AN EXAMINATION OF THE ROLE OF COMMERCIAL
BANKS IN FINANCING AGRICULTURAL PROJECTS IN ENUGU STATE ( A CASE STUDY OF FIRST
BANK NIGERIA PLC)
ABSTRACT
It has because very imperative to examine
the role of commercial Bank in financing of A agricultural projects PLC, (1999
– 2003), is s topic so crucial that interested parties in the work many.
It
is very vital considering the role of commercial banks in general and first
Bank in particular play in financing of Agricultural. Project in Enugu state, in
sustaining the Economy.
This
creditable role being played by the above bank in sustaining the economy of Enugu state and the
position of agriculture in the building of a venture find a self reliant nation
attracted the attention of the researcher. The instrument with which the
Central Bank of Nigeria Central the commercial Banks in general and first Bank
in particular in terms of Agricultural loans were examined. With credit
guidelines which comes out every year, Central Bank of Nigeria
specifies, the minimum percentage of loan of agricultural sectors. Secondarily,
the Federal Government of Nigeria and the Central Bank of Nigeria
established the Agricultural credit guarantee the value fund by which the
farmers who receive loan under it are guaranteed by the Central Bank of Nigeria. The
liability of CBN is the case of default is up to 75%.
The
study tried to find out whether the decline in agricultural output within the
state has link with the absence of credit facility made available to formers by
commercial banks in general and first bank in particular in financing of
Agricultural projects in Enugu state, in doing so first Bank of Nigeria (FBN)
PLC with Bank office and area offices within Enugu state were selected for
studies, and because of size three local Government treas were also selected
for study and the include Enugu East and Enugu South.. Cluster sampling was
used to selected farmers on which questionnaire were administered.
Also
used in collecting data was interview method because there were some farmer who
were not very literate. The data collected was used testing the two hypothesis
for the topic. The hypotheses included that carry out feasibility study to Agricultural
farmers do not have any effect on commercial Banks in general and Bank in
particular in financing of agricultural project in Enugu state, and commercial
Banks aim general and first Bank in particular do not respond adequately to
farmers in financing needs of
agricultural project in Enugu state.
In
testing the above hypothesis, chi – square test was used. The test concluded
that carrying out feasibility study to Agricultural farmers in Enugu state do not have any effect.. It was
also concluded that commercial Bank in General and first Bank in particular do
not respond adequately to farmers in financing need of agricultural projects in
Enugu
state.
Other
mirror issues in the researcher
questions in the project were weighted to percentages.
In
conclusion, commercial banks in general and first Bank in particular should be
more encourage to assist agricultural sector and appropriate staff expansion
recommended for effective supervision to avoid both loan default and diversion in Enugu state.
TABLE OF CONTENTS
Title page ii
Approval page iii
Dedication iv
Acknowledgement v
Abstract viii
Table of contents xi
List of tables xv
List of figures xv
List of abbreviation xv
CHAPTER
ONE
Introduction 1
1.1
Background of study 1
1.2
Statement of the problem 4
1.3
Purpose / objective of the
study 6
1.4
Research question 7
1.5
Research hypothesis 8
1.6
Significance of study 8
1.7
Scope, limitations and
delimitations 11
1.8
Definitions of terms 12
References 14
CHAPTER
TWO
Review of related literature 16
2.1
The meaning of agricultural
finance 16
2.2
Financing agricultural projects
in developed country 17
2.3
Agricultural finance in Nigeria as a
developing country 21
2.4
Problems facing agricultural
project finance in Nigeria
commercial
bank (first bank of Nigeria plc) 24
2.5
Agricultural financing in Enugu state 31
2.6
Evaluation of commercial banks
(first bank
f Nigeria plc)
performance in granting agricultural loans 31
2.7
Sources of agricultural finance
in Enugu state 34
2.8
An overview of the federal
government assistance
in relation to
agricultural finance 35
References 40
CHAPTER
THREE:
Research design and methodology 42
3.1
Research design 42
3.2
Area of study 43
3.3
Population 43
3.4
Sample and sampling
techniques 44
3.5
Instruments of data
collection 46
3.6
Methods of data
presentation 48
3.7
Methods of data analysis 49
References 51
CHAPTER
FOUR
Data presentation and analysis 52
4.1
Presentation of questionnaire 54
4.2
Discussion of result 70
References 73
CHAPTER
FIVE
Findings,
recommendations and conclusions 74
5.1
The findings of the study 74
5.2
Recommendations 77
5.3
Conclusions 80
Bibliography 81
Appendix 87
Questionnaires 88
LIST OF TABLES
4.1
Administration of questionnaire
4.2
Feasibility study table
4.3
Contingency table on loan
application
4.4
Save custody respondent
4.5
Advisory services respondent
4.6
Conditions specified by banks
4.7
Respondent on granting of loan
to agricultural projects
LIST OF FIGURES
4.1
Graph showing acceptance and
rejection region
4.2
Graph showing level of
significance
LIST OF ABBREVIATION
Acgsf
– agricultural credit guarantee scheme
funds
Camd – company and allied matter degree
C.B.N
– central bank of Nigeria
Fao – food
and agricultural organization
Fbn – first bank of Nigeria
Nig –
Nigeria
Plc – public
liability company
X2 – chi
– square
PROPOSAL
It has become
very imperative to examine the role commercial Banks play in financing
Agricultural project in Enugu
state. This creditable role being played by the above bank in the economy of Enugu state and the
position of agricultural in building of a virtue and self – reliant nation will
attract the attentio0n of the researcher.
The
instruments with which Central Bank of Nigeria (CBN) control the commercial
banks in terms of agricultural loans will be examined. With credit guideline
which comes every year, CBN specifies the minimum percentage of loan to
agricultural sector.
This
study will find out whether the decline in agricultural output within the state
has link with the absent of credit facility made available to farmers by
commercial banks in financing agricultural project in Enugu state. In doing this, First Bank of Nigeria with
the Enugu Zonal Office and area offices within EnuguState
will be selected for the study. Because of size, three Local Government treas
will be selected for the study and they are Enugu North, Enugu South and Enugu
East Local Government treas. Cluster sampling will be sued to select farmers on
which the question will be administered.
Also,
interview method will be used in collecting data because there are some farmers
who are not very literature. Data that will be collected will be used in
testing the hypothesis of the topic. In the testing of the above hypothesis,
chi – square test will be used.
The
finding and recommendation of this will be made based on the analyzed data.
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF STUDY
In the
immediate past decade and this present decade, there have been seminars,
conferences, articles, Journals and various publications by both local,
national and International Organizations on the sharp decline in Agricultural
production on these various programmes, some of these workshops, conferences
and seminars include the followings:
–
The 13th Annual
workshop of the South – West Research Extension Farmers impute Linkage system
(REFILS) helped at the Institute of Agricultural Research and Training
(I.A.R.T), Moor plantation Ibadan in March 2000 with topic “Adaptive Research
and Method in Agriculture”.
–
An Annual conference Organized
by Agricultural Extension society of Nigeria (AESON) held at university of Ibadan
Conference Society of Nigeria Centre, Ibadan on 10 – 12 April, 2000.
They emphases on the need to promote
agricultural production to reduce the unguided population explosion which is
at geometrical progression (G.P) while
Agricultural production was only growing in an arithmetical progression. These
seminars, workshops, conferences also reminded the populace world wide of the
impending danger posed by the continuous deforestation practices of our forest
reserve, bush burning overyrazury, continuos coming and other environment
gradation hazards.
They
panted out little or on concerted effort are made in replacing the deforested
areas. They called on the need to embark on a national forestation scheme and
forest conservation
In
Nigeria, there bad been various campaigns for to inhabitants nationally to
plant at least one tree crop in his vicinity annually (tree planting compaign)
All these would have been uncalled for but for the indispensable role played by
agriculture in Nigeria economy, justly this project work, Agriculture sector in
developing and under – developed countries. It provides foods required for the
teeming population in both the rural land populace. It also provides raw
materials for our agricultural industries like Cotton to our textile
industries.
Agriculture
provides employment for about 60% of the labour force in developing countries.
Agriculture also provides incomes to individuals, states, and the nation, to
the peasant farmers and traders aluce. It provides money as income and means of
live holds to the farmer who sells this farm wares to the populace. To the
states, like Enugu state the cashew plantation at Ohhe not only provides raw
materials to industries but also provide income to the state government and to
the nation, it provides a means of export, thereby learning foreign exchange
and consequently reducing the chorus balance of payment deficit prevalent in
these region.
In
1969, Agriculture contributed 31% the cross Dmester product (GDP) in sierra
Leone, 1957, it contributed over 61% to GDP in Nigeria and in the year 2001,
proceeds from sales of grain (Agricultural product) in Nigeria amount to over
N2.5N Billion (CBN Bullion Jan / March 2001) The percentage contribution of
Agricultural sector to the national has seen declining since when the petroleum
sector started contributing heavily to the national income. Presently,
agriculture has assured a wider scope as against those days when agriculture
was viewed as a narrow feed which includes the propagation of seeds and crops
and the rearing of animals for man use. This does not fully inculcate all the
relevant aspect of agriculture. Some agriculture in of seeds and crop, include
souring and buying of farm input like seedlings machinery’s etc and the selling
of its output (agricultural marketing) and the use and provision of credit in
agricultural – financing). This later view is more prevalent now especially
among the literate populace. The use and provision of agricultural credit will
equally assist us in appreciating the role of commercial banks in financing
agricultural project in Emugu state their problems and prospects. This forms
the course of this project.
1.2
STATEMENT OF THE PROBLEM
The major
concern of this study us to know from the lender (First Banks as the Commercial
Bank) and the recount (Farmers and Agriculturists) loan effectively
agricultural project are Financed in EnuguState a result of the
donnreeening and indispensable role of commercial banks. Since the establishment of the bank in 1894, they
has been carry out financial assistance to agriculturist.
Farmers
encounter various difficulties when trying to get financial aids from
commercial banks – some of these
difficulties are as follows:
(i)
Agriculturist / Farmers do not
get financing aids such as Bank Loans / credit when they need it.
(ii)
Commercial banks granting loan
to farmers due to adequate collateral for such loan .
(iii)
Illiteracy among the farmers
also crenate a very difficulties because of this farmer do not o to banks to
receiving advisory services which might help then to increase their
productivity.
1.3
PURPOSE / OBJECTIVE OF THE STUDY
1.
To find out whether carrying
out feasibility studies for agricultural project is one the roles commercial
banks plays in the financing of Agricultural projects in Enugu state..
2.
To investigate whether
provision of credit facilities to farmers is one of the first banks play in
financing of agricultural projects in Enugu
state.
3.
To find out whether opportunity
of safe custody of fund is one of the roles which First Banks play in financing
of Agricultural projects in Enugu
stare.
4.
To find out whether provision
of financial lease to farmers in Enugu state is one of the roles First Banks
play in financing of agriculturist project in Enugu state.
5.
To find out whether rendering
advisory services to farmer is a role which First Banks plays in financing
Agricultural project in Enugu
state from 1999 –2003.
1.4
RESEARCH QUESTIONS
1. Is
carrying out feasibility studies for Agricultural project one of the roles of
commercial banks play in financing agricultural projects in Enugu state ?
2. Is
provision of credit faculties to farmers one of the roles of the First Bank
play in financing of Agricultural project in Enugu state ?
3.
Is commercial banks in general
and first bank in particular save funds realize by farmers in Enugu state.
4.
Is provision of financial lease
to farmers in Enugu
state one of the roles First bank play in financing of agricultural project in Enugu state.
5.
Is rendering of industry
services to farmers in Enugu
state one of the which First bank in particular and commercial bank in general
play in financing of agricultural projects in Enugu state 1999 –2003.
1.5
RESEARCH HYPOTHESIS
H0: Absence
of feasibility study do not affects the farmers chance of securing loan in Enugu state.
Hi: Absence
of feasibility study affects the farmers chance of securing loan in Enugu state.
H0: First
bank in particular commercial bank in general do not respond adequately to the
financial needs of agricultural projects in Enugu states.
Hi: First bank in particular and
commercial banks general do respond adequately to the financial needs of
agricultural projects in Enugu state..
1.6
SIGNIFICANCE OF STUDY
The study will
benefit a lot of lot of people due to the astronomical population growth
presently with out a correspondent growth in agricultural productivity to feed
for the growth in population, especially in the developing countries the people
who benefit more from this study are the national, state government especially
Enugu state the commercial banks with emphases on First bank, the farmers the
renders and prospective future researcher on this topic.
THE
GOVERNMENT :The federal government stands to gain
from this study by understanding the impact of
the various monetary places on the effective running of commercial banks
in relation to loan granted to the farmers. The state government especially
Enugu state, in th same vein, stands the extent and effect on commercial bank
lending policies in relation to farmers in the state and the various ways they
can help in amehoreting the plight of farmers in elation to securing loans and
consequent increase in productivity in the state.
THE
COMMERCIAL BANK: This commercial bank with great
emphases on First bank, it will enable them
to know the most suitable loan to be issue to different categories of
farmers to reduce the changes of bad debt arising from non – repayment of loans
granted to farmers, the type of incentive necessary to reduce non – repayment record, recorded on
farmers part and on the need to recruit more agricultural credit officers do as
to bridge the gap create by farmers knowledge of banking activities.
FARMERS: On the part
of farmers, it will enlighten the
agricultural sector, the collateral expected of them and the repayment period
to the prospective researcher, it will
serves as a fertile ground to update and expand this study.
READERS: To the
reader, it will help them appreciate and evaluate the efforts the Federal and
their arms of government in boasting agricultural productivity. It will also
enable them to assess how effective and efficient the loan responding to
agricultural financing.
In
summary, the findings may help in redirect and reorienting our farmers on the
right direction as to loan available and requirement.
1.7.
SCOPE , LIMITATION AND DELIMITATION OF STUDY
The scope of
this study were limited by the various factors, same of which are classified as
secret nature of banking industry, inadequate finance , time constraint the
magnitude of illiterate farmers, the
dispersed nature of their settlement and the unwillingness on the part of
respondents in sacrificing their time.
Under
limitation of this study classified nature of banking industry; since banking
activities are mostly not assessable to members of public, most of the required
data for this project could not be reached. The shortage of finances experience
by the researcher especially in the present economic recession prevented the
research from reaching out to as many
respondents and First Bank as possibly.
Time
constraint also militated against this project due to the 2003 /2004 academic year calendar, the
short period therein was inadequate time for the academic work which equally
affected this project due to this time constraint some text books and journals
which would have added space to this project were non – used.
Under the deli9mation of the study, the study is on the role of commercial banks
in financing of agricultural project in Enugu
state. The study is such that it concern the farmers as the agriculturist and
the bank as financial institutions.
The
researcher would have loved studying all other banks and states in the same
category but due to some constraining factors, he has limited on First Bank of
Nigeria PLC
1.7
DEFINITIONS FO TERMS
1. FINANCE: This
is the efficient sorcery, application and management of fund to maximize
wealth. Finance can also be explained as the possession of funds when it is
needed for investment. This explanation indicates that finance does not just
mean the usage of fund but as well included the souring required funds at the
right time and sharing of return (Iloh;
1999)
2. AGRICULTURE : This is the scientific propagation of plant and rearing of
amounts which is meant for scouring and application of fund ( Credit Facilities
to make it available for use) and the
marketing of its out put (Agricultural
marketing) for man uses .
3. COMMERCIAL BANKS: These are those banks concerned with lending of money to
businessmen, firms co-operation etc. for a short periods on the strength of
liquid securities, they also play the role of safe custody of find and the
valuable items.
4. PROJECT : This
is plan when making a research work, or tools that are necessary for work making which involves
the investment of scare human and material resource which can be quantitative
and qualitatively analyzed with a primary objectives of assessing the economic
returns which accrue to that venture inflows.