ANALYSIS OF CREDIT FACILITIES TO SMALL SCALE FARMERS
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The science or practice of farming is called agriculture, according to the Longman Dictionary of Contemporary English (New Edition). Nigeria’s economy is mostly dependent on agriculture, which is a major sector of any significant economic development that a country like ours is pursuing. The output of agriculture typically makes a significant contribution to the GDP, which allows the nation to earn foreign exchange, creates jobs, feeds the growing population, and supplies raw materials to our local industries particularly the agro-allied industries for continued production.
An analysis of Nigeria’s agricultural industry in the 1960s showed that it was the most significant to the country’s economy. In fact, the generation of this period can still recall the days when the groundnut pyramid was the glory of the northern region while cocoa production areas in the west increased foreign earnings from cocoa exports. Today, the country remains depends on agriculture to feed its people.
Credit is a crucial tool for increasing the poor’s wellbeing directly through consumption smoothing, which lessens their reliance on short-term income. It also increases the productive capacity of the impoverished by subsidizing investments in their human and physical resources. The poor, who are less risk-averse, typically desire loans for productive investments, which allows them to overcome liquidity constraints and pursue projects that can improve production, employment, and income. Financial intermediaries have been unable to accommodate small-scale farmers due to the risk involved and the high transaction costs.
Large formal leaders who were capable of serving small-scale farmers and the impoverished were unable to do so due to a lack of information. It is undisputable that small-scale farmers have always had a problem of access to credit facilities. To improve the access, improvements need to be made in the provision of financial services. In order to implore financial services, leaders need to consider the preferences and socio-economic condition of clients. This contributes to both regulatory process as well as product development – thus, an understanding of characteristics influencing farmers’ decision to use agricultural credit could assist policy formulation that could enhance welfare of the poor or those excluded from access to credit facilities.
The poor performance of Nigerian agriculture and its attendant effect prompted government to seek and reverse the situation which was demonstrated in the policies and practice such as National Accelerated food production programme (NAFPP), Operation Feed the Nation (OFN), Green Revolution Programme (GRP), Accelerated Crops Production Programme Scheme (ACPS) and international organisation like the World Bank. This includes some of the steps taken by the Federal Government of Nigeria to assist farmers to boost agricultural production in the country.
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