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EVALUATION
OF THE EFFECT OF CREDIT USE ON THE PRODUCTIVITY OF SMALL SCALE COWPEA FARMERS
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the Study
Agriculture
plays a significant role in the growth of Nigeria’s economy especially, as it
contributes over 20.89 percent of the nation’s Gross Domestic Product (GDP),
offers 66 percent employment to her populace, accounts for 50 percent of the
sources of raw materials required by industries for further production,
provides 80 percent food for man and market for other industrial goods as well
as export earnings (NBS, 2014). Despite these, agricultural production in
Nigeria is subsistence, as a result of low utilization of modern inputs by
farmers, unavailability and inaccessibility of farm land as well as low
mechanized nature of the prevailing agricultural production system. Therefore,
to improve the national economy, farmers should be supported to expand their
scale of production through financial resource, such as credit (Akpokodje and
Olomola, 2000).
Okurut,
Banga and Mukuga (2004) affirmed that associated with mechanization and
acquisition of agricultural inputs is the issue of credit without which the
envisaged agricultural production and development will be a mirage. Inadequate
access to credit by the smallholder farmers has been identified as one of the
contributing factors to poverty. Credit allows farmers to satisfy their cash
needs induced by the production cycle which characterizes agricultural
production.
Credit
supply to farmers is widely perceived as an effective strategy for enhancing
increase in agricultural productivity and transformation of rural economy
(Philip, Ephrain, and Omobowale, 2008). According to Mahmood, Okpara, Rahji and
Ogwumike (2009), the introduction of easy access and low interest rate credit
is the quickest way for boosting agricultural production. The argument is that
the agricultural sector depends more on
credit than any other sector of the economy because of the seasonal variation
in the farmer’s returns and requirement in transformation of subsistence to
commercial farming.The provision of credit as noted by Rosemary (2001) has
increasingly been regarded as an important tool for raising the income of the
rural populace, mainly by mobilizing resources to more productive uses.
Cowpea is an
important major staple food crop in sub-sahara Africa, especially in Nigeria.
The seeds are major source of plant protein and vitamins to man and feed for
animals. The young leaves and immature pods are eaten as vegetables. The sale
of cowpea seeds and fodder earns income to the farmers. In Nigeria, farmers who
cut and store cowpea fodder for sale at the peak of dry season have been found
to obtain as much as 25% of their annual income by this means. Cowpea also
plays an important role in providing nitrogen to the soil when included in crop
rotation system (Okunmadewa, 2009).
In Nigeria,
the greatest production comes from northern region with about 1.7million tonnes
from 4 hectares. This represents over 60 percent of total production. The producing
areas are Niger, Kano, Sokoto, Kaduna, Zamfara and Gombe State. Despite that cowpea yield is very low, grain
yield range between 100-300kg/ha. This is due to several constraints such as
weather, parasitic weeds, insect-pests and diseases (Olamola, 2009). In Niger
State, cowpea production is rain fed, usually planted between the months of
April-May for early variety and July-August for late variety. It is worth
noting that cowpea production is dominated by small scale producers in the
state who employ traditional practices and inadequate techniques with resultant
negligible outputs and low supply of commodity despite its high demand (Adrew,
2012). Low production efficiency and inaccessibility of credit have been
implicated as some of the culprits leading to low outputs.
1.2 Problem
Statement
Against the
backdrop of increased advocacy and policy efforts geared towards agricultural
transformation, the injection of credit facility holds the potential and
propensity of breaking the vicious cycle of poverty by enhancing farm incomes
and developing market opportunities for producers and processors along the
value chain.
More often
than not, producers over rely on the usage of meager household resources which
limit economies of scale and expansionary motives which credit has the
propensity to resolve.
Poverty
level is high among the small scale farmers who keep large family sizes, high
level of non-literacy and strict adherence to traditional methods, low crop
yields and low levels of income. This makes it difficult for them to meet their
financial needs for agricultural production from personal savings. Hence, seeking for other sources of input
becomes necessary in order to meet up with their agricultural demand. High cost
of risks involved in agriculture as well as high default rate among small scale
cowpea farmers has been identified as major constraints as to why commercial
banks are unwilling to grant credit facility to small scale farmers (Okpara,
2010). In the same vein, untimely disbursement of agricultural loans, high
level of office bureaucratic protocols involved in credit acquisition among
others from formal sources have also been implicated, while high interest
rates, small size of loan and short time duration for loan repayment had been identified in the case of informal
sources of credit.
Non
availability of adequate credit needs of small scale agricultural producers can
constitute a hindrance towards the attainment of high levels of production. The
Federal Government of Nigeria (FGN) had made provision of credit a major thrust
of its agricultural policy since the 1970s when it introduced the Agricultural
Credit Guarantee Scheme Fund (ACGSF) managed by the Central Bank of Nigeria.
Under this scheme, Commercial Banks made available to small scale farmers small
loans, which are guaranteed by the Federal Government. Also, banks were
mandated to allocate a certain proportion of credit portfolios to agriculture.
However, mandatory allocation of credit to agriculture was discontinued. This
had far-reaching implications. The FGN as a follow-up cushioning measure
recapitalized and repositioned the Bank of Agriculture (BOA) for better
performance (Okunmadewa, 2009)
According to
Miller (2012), lack of credit and other interventions were the major constraints
haunting agricultural development and stressed the need for increasing the
amount of capital in agriculture through the use of credit. Small holder
farmers need credit for several purposes. The production of cowpea requires the
adoption of improved production practices credit facility is therefore needed
to purchase improved seeds, agrochemicals, fertilizers and to hire labour to
ensure timeliness of farm operations. Despite the critical roles credit play in
agricultural development however, the abuse and misuse of credit meant for
agricultural purposes by farmers have been reported. The consequence is the
non-realization of the objective credit was meant to achieve. This calls for an
investigation in the study area with a view to enhancing credit utilization for
intended purposes. Credit is also hard to come by for the poor resource farmers
and even when available, it had been politicized whereby only farmers who are
connected to politicians get access to soft loans which they divert to other
ventures other than crop production (Okurut et al., 2004)
On the basis
of the foregoing, the following research questions are pertinent:
i. What are
the socio-economic characteristics of the small holder cowpea producers who are
credit beneficiaries and non-beneficiaries in the study area?
ii. What are
the sources of credit available to the small scale cowpea farmers in the study
area?
iii. What
effect did credit exert on cowpea productivity in the study area?
iv. What is
the relative technical efficiency of credit beneficiaries and non-beneficiaries
in production of cowpea in the study area?
v. What are
factors limiting small holder cowpea farmers access to credit in the study
area?
1.3 Objectives of the Study
The broad
objective of this study is to evaluate the effect of credit use on the
productivity of small scale cowpea farmers in selected Local Government Areas
in Niger State, Nigeria. The specific objectives of the study are to:
i. Describe
the socio-economic characteristics of small scale cowpea farmers in the study
area;
ii. Identify
the various sources of credit available to small scale cowpea farmers in the
study area;
iii. Analyze
the effect of credit on small scale cowpea production in the study area;
iv. Estimate
the relative technical efficiency in cowpea production of credit beneficiaries
and non-beneficiaries in the study area and
v. Identify
the problems limiting small scale cowpea farmer’s access to credit in the study
area.
1.4 Hypothesis
Ho: There is
no significant difference between productivity of small scale cowpea farmer
credit beneficiaries and non credit beneficiaries in the study area.
1.5 Justification for the study
The idea of
alleviating poverty in Nigeria, especially among the grass root farmers through
government credit policy is a welcome development for sustainable agriculture,
particularly in cowpea production. Small scale farmers need credit in order to
adopt new technologies and to procure production inputs. According to Tanko and
Jirgi (2008), modernizing agriculture in Nigeria requires optimal infusion of
funds to finance the purchase of inputs such as fertilizer, improved seeds,
insecticides and additional labour. The outcomes of this research will be of tremendous
benefit particularly to the small scale cowpea farmers in study area.
The research
output will also be relevant to several other stake holders in credit delivery
programmes that will enchance productivity of the small scale farmers. It will
also serve as a guide for future credit policy formulation, implementation and
evaluation. Moreove, the output of this study will enable the policy makers,
financial lending institutions to reappraise past policies and formulate
realistic agricultural credit policies that will assist the farmers to increase
their production. The findings of this research study will also guide credit
beneficiaries to select the most effective and efficient ways to utilize their
loan in order to boost agricultural productivity especially, in cowpea
production.
The findings
may also be used by extension agents in their teaching and demonstration
contents as it identified factors significantly affecting the technical
efficiency of contact farmers they interact with.
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