THE ROLE OF AGRICULTURE CREDIT GUARANTEE SCHEME FUND IN THE DEVELOPMENT OF AGRICULTURE

CHAPTER ONE

1.0  INTRODUCTION

In Enugu state most inhabitants survive through agriculture and their main occupation is subsistence farming which attract the interest of may cooperative societies both old and new ones.       Agriculture plays a very central role in the economic development of Nigeria like offering of employment to more than 65% of the working population account for more than 70% of non oil exports and provides raw materials for the industrial sector.    Following the oil boom in the seventies agricultural production started to decline, the country started expressing increasing food shortage with the attendant increase in the quantity of food imports.

       One can observe that Enugu state is still semi substantial and their output from agriculture production can neither feed the fearing population nor provide essential raw materials for the agro based industries. The export of the state major cash crops which has in the past supported the economy has verbally stopped.

       While a lot of observers dwelt on the urgent need to reinitialize this sector, Omuma (1998) implied that the adverse effect of non-initialization of the agriculture sector will only bring such condition like famine and Kwashiorkor to the village but emphasizing on the importance of improving agricultural production through loans from government Igbo (1986) said it is now on the government for the independence on the external sources of food because it has tried their state independence to the uncertainties of ridicule.’

       Then in the early seventies, the central bank of Nigeria and the federal government carried out a study to find out reasons for the declining agricultural production. The study revealed that credit was one of the major factors then the commercial and merchant banks (now deposit money bank) were reluctant to lend to agriculture because of the high default risk and the inability of the borrower offer tangible collateral.

       The agricultural credit guarantee scheme was established in 1977 to share in the risk of the banks in agricultural lending and hence encourage them to continue to extend credit to it. As at 31^st December 2004 the total investment under the scheme were N4.4billion.

1.1  BACKGROUND OF THE STUDY

       In our country today, sources of statements have been made in the newspapers and other news media, scholars advocating the use of agriculture for the development and improvement of living standard of the rural people.   Agricultural activities have brought about solutions to our national problem of massive food shortage. Many agricultural cooperative societies plays vital role and function in massive food production they include the following:

1.  Agriculture has embrace all the cooperative activities with the aim of helping farmers in their professional capacities and producers. The inherent weakness of farming Calo of this type of cooperative society.

2.  Agriculture has contributed immensely to the improvement of the viability of the small holders by bringing their economies of scale.

3.  Agricultural activities are a type of producers cooperatives which aim at improving food production and well being of the citizens.

1.2  STATEMENT OF PROBLEM

Much of the increase in Nigerians agricultural output in recent years has resulted from expansion of the area under cultivation rather from increased productivity. Some of the many problems militating against the agricultural sector have been listed and discussed.

Infrastructure Problem

Which include the following             

Poor feeder road and inadequate road network between the rural areas where agriculture production mainly takes place and the urban area

Lack of appropriate on-farm and off-farm storage facilities.

       Irrigation facilities are still very poor despite the existence of River Basin  and rural Development Authorities (RBRDA) for instance in Ogun state only 15 hectares of land were irrigated between 1997 and 1999 by Ogun-Osun RBRDA.

Manpower/Skill Underdeveloped Problems

       The extension services delivery system still suffers from inadequate number of extension men/women. The few areas that are in place lack mobility to improve on extension farmers while women extensionist are few to handle gender issues.

Inadequate capital is a major problem hindering agricultural production.

Default in repayment of loan by peasant farmers who could not meet up with loan    collateral   requirement       

Low income and poor provision of collateral ,security to qualify for credit worthiness 

Government /Regulatory Policy Problems      

       There are numerous policies that are not supportive enough to agriculture transformation E.G landAct ,importation tariff and unproductive policies.

1.3  OBJECTIVES OF THE STUDY

       The general purpose of this project report is to undertake a study of the existing farmers of agricultural activities and the effort of the government in enhancing the development of agriculture through the agricultural credit guarantee scheme, also the study has the following objectives.

(a)       To examine the organizational structure and the operation of agricultural activities in Enugu state with particular reference to Nkanu East local government area.

(b)      To examine the impact of the farmer’s cooperative societies.       

(c)       Investigate the problems facing the farmers co-operative societies.

(d)      To suggest ways and means for enhancing and proffering for loans from banks for the effectiveness of the societies and assist in further research into contemporary issue on this manner.

(e)       To increase production of livestock and fish to meet the domestic needs and increase surplus for export.

(f)        To know whether there are benefits members derive from the agricultural cooperative societies in the area.

1.4  RESEARCH HYPOTHESIS   

1.  What are the main objectives for establishing of agricultural cooperative societies in Nkanu East local government area?

2.  To what extent have these objectives been realized?

3.  What are the problem militating against agricultural activities?

4.  Do agricultural cooperative societies receive support from the government?

5.  What are their sources of finance?

1.5  SIGNIFICANCE OF THE STUDY

       Any study that has positive outcome must have negative aspect moreover the significance of the particular studies are central banks of Nigeria has taken up greater responsibilities particularly with respect to information of agricultural policy and various means which enhances agricultural productivity.

       Areas of central banks of Nigeria involvement in improving agricultural activity  includes:

(a)       Agricultural research

(b)      Training of middle level agricultural workers

(c)       Creation of loans and large scale mechanization food agriculture farmers.        

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