CHAPTER ONE

INTRODUCTION

Background to the Study

       The performance of the nation’s agricultural sector has often been described as being far below optimum (Akinbile, 2003). Nigeria continues to import agricultural raw materials, which on average accounted for 16% of total imports during the period of 1991/1994. As a result the Nigerian economy is totally dependent on oil for export earnings despite the nation’s vast agricultural resource base.

       In the early seventies agricultural exports contributed nearly 62% of total exports; now it accounts for less than 10%. Decline in agricultural contribution was attributed to neglect of the rural sector, comprising mainly the small scale farmers (Akinsoye, 2006). As the role of agriculture in the economy declines food importation increase leading to the depression of locally produced food which has decreased farmers expected income that could have been used to improve their socio-economic status. Socioeconomic status (SES) is the position that individual or family occupies with reference to the prevailing average standards of cultural possessions effective income, material possession and participation in the group activities of the community (Akinbele 2007 and Oyeyinka, 2002). SES greatly influences the social behaviour of rural farmers and it is necessary to be able to identify and control those variables that indicate SES, especially in a study where other aspects of social behaviour are studied. Wilson (2005) described SES as a classification, of individual household or family according to occupation, income, education on some other indicators of social status.

       Farmers with higher SES are much more likely to become involved in voluntary actions than lower status people and it is of major importance in extension programmes because for extension programmes to be successful, it must start where the people are. Thus in the field of agricultural extension status plays an important role in the understanding of clients and planning of development concerns. The major factor affecting adoption of innovative economic strategies is SES, which is more important as a predictor than world view and attitude towards change. The goods which people strive to acquire as soon as they could possibly offered them to change with time the indicator of SES also change as those needs change. In Tanzanian, crop type cultivated was an indicator of difference in SES among farmers and that farmer with high SES engaged their land more in the production of coffee and tea, while those on the lower level were more into maize and cassava production (Sender and Smith 2000).

       Cassava is one of the most important crops in Nigeria, playing a dominant role in the rural economy in the southern agro-ecological zones and is increasingly gaining importance in other parts of Nigeria. It is important, not just as a food crop but even more so as a major source of income for producing households. As a cash crop, cassava generates income for the largest number of households, in comparison with other staples, contributing positively to poverty alleviation. As a food crop, cassava fits well into the farming systems of the smallholder farmers in Nigeria because it is available all year round, thus providing household food security. An estimated 70 million people obtain more than 500 Kcal per day from Cassava and more than 500 million people consume 100 Kcal per day (Kawano, 2003).

       Nigeria is currently the largest producer of cassava in the world with an annual output of over 34 million tonnes of tuberous roots (FAOSTAT, 2005).This could be attributed to the cassava multiplication programmes in the country. However, cassava is majorly produced by smallholder farmers cultivating less than two hectares of land and their production is characterized by low productivity. Low agricultural productivity has been alleged to be the critical factor accounting for rural poverty (Omonona, 2005; Uganda, 1998). Poverty is endemic to rural areas where the main occupation is farming (World Bank, 2008). According to the NLSS Report (2011), 73.2% of the rural population in Nigeria is described poor compared to 61.8% in the urban area. The predominance of rural poverty over urban has been consistent between 1996 and 2010. Incidentally, the rural sector is the predominant sector in the nation’s economy as it plays some fundamental roles such as serving as a base for food and fibre production; the major source of capital formation for the country; a principal market for domestic manufacturers; job creation at relatively low unit costs and in general, engages in primary activities that form the foundation of any economic development. Thus remains the most important growth priority of the country.

       In Nigeria agrarian-based community is made up of some poor ruralite and generally poverty ridden farming population (Olawoye 2002). Thus, the higher a farmer’s social status, the better his adoption behaviour tends to be when compared with other farmers.

       It has been observed that rural farmers do not have enough to eat and poverty is prominent with them. Consequently, savings have become an unaffordable luxury and over 60% of Nigerian farmers live below poverty line (Okunmadewa, 2003).

       Farmers access to credit facilities is supported to be an accelerator of agricultural development through a wide spread break away from traditional technology and by fostering the generalized adoption of developed and improved technology. Flores (2004) corroborating this assertion “stated that institutional credit if made available to farmers could ameliorate some of the farmers problems such as small farm size, low output, low income and low social–economic status. It can also relieve farmers of the excesses interest impose on them by the informal creditors who usually charge high interest rate of between 100-300 percent per annum. Based on the above consideration and the vital role of credit in agricultural development, government initiated different policy measures for extending financial assistance to small-scale farmers through a farm credit scheme at low interest rates. Some of the credit institutions established include: Agricultural Credit Guarantees Scheme, Nigeria Agricultural Insurance Scheme, Rural Banking Scheme, Agricultural Credit Corporation, Cooperative Thrift and Credit Society. The role of credit in agricultural economy cannot be overemphasized. It has been put forward as a tool for agricultural development. Credit for rural small-holders especially in agriculture is gaining relevance in many parts of the world in response to the needs of less privilege entrepreneurs with limited capital base in the sector

       It has been confirmed that a well-managed institutional credit scheme aided agricultural development while poorly managed credit programme has been instrumental to agricultural stagnation in many developing countries (Alabi, Aigbokhan and Ailemen, 2007). These farm credit schemes have been functioning for many years; it is therefore become pertinent to ascertain it’s assess and availability to farmers.

Statement of the Problem

       Despite the fact that 80% of Nigeria’s population lives in rural areas and that majority is involved in agricultural activities, there are no efforts to facilitate credit to farmers which is crucial in rapid development of this dominant section of the population. Agricultural productivity and growth are hindered by limited access to credit facilities (Odoemenem and Obinne, 2010); only few farmers have access to rural credit. According to Enhancing Financial Innovation and Access (EFInA, 2008), 23% of the adult population in Nigeria has access to formal financial institutions, 24% to informal financial services, while 53% are financially excluded. Credit provision has been put forward as one of the principal components of rural development, which helps to attain rapid and sustainable growth of agriculture. Rural credit is a temporary substitute for personal savings, which catalyses the process of agricultural production and productivity. To boost agricultural production and productivity farmers have to use improved agricultural technologies, however the adoption of these technologies is relatively expensive and small holder farmers cannot afford to self-finance it. As a result, the use of agricultural technologies is very low. Therefore, enhanced provision of rural credit would accelerate agricultural production and productivity (Briquette, 1999).

       It is interesting to note that credit has been advocated as a poverty alleviation measure (Boomgard, 2009). Limited availability of credit services has undermined rural income activities due to lack of capital for investment and has prevented farmers to adopt improved farming practices. Credit is a necessary input in the various aspects of farm operations. In Nigeria, as in most developing countries, lack of credit facilities has been regarded as the major constraint farmer’s face when they try to improve their economic activities and/or living conditions (Agbor, 2004; Binswanger, Khandker and Rosenzweig, 1993). However, even when available, credit is difficult to access by farmers in the rural area despite the fact that it is an essential input in production (FARM, 2006). Most of these farmers cultivate cassava as major crop for sustenance; it is therefore pertinent to determine access and availability of agricultural credit to these cassava farmers. Therefore, this study seeks to determine the availability and access of agricultural credits by cassava farmers in Isoko North LGA of Delta State. This small area was studied due to time and finance.

Purpose of the study

       The main purpose of the study was to assess the availability and access of agricultural credits by cassava farmers in Isoko North Local Government Area of Delta State.

Specific Objectives

The specific objectives were to:

1. determine the socio-economic status of cassava farmers in Isoko North Local Government Area
2. determine the availability of credit facilities to cassava farmers in Isoko North Local Government Area.
3. investigate access of agricultural credits amongst cassava farmers in Isoko North Local Government Area.
4. assess the problems associated with obtaining credit from financial institutions
5. determine and examine the effect of credit provision on cassava farmers and production.

Significance of the study

       The study will be beneficial to farmers, government, financial institutions and future researchers.

Farmers: The study will expose the possible ways of acquiring credit from financial institutions to farmers and also identifying the group of financial institutions responsible for giving out credits to farmers. The study will also provide information on the importance of credit availability to farmers with respect to improving agricultural production in the country.

Government: The findings of the study will assist the government to identify existing problems associated with access to credits and proffer solutions through developing policies that will enhance availability and access of cassava farmers to credits.

Financial institutions: The study will reveal the socio-economic status of the cassava farmers to the operator of these financial institutions as this can help them to adjust their collateral requirement towards giving out loans or credit to farmers.

Future Researchers: The findings of the study will serve as a base for further research in the same area of study to future researchers.

Scope of the study

The study will focus on availability and access to agricultural credits by cassava farmers in Isoko Local Government Area with emphasis on: socio-economic status of the cassava farmers; credit facilities available to cassava farmers; access of agricultural credits amongst cassava farmers; problems associated with obtaining credit and benefits of credit provision to cassava farmers and production.

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