AN EXAMINATION OF THE ROLE OF COMMERCIAL BANKS IN FINANCING AGRICULTURAL PROJECTS

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.