ABSTRACT
This research project investigated the effect of Central Bank of Nigeria on Agricultural Finance Development in Nigeria. Its secondary purpose was
to assess the policies and programs of CBN to the development of Agricultural
Finance. For the Purpose
of the study, data was collected through the issue questionnaires and analyzed
Pearson Correlation Co-Efficient. In the course of the data analyses, we found
also that there is a positive and significant relationship between agricultural
co-operative societies and the central bank of Nigeria. This indicates that the
assessment of the use of monetary and fiscal policies in stabilizing
Agriculture should be regarded as being very good. Given our findings, it was
concluded that: that CBN plays a vital role in Agricultural finance
development. But still some pose a threat to the successful attainment of their
objectives. Finally, we make the following recommendation: The government
should also establish a scheme that will be in charge of Agricultural funding
and the people that will be among the scheme should be people of good conduct
in order to avoid or rather reduce fraud and misappropriation funds. The CBN
should make sure that Nigerian Agricultural cooperative and Rural development
bank Ltd (NACRDB) spread out into the interior parts of the states so that
farmers can always have people to lean
on for some of those farmer are poor to the extent that they can’t afford the
transport fare of going to the urban banks to seek advisory services or
rather spend delegates to them on weekly
bases
70 Pages
Project Reference Code: C088
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The
Central Bank is a government established agency responsible for controlling the
nation’s supply , credit conditions and
supervising the financial system especially the commercial banks and other
depository institutions .The major features of Central Bank are as follows:
(a)
Note Issues— One of the features of Central Bank is the issue of
currency note in the country. The Central Bank controls the volume of currency in the country in
accordance with requirements of the business and the general public.
The Central
Bank is the banker to the government and also acts as its fiscal agent. The
government keeps its balances with the Central Bank without paying interest. It
receives and disburses the payment on behalf
the government
The
Central Bank also acts as the banker to scheduled and other banks. It is the
custodian of the cash reserves of the commercial banks. Every scheduled bank is
required to maintain not less than 5% of its total demand and time liabilities
with the Central bank. Against this obligation the scheduled banks are entitled
to loan and discount facilities of the
bank. The reserves with Central bank is known as liquid cash. The reserves
enable the Central Bank to have control over the credit creation of the
commercial banks.
The
Central Bank regulates and controls the credit in the country according to the varying economics situations. Bank rate policy and
open market operations are direct method of
controlling credit by Central Bank. It can either increase or decrease
the reserve ratio and control the
advances policy of commercial banks.
Agricultural
Finance generally means the studying, examining and analyzing the financial
aspect pertaining to farm business. This financial aspect
includes money matters , relating to production of agricultural products
and their disposal.
(Murray 1995)
defined Agricultural Finance as “ An economic study of borrowing fund by
farmers, the organization and operation of farm lending agencies and of society’s
interest in credit for agriculture”
The
underdeveloped of Nigerian economy has made the Central Bank be actively involved in the promotion of
rapid economic development t of other sectors especially the agriculture
through its development roles.
According to Dr.
Belshaw in his book
entitled “Agriculture al Credit
in economically under-developed countries , he wrote that ‘ .. in respect
of agricultural credit, the Central Bank
has an important role to play by helping to establish, strengthen and promote
the extension of commercial banking facilities and agricultural credit institutions.
To this end, the Central Bank of
Nigeria embarked on some programmes and policies to curb the
under-economic development and
low trend in agricultural
production.
The policies
include the following:
The provision of
credit market board for the purchase of some agricultural produce for
export. This has become the sole responsibility of the Central Bank of Nigeria since 1968, when the commercial finance was abolished by the federal
government.
The establishment
of the Nigeria Agricultural Bank (NAB) IN 1976, the Nigeria Agricultural Co-operative Societies, improved
agricultural production and storage facilities
and promote marketing of
agriculture through liberal credit to
farmers at softer terms. The bank
started with a capital of N6 million ,
which later increased to #250 million in 1991. The CBN contributed 40%
while the federal government contributed 60%.
The CBN also used
another instrument in the financing of
agriculture, this is through its credit guidelines contained in its monetary and fiscal policy circular which required the commercial banks to give preferential treatment to agriculture
.
The establishment
of Agricultural Credit Guarantee Scheme Fund (ACGSF)
in 1977 by both the federal
government and the central bank of Nigeria. The act
provided #100 million
subscribed by the federal government
and the CBN at the ratio of 40% while 60% went to the federal government.
1.2
STATEMENT OF PROBLEMS
Despite the various policies
and programmes mapped out annually for the economic development of Nigeria with
emphasis on Agriculture, the agricultural production level remained very low
and recently on the decline.
Finance has been traced to
be the major handicap to the typical Nigeria farmer, inadequacy of modern
farming equipment, inputs, basic infrastructure and storage facilities,
marketing and distribution system. Then
the central Bank of Nigeria – the apex bank has been mandated by the federal
Government of Nigeria to find a solution to these problems.
Consequently, the Central
Bank of Nigeria through its agencies grant credit for the purpose of
agriculture. But was faced with the
following problems: Inadequate public enlightenment, Mismanagement, Technological
constraints, Poor land tenure system, Environmental constraints, Above all
financial constraints.
Identifying financial
constraints as the major handicap to increase agricultural production. The federal government increased its spending
on agriculture by 12.7 percent in 1981 as against 6.5 percent in 1970’s. a total of #8 million was allocated to
agriculture during the five years National Development plan 1981 – 85. still not much has been achieved in food
production. To this end, the federal
Government through the CBN policies and programmes aimed at adequate financing
to increase agricultural productivity, for a nation that cannot feed herself is
said to be economically undeveloped.
1.3 PURPOSE OF THE STUDY
1.4 RESEARCH QUESTIONS
1.5 HYPOTHESIS
1.6 SIGNIFICANCE OF THE
STUDY
1.7 LIMITATION OF THE STUDY
1.8 DEFINITION OF
TERMS
CHAPTER TWO
REVIEW OF RELATED
LITERATURE
This research work in particular
is very important to the economy as it deals with policies of the bank at the
apex of the banking system (the central Bank) and one of the most priority
sector of Nigeria economy – the Agriculture sector. As a result much ought to have been written
on it by eminent school and schools of thought in the field of banking,
finance, monetary economies and Agriculture, but only very few have dealt with
the two aspect (CBN and Agriculture).
The policies
of the central bank of Nigeria as they affect agriculture are mainly on the
monetary programs, and fiscal policies.
However, the literature reviewed were the background of agricultural
financing, importance, problems, establishment of the CBN and its organization, roles and policies
(fiscal and monetary policies) of the CBN in relation to Agriculture and its
other policy instruments / programmes.
2.1
HISTORICAL PROSPECTIVE OF AGRICULTURAL FINANCING IN NIGERIA
Tracing the early
sources of agricultural credit financing in Nigeria, M.O. Ijere (1983) wrote
“there are three categories of Agricultural credit in Nigeria – The organized
credit which is characteristically subject to the market laws of supply and
demand and are granted by institutions.
The organized credit is characterized by its being given by private
person on whose whims and caprices the conditions are completely dependent as
it is less regulated by the market forces of demand and supply.
In a study on the
early Agricultural credit institutions: Nzewi (1986) stated that “tare
provisions of institutional agricultural credit in Nigeria dates back to the
1930s when the native authorities in Northern Nigeria undertake to finance
mixed farming” According to this man “Agricultural financing by a public credit institution
started on a nation wide scale with the Nigeria local Development loan Board
which was established in 1946 but centralized along regional lines in 1947.
These boards were
not efficient and so were re-organized into the western state Agricultural
co-operation fund for the Agricultural and industrial Development and the
mid-western Nigeria Agricultural credit co-operation. Agricultural loans in the North were mostly
in form of government guaranteed overdraft from commercial banks. As a result of the credit gap existing in the
four regions which these institutions were unable to fill the Nigeria
Agricultural and cooperative bank (NACB) was established in 1973 to boost
agricultural production and enhance agricultural development in Nigeria.
R. Adeyean (1981) in his own write –up holds that
commercial banks represent the oldest credit institution in the country but
that since they are operating especially for profit, most of their lending
activities were concentration in non-farms investment opportunities. He went further to stress that in attempt to
over this, led to the establishment of financial institution charged with the
specific objective of making loans available to farmers. This started in 1949 when the western Nigeria
Development Boards took over responsibility for credit supply in western
Nigeria and in 1955 when the western region finance corporation took over the
administration of credit farmers.
Also, he stated that in 1964, the western Nigeria
credit corporation was established to further reform agricultural credit
institutions. And in the former Eastern
Nigeria credit was provided from the fund for agriculture and industrial
development while in the Northern in the Northern Nigeria agricultural credit
was administrated by the Registrar of corporation under which the government
guaranteed loans from Backings Bank (as it was then called now union Bank) to
cover pre-season loans.
2.2
THE IMPORTANCE OF AGRICULTURE
2.4 THE ESTABLISHMENT OF CENTRAL BANK IN
NIGERIA
2.5 THE MAJOR DEVELOPMENT PROGRAMMES/POLICIES OF CBN IN
RELATION TO AGRICULTURE FINANCING
2.5.1
AGRICULTURAL CREDIT GUARANTEE SCHEME FUND
ESTABLISHMENT
2.5.3 INCENTIVES/WAIVER TO COMMERCIAL BANKS
2.5.4 THE ROLE OF CBN IN EXPORT PROMOTION AND FINANCING OF COMMUNITY MARKET.
2.5.5
CREDIT GUIDELINE IN RELATION TO NIGERIA AGRICULTURE
2.5.6
CBN AND AGRICULTURAL FINANCE THROUGH A SPECIAL
DEVELOPMENT INSTITUTION (NACB)
2.5.7 PROBLEMS AND
PROSPECTS OF AGRICULTURAL FINANCING IN
NIGERIA
2.6
THE C.B.N AND ITS OBJECTIVES AND FUNCTIONS.
2.6.1
ISSUING OF CURRENCY
2.6.2
BANKER AND FINANCIAL ADVISER TO THE GOVT
2.6.3 BANKER TO AND SUPERVISOR OF BANKS AND OTHER FINANCIAL INSTITUTIONS
2.7
THE ORGANISATIONAL STRUCTURE OF THE CBN AND ITS
AGRICULTURAL FINANCE DEVELOPMENT
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 RESEARCH METHODOLOGY
In this chapter, the researcher tries to access the
following issues. Research design, area of study, sources of data, method of
investigation and method of data
analysis.
3.2 RESEARCH DESIGN
This study is designed to use the survey approach and
conduct intensive and in-depth investigation of the research problems. The
output will be in form of descriptive findings and descriptive answers to the
research questions presented in the section. The output survey will be used to test
the hypothesis.
3.3 AREA OF STUDY
3.4 SOURCE OF DATA
3.5 METHOD OF INVESTIGATION
3.6 METHOD OF DATA ANALYSES
3.7 VALIDITY AND RELIABILITY OF THE RESEARCH INSTRUMENTS
CHAPTER FOUR
DATA ANALYSES AND INTERPRETATION
4.0 INTRODUCTION
In this chapter,
data are represented to identify the role of CBN in agricultural finance
development.
To achieve this, a structured and close ended questionnaire was designed,
validated reproduced and administered on the (30) respondent who made up the
sample twenty-five (25) of the questionnaire were duly returned by the
researcher after completion by the respondents.
Data gathered there of are presented below in table and analysised using
simple percentage techniques and the chi-square technique.
4.2
ANALYSIS OF RESPONSE TO
4.3
TESTING OF HYPOTHESES
HYPOTHESIS ONE
HYPOTHESIS TWO
HYPOTHESIS THREE
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY OF FINDINGS.
The findings from
hypothesis tested in this study upheld the view that CBN has made remarkable
impact in the Agricultural financing in Nigeria through its policies and
programs. This is gotten from the result of hypothesis one which show a
significant relationship between Agricultural Credit Financing scheme and the
CBN.
The second revealed
that the a positive and significant relationship between agricultural
co-operative societies and the central bank of Nigeria. This indicates that the
assessment of the use of monetary and fiscal policies in stabilizing
Agriculture should be regarded as being very good.
Apart from
finding from hypothesis tested there are also some other findings from oral
interview carried out by the researcher. This include that:
·
The economy is yet to be stabilized and Nigeria economy do not
have a well developed financial market
for proper functioning of financial and monetary instruments.
·
About 90% of respondent to the interview indicated that
illiteracy of the farmers initiates against the ineffectiveness of Agricultural
finance scheme.
·
The problems of poor record keeping also constitutes another
category.
·
Mismanagement and irregularity has contributed immensely to
the inadequate financial and agricultural development in Nigeria.
5.2 CONCLUSION
5.3 RECOMMENDATION
BIBLIOGRAPHY
Adeyemo Femi A
(2008):The establishment and growth of the CBN. Element of banking F&A
Publisher limited Lagos 3rd Edition
Adeyemo Rem
(2001): Agricultural finance policies and strategies in the1990’s
Ajakaiye M. B.
And Ogunna P. A (1985): The Role of banks in Agric finance paper presented on
quarterly lunch on/conference of the .
.
Orinde Wale (2002): Agriculture lending and
interest deregulation: Business Times
Uzoaga W. Okefie
(1991): Money and banking in Nigeria furth edition dimension publisher 1991.
Project
Reference Code: C088
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