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AN EXAMINATION OF IMPACT OF BANK OF AGRICULTURE CREDITS ON AGRICULTURAL SECTOR PERFORMANCE IN NIGERIA
ABSTRACT
The study attempted to examine the impact of deposit money bank credit or loans on agricultural sector performance in Nigeria between1982 -2016. The study examined the effect of deposit money bank credits on crop production in Nigeria, to find out the impact of deposit money bank credits on livestock production in Nigeria, to ascertain the extent to which deposit money bank credits has affected the overall agricultural sector in Nigeria. This research adopted the econometric method of ordinary least square (OLS) techniques of multiple regressions as the main analytic tool . This study obtained data from secondary sources mainly the Central Bank of Nigeria (CBN) statistical bulletin, National Bureau of statistics (NBS) the CBN’s annual reports and financial statement. From our findings the result revealed positive and insignificant impact of interest rate on agricultural output. The result also established a positive and significant relationship between bank loan advances and livestock, production. The general conclusion is that a deposit money bank credit is paramount in promoting agricultural sector.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Finance is the wheel on which every production activity anchors. The activities of the financial institution especially the banks, determine the economic progress and or retardation of a given nation. The banks are noted for playing the role of financial intermediation, which involves channeling funds from the surplus unit to the deficit unit of economy, thus transferring bank deposits into loans or credits.
The role of deposit money bank loans in economic growth and development can be recognized in the sense that various economic units use to meet their operational needs. For example, in the agricultural sector firm’s bank loans to purchase machinery and equipment buying seeds, fertilizers, erect various kinds of farm buildings (Adeniyi, 2006).
While highlighting the role of deposit money bank loans, Ademu (2006) explained that credit can be used to prevent an economic activity from total collapse in the event of natural disaster, such as flood, drought, disease, or fire. The banking sector is at the centre of making these credits available by mobilizing surplus funds from servers who have no immediate need of such fund and thus channel it in form of loans to investors who have brilliant ideas on how to create additional wealth in the economy but lack the necessary capital to execute their ideas.
According to the CBN (2007), credit or loans to the core private sector by the deposit money banks grew by 98.7%. Outstanding credit to agriculture, solid minerals, export, and manufacturing in 2007 stood at 3.1%, 10.2%, 1.4% and 10.1% respectively. Credit flows to the core private sector in 2007 amounted to N2, 289.2 billion. Adekanye (1986) noted that in making credit available to the productive sectors such as agriculture, manufacturing, real estate or housing etc, banks render a great deal of service as production will be increased, capital investment expended and higher standard of living realized.
Agricultural credit access has important role it plays in the context of agricultural and rural development in Nigeria. Rahji and Adeoti (2010) noted that some 70% of the population lives in the rural areas with their main source of livelihood being agriculture. Therefore, credit constants to farm household impose high cost on the society in the areas pf rural unemployment, poverty, and distortion s of production activities. Swinnen and Gow (1999) pointed out that access to agricultural credit has been severally constrained the productivity of agriculture in the developing countries. This is because of the imperfect and costly information problems encountered in the financial markets.
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