CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

Agriculture was the main stay of Nigeria economy before the discovery of Oil in 1958. As a matter of fact, Nigeria was exporting agricultural produce such as; groundnut, cocoa, rubber, cotton, groundnut oil, cassava and yam to other part of the world. Agriculture was the Nigeria’s major sources of foreign exchange earnings before the attainment of independence in 1960. Subsequently, the discovery of oil in commercial quantity made Nigeria to abandon agriculture. Although, laudable efforts were made by successive governments in the introduction of programmes such as; Green Revolution, Operation Feed the Nation and Agricultural Development Programme (ADP), etc. but it appear that the political will to pursue such programmes to logical conclusion was lacking. This is so because; no effort was made towards the reduction in interest rates for farm loan or reduction in tariff for agricultural inputs. By implication, the larger proportion of farmers in Nigeria since independence usually engage in subsistence farming which focuses on the production of food for their families with little or nothing left over for sale.

        The broad spectrum of opportunity in agricultural sector paves way for more attentions of the stakeholders and governments across the globe. The Nigerian government realized that less patronage of locally growing crops may have adverse effect on Nigerian economy in many ways including loss of revenue, high rate of unemployment, inflations, decline in foreign reserve, increase inventory, proliferation of sub-standard crops in the market, price discrimination, problem associated with rural-urban migration, and low productivity among others (Adesina, 2013). This has forced the Nigerian government to place embargo on importation of some agricultural products including, foreign rice, dairy product, and tomatoes, among other commodities through land frontier in order to control or limit the inflow of such commodities (CBN, 2016). However the low productivity challenges of the Nigerian farmers could be linked to a number of factors, of which agricultural credit facility (loan) remain dominant. Most of the farmers in the rural areas engage in subsistence agriculture and lack sufficient funds to operate, expand their business, or even practice mechanized farming, with modern equipment like plough, tractors and other labour saving devices. Hence, they could not produce enough food to feed the ever growing population of Nigeria. In fact, there is insufficient and limited sources from which funds can be obtained by farmers in the rural areas to improve their productivity (Saheed, 2014).

        In an effort to meet the food supply for the growing population of the country, the government also introduced various policies aimed at achieving self-sufficiency in basic food supply and attainment of food security for the entire population, as well as, encouraging production of improved inputs for the local industries, through increased investment in agricultural business and increasing budget allocation for the agricultural sector. For example, as at December 2017 about N55 billion have been so far invested in rice industry through anchor borrower programme of Central Bank of Nigeria (CBN, 2015). This is to provide succor to Nigerian rice farmers in order to meet up some challenges associated with high cost of agricultural input, low output, low income, poor seedling, inadequate fertilizer, low patronage, problem of irrigation, water pumping machine among others. In furtherance to her past efforts to fight inflation and unemployment, the Central Bank of Nigeria in line with its developmental function established the Anchor Borrowers’ Programme (ABP) in year 2015 with a view to collaborate with anchor companies involved in the production and processing of key agricultural commodities. The Programme is targeted toward helping local farmers increase production and supply of feedstock to the processors, reduce importation and conserve Nigeria’s external reserves. Under the Scheme, Anchor firms serve as Off-takers in recognition of their track record and experience in working with out-growers involved in production. The Scheme involves a finance model whereby the anchor firms, CBN, NIRSAL and State Governments organize the out-growers and ensure that they comply with contractual terms thereby reducing the incidence of side-selling. The financing institutions serve as veritable channels for delivering credit to the out-growers.

1. STATEMENT OF THE PROBLEM

Agriculture over the years has been one of the major contributors to the Nigeria economy. However the issue of agricultural financing is seen mostly in the rural areas. Most farmers in rural areas do not have access to commercial bank lending. Secondly the high interest rate might scare famers from seeking financing from commercial banks. Thirdly the CBN anchor borrower programme scheme procedure might become a major challenge to farmers especially those in the rural areas. But farmers in the rural areas do not have bank accounts neither do they have BVN. This made it impossible for them to participate in the CBN anchor borrower programme.  

1.3 AIM AND OBJECTIVES OF THE STUDY

The aim of the study is to carry out an assessment of the role of government financial institution in the development of agriculture in Nigeria. The objectives of the study are:

1. To determine the effect of government financial institution on agriculture development in Nigeria
2. To examine the influence of CBN anchor borrower programme on agriculture development in Nigeria
3. To determine the importance of CBN anchor borrower programme to the agricultural sector in Nigeria
4. To identify the factors affecting the CBN anchor borrower programme and agriculture development in Nigeria
5. To recommend ways to improve the role of government financial institution in the development of agriculture in Nigeria 

1.4 JUSTIFICATION OF THE STUDY

The study on assessment of the role of government financial institution in the development of agriculture in Nigeria will be of immense benefit to farmers in Nigeria. The study will create awareness to famers on the CBN anchor borrower programme. The study will help the federal government of Nigeria on method and ways of improving agricultural funding in Nigeria. The study will also serve as a source of information to students, farmers and other researchers that desire to know more on the CBN anchor borrower program. Finally the study will contribute to the body of the existing literature on assessment of the role of government financial institution in the development of agriculture in Nigeria.     

1.5 SCOPE OF THE STUDY

The study covers on assessment of the role of government financial institution in the development of agriculture in Nigeria with focus on the CBN anchor borrower programme from 2015-2017 

1.6 LIMITATION OF THE STUDY

TIME CONSTRAINTS: One the challenges experienced by the researcher is the issue of time; the research will simultaneously engage in departmental activities like seminars and attendance to lectures. But the researcher was able to meet up with the deadline for the submission of the project.

FINANCIAL CONSTRAINTS: Every research work needs funding; however lack of adequate funds might affect the speed of the researcher in getting materials for completion of the project.

1.7 HYPOTHESIS

H01: government financial institution has no significant effect on agriculture development in Nigeria

H02: CBN anchor borrower programme does not influence agriculture development in Nigeria

H03: CBN anchor borrower programme is not important to the agricultural sector in Nigeria

H04: there are not factors affecting the CBN anchor borrower programme and agriculture development in Nigeria

1.8 ORGANISATION OF THE WORK

The study is organized in five chapters. The first chapter gives the background to the study, problem statement, the objectives, research questions, research hypothesis and the justifiucation of the study among others. The second chapter dealt with a review of related literature on the topic whereas the third chapter covers the detailed methodology. The fourth chapter covers the presentation and discussion of the results. The summary, conclusion and recommendations are provided in the fifth chapter

1.9 DEFINITION OF TERMS

CBN: Central bank of Nigeria

AGRICULTURAL DEVELOPMENT: Agriculture is the science and art of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people to live in cities.

LOAN: a thing that is borrowed, especially a sum of money that is expected to be paid back with interest.

FINANCIAL INSTITUTION: Financial institutions, otherwise known as banking institutions, are corporations that provide services as intermediaries of financial markets

AGRICULTURAL FINANCE: Agriculture finance refers to (public or private) resources (in form of equity, gift or loan) for improving social welfare through development of agricultural sector.

FARMER: A farmer (also called an agriculturer) is a person engaged in agriculture, raising living organisms for food or raw materials. The term usually applies to people who do some combination of raising field crops, orchards, vineyards, poultry, or other livestock

AGRICULTURAL CREDIT: Agricultural credit refers to one of several credit vehicles used to finance agricultural transactions such as a loan, note, bill of exchange, or a banker's acceptance. Financing is specially adapted to the specific financial needs of farmers.