PROJECT TOPIC- IMPACT OF COMMERCIAL BANK LOAN AND ADVANCES ON AGRICULTURAL SECTOR IN NIGERIA ECONOMY
This study titled “The impact of commercial bank loan and advances on agricultural sector in Nigeria economy” was aimed at evaluating the impact of commercial bank loan size on agricultural sectors in Nigeria, ascertaining the impact of commercial bank interest rate on agricultural sector in Nigeria and to determine the impact of loan repayment rate on agricultural sectors in Nigeria. The researcher adopted ex-post facto as a design, data were collected and analyzed. Based on the analysis the results from hypotheses one confirms that the level commercial bank size of loan over the years has significant positive effect on the growth of Nigerian economy. This is because the coefficient of the variable (AL) is 114.9555 and the t-statistic is 0.153299. Meaning that we are 95% sure that size of loan giving out by commercial bank has effect on the growth of Nigerian economy through, and conclude that size of agricultural loan is a good measure for economic growth in Nigeria. This finding did not confirm with the finding of Rhaji (2008) that the lack of adequate, accessible, and affordable credit is among major factors responsible for the systemic decline in the contribution of agriculture to Nigerian economy.
- Background of the study.
In spite of the current dominance of crude oil in Nigerian’s exports, agriculture is stick a major sector of the Nigerian economy. It employs well over 70% of the rural populace engaged in agricultural production. According to Central Bank of Nigeria (2000) Nigeria is endowed with huge expanse of fertile land, rivers, streams, lakes, forests and grass lands as well as a large active population that can sustain highly productive and profitable agricultural sectors which can ensure self-sufficiency in food and raw material for the industrial sectors and as well.
Provide gainful employment for the teeming population and generate foreign exchange for the economy, several factors account for the poor performance of the agricultural sector in Nigeria, these include virtual neglect of the sector, poor access to modern inputs and technology, also lack of optimum credit supply (Enyim, Euno and Okoro 2013). Aside the problem of poor access to modern technology, the major bane of agricultural development in Nigeria is low investment and finance (Salami and Arawono 2013).
According to Udih (2014), bank credit is expected to impact positively on the investible sectors of the economy though improved agricultural production of goods and services, he opined that sufficient financing of agricultural projects will not only promote food security but also enhance the entrepreneurship performance of our young investors, concluding that this is borne out of the expectation that a good match between adequate bank credit and agricultural productivity.
Banks credits has the capacity to remove the financial constraints failed by farmers as it provides incentives to enable farmers to switch quickly to new technologies which can enhance the achievement of rapid productivity and growth (Qureshi, Akitan and Shan 1996). Ijere (1996), viewed banks credit as a catalyst that can activate the engine of growth enabling it to mobilize its inherent potentials and to advance in the planned or expected direction, in support of the same view, Umoh (2003) maintained that banks credit constitutes the power or key to unlock latent talents, abilities visions and opportunities which in turn act as the moves of economy development.
Bank credits has a significant contribution to economic development by enhancing production and productivity and thus higher income and better quality of life to the people (Well 1970). However from available statistics of commercial banks total sectional credit distribution in Nigeria, the allocation to the agricultural sector given the importance of the sector is insignificant for instance, credit allocation to the sector fluctuated between 6.98% and 10. 66% in 1981 to 1985, between 10. 66% and 16. 15% in 1985 to 1990, between 16. 15% and 17.5% in 1990 to 1995, it declined shaping to 8. 07% in 2000, 2. 46% in 2005, 1. 67% and 3. 44% in 2010 to 2013 (source: CBN statistical bulletin 2013).
PROJECT TOPIC- IMPACT OF COMMERCIAL BANK LOAN AND ADVANCES ON AGRICULTURAL SECTOR IN NIGERIA ECONOMY
- Statement of the problem.
Presently in Nigeria with her vast expanse of rich soil, a sizable number of her citizens suffer from hunger and starvation as a result of agriculture, few agro-industries around depend greatly on importation of necessary raw materials in then production and many of the Nigerian youths Nam about unemployed, it is of more that various policies have been made to solve these problems in which the banks have been targeted to provide the pivotal role in the area of funding through provision of credits.
However, the facts remains that the banks precisely, the commercial banks have not come to grapple with the problem as much has not been fact in the area of credits to agricultural. The accusation was that commercial banks prefer granting credits to commerce or trading to agricultural sectors and where the credits was allowed, the interest payable seems outrageous with some tight securities which place restrictions and scare may prospective farmers.
On the contrary, where the credit are ready to be granted, some of the client are unable to furnish the necessary collateral and honesty required by the banks as guarantee to cushion the effects of leakages or unforeseen exposures should there be default. Also there are fears of diversion of the loans to non-agricultural projects as it attitude of some people to embrace luxurious household spending, thereby suffocating the unavoidably weighed down by uncontrollable factors such as changes in policies rules regulation and certain difficulties in obtaining official permit.
On the above highlighted problem, thus study will examine the efforts of some stakeholders such as the commercial banks government policy with respect to the agricultural credit guarantee scheme fund in Nigeria, her financial allocation to agriculture and the farmers in relationship to the agricultural production output.
- Objectives of the study.
The main objective of the study is to determine the impact of commercial bank loan and advances on agricultural sector in Nigeria economy but the specific objectives are as follows;
- To evaluate the impact of commercial bank loan size on agricultural sectors in Nigeria.
- To ascertain the impact of commercial bank interest rate on agricultural sector in Nigeria.
- To determine the impact of loan repayment rate on agricultural sectors in Nigeria.
- Research Questions
In line with the above objectives of the study, the research questions are as follows
- To what degree has commercial bank size of loan affect the growth of agricultural sectors in Nigeria?
- To what extent has commercial bank interest rate affect the growth of agricultural sector in Nigeria?
- To what extent has loan repayment rate affect the growth of agricultural sector in Nigeria?
- Research Hypothesis.
Based on the above objectives of the study, the research hypothesis are as follows
H0: there is significant and positive impact of commercial bank loan size on the performance of agricultural sector in Nigeria.
H1 : there is significant and positive impact of commercial bank loan size on the performance of agricultural sector in Nigeria.
H0: there is no significant and positives impact of commercial bank interest on agricultural sector in Nigeria.
H1 : there is significant and positive impact of commercial bank interest on agricultural sector in Nigeria.
H0: there is no significant and positive impact of loan repayment rate on agricultural sector in Nigeria.
H1 : there is significant and positive impact of loan repayment rate on agricultural sector in Nigeria.
- Significance of the study.
Agriculture is expected to make a significant contribution to net foreign exchange earnings to Nigerian economic growth, as a result, this study sets to reveal the important problems and prospects of the agricultural financial and economic growth in Nigeria.
- Scope of the study.
This is an investigation into the impact of commercial bank loan and advance on agricultural sector in Nigeria economy for the period 1982 -2015. The reason for these thirty-three years interval study is to have a wider and contemporary view of the commercial bank loan and advances and its impact on agricultural sector in Nigeria.
- Limitations of the study.
It is rare or completely impossible to have a research work that does not have one difficult or another. In order words every research study has some shortcoming which arise as a result of problem encountered by the researcher in the course of his research. Some limitations notably are;
Lade of the sophisticated investigation of domestic data relating to the impact of commercial bank loan and advances on agricultural sector in Nigeria economy.
Inadequate research material: the school library is not well equipped with enough materials for this research and the materials needed were scarce even outside the school library.
Finally five constraint and epileptic power supply: the light problem experienced in Nigeria was a problem to the writing and especially typing of the research work.
- Definition of Operational Terms.
All operational terms used in this study will be defined in line with the focus of study, such terms include;
Bank: this is seen as an institution which deals in money or a place where surplus fund holders or savers keep their cash balances inform of deposits (Ibe 2010).
Loan: money that an organization such as banks lends and somebody borrows (oxford dictionary 6th edition).
Agricultural credit guarantee scheme (ACGS): this is federal government sponsored programme where farmer’s loans are guaranteed by scheme, the scheme guarantee about 75% at the loan being granted by the approved bank (Nwankwo 2002).
Agricultural credit: this involves all loans and advances granted to borrowing farmers (Nwankwo 2002).
Economy: this refers to the economic system of an area region or country (Ibe 2002).