farmers.

DEFINITION OF TERMS

Poverty is defined as a lack of a specific amount of material possessions or money. Deprivation of essential human needs such as food, water, sanitation, clothing, shelter, health care, and education could also be a factor.

An entrepreneur is a person who comes up with a novel concept and takes the risk of starting a business to produce a product or service that meets the demands of customers.

NAPEP stands for National Poverty Eradication Program, and it is in charge of reducing poverty in the country.

SAP stands for State Poverty Alleviation Program, and it is in charge of alleviating poverty in the state.

YES: A youth empowerment program that focuses on building capacity, increasing productivity, advancing technology, and promoting small businesses.

The UNDP stands for the United Nations Development Program. This is the United Nations’ development organization.

HDI stands for “Human Development Index.”

ORGANIZATION OF THE STUDY

There are five chapters in this research. The study is introduced in chapter one, followed by a review of relevant literature and a theoretical framework in chapter two, and finally, the research methodology, which includes the specification of estimating approaches in chapter three. The presentation and discussion of results and discoveries is found in Chapter 4, while the summary of findings, conclusion, and recommendation are found in Chapter 5.