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Title Page – – – – – – – – – i
Declaration – – – – – – – – – ii
Approval Page – – – – – – – – iii
Dedication – – – – – – – – iv
Acknowledgement – – – – – – – – v
Table of Contents – – – – – – – – vii
Abstract – – – – – – – – – x

1.1. Background to the Study- – – – – – – 1
1.2. Statement of the Problem- – – – – – – 7
1.3. Purpose of the Study- – – – – – – – 8
1.4. Research Questions – – – – – – – – 8
1.5. Significance of the Study – – – – – – – 9
1.6. Scope/Delimitation of the Study- – – – – – 9

2.1 Financing Agriculture in Nigeria – – – – – – 10
2.2 Characteristics of Nigerian Agriculture – – – – – 17
2.4 Nigerian Agricultural Finance Policies, Institutions, Schemes and
Programmes – – – – – – – – 28
2.5 Role of Credit in Agricultural Production – – – – – 30
2.6 Constraints to Agricultural Financing in Nigeria – – – – 32
2.7 Summary of Literature Review – – – – – – 33

3.0 Introduction- – – – – – – – – 37
3.1 Research Design- – – – – – – – 37
3.2 Population of the Study- – – – – – – 37
3.3 Sample of the Study – – – – – – – 37
3.4 Sampling Technique- – – – – – – 38
3.6 Instrument for Data Collection- – – – – – 38
3.6.1 Validation of Instrument – – – – – – 38
3.6.2 Reliability of the Instrument- – – – – – – 39
3.7 Procedure for Data Collection- – – – – – – 39
3.9 Method of Data Analysis – – – – – – 39

4.0. Introduction- – – – – – – – – 41
4.1. Data Presentation and Analysis – – – – – – 41
4.2 Presentation of Questionnaire – – – – – – 42

5.1 Summary of Findings – – – – – – – 45
5.2 Conclusion – – – – – – – – – 46
5.3 Recommendations – – – – – – – 46
References – – – – – – – – – 47
Appendices – – – – – – – – 56

The research was carried out in order to determine the agricultural financing of smallholders in Pankshin Local Government Area of Plateau State. The survey research design was used. The population of the study consisted of all the small holders in Pankshin. The sample of the study consisted of 100 respondents from five selected districts in the local government. The simple mean was used to analyse the data. The findings of the research indicated the extend of small holders having access to agricultural financing, farmers do not have access to agricultural financing with a mean of 2.24, there are agricultural financing institution in the Local Government Area with a mean of 3.74, most of the farmers r have not been benefiting from agricultural financing with a mean score of 2.20, most of farmers have been denied of agricultural loan when they applied with a mean score of 3.22, lack of collateral is a serious challenge to the farmers in securing loans with the mean score of 3.03, agricultural financing institutions are afraid to give out loans because people hardly pay back with the mean of 2.65, the interest rate charged by these financing institution is high therefore with a mean sore of 3.03, the short term of the loans or limited time given is a challenge to the farmers with a mean score of 2. 66, agricultural financing is important because it helps farmers financially with the mean score of 3.78, agricultural financing institutions offer both short and long term loans. In the light of the findings, the following recommendations were made among others: Agricultural financing should make collateral affordable to all farmers, short-term nature of loans should be avoided by farmers, farmers should endeavour to pay back their loans so as to encourage these financial institution give this loan to other farmers as well, government should set up more agricultural financial institutions in order to enable farmers access to loans, especially smallholders.





1.7. Background to the Study
Globally, agriculture has been identified as a major component in the achievement of the second millennium development goals – to eradicate extreme poverty and hunger (Kersten, Harms, Liket, and Maas2017; United Nations, 2015), and as such the world’s government has placed so much focus on the development of agriculture across the world. If the focus of world is to eradicate poverty using agriculture as a medium, new investments in agricultural research, and perhaps, technological developments directed towards enhanced agricultural farming systems are required (Jones & Ejeta, 2016).
Furthermore, the agricultural products from these rural areas account for majority of the agricultural products in terms of crops and animal produce consumed in the cities across the world. To be able to continue with the production of agricultural products to match up with the world’s increasing population, which is put at an annual growth rate of 1.7% (World Bank, 2016), it is inherent that these smallholder farmers move from the traditional method of farming to a more developed and improved technological way of farming (Ellinger & Penson, 2014). Across the world, smallholder farming has been rediscovered as important in the eradication of poverty, creation of employment and provision of food for sustenance of the population (Röttger, 2015), and as such, nations are now focusing on the sector. A shift from the rural agricultural farming method to the modern agricultural farming method requires the flow of a consistent level of funding (Ellinger & Penson, 2014; Miller & Jones, 2010; Olomola, 2010). Hence, steady and consistent access to finance by the smallholder farmers is critical for the much-required growth needed in the agricultural sector, hence agricultural financing.
Finance is the lifeblood and nerve centre of a business, just as circulation of blood is essential in the human body for maintaining life. It has been rightly termed as the universal lubricant that keeps the enterprise dynamic. Thus, the importance of finance cannot be over-emphasized and the subject of financial management has become of utmost importance both to the academicians and practicing managers (Pandey, 2001). Agriculture needs financial services for its development in the form of saving accounts, loans and insurance: health, life, credit insurance products and leasing. Although the issue of accessing finance by small-scale farmers has been one of the most extensively discussed topics in recent decades within community finance, many micro-finance operators have achieved only varying degrees of success in their attempts to develop methodologies for agricultural financing due to constraints related to the very nature of agricultural activities (Department for International Development, 2005). Agricultural credit is expected to play a critical role in agricultural development (Duong and Izumida, 2002). Farm credit has for long been identified as a major input in the development of the agricultural sector in Nigeria. The decline in the contribution of this sector to the Nigeria economy has been attributed to the lack of a formal national credit policy and paucity of credit institutions which can assist farmers among other things. The provision of this input is important because credit or loanable fund (capital) is viewed as more than just another resource such as labour, land, equipment and raw materials (Rahji and Fakayode, 2009). Financial constraint is a perennial problem confronting investors in both the up-stream and downstream segments of agriculture. The overall constraint manifests in terms of poor access to credit and high lending rates. The two combined, along with bureaucratic bottleneck, lead to an inefficient agricultural finance market in Nigeria.
Agricultural financing has been identified as a means of transforming the agricultural sector and revamping the Nigeria economy. However, the difficulty of smallholder farmers who produce more than 85% of domestic food supply to participate in agricultural credits/loans has remained a fundamental problem, despite the provision of financial aids by the government. Sub-Saharan African agriculture generally suffers this fate and this explains the socioeconomic characteristics of farmers and the nature and state of agricultural production across the African sub region (Adewunmi and Omotesho, 2002; Tchale, 2009; Omiti et al, 2009; Akinwale et al, 2016).
The financing of agricultural activities, otherwise referred to as agricultural financing has been identified as an essential and crucial aspect of agriculture, as it is an important precursor needed to determine the quantity and quality of inputs in terms of technology, materials, and labour that can be used on the farm (Ellinger & Penson, 2014; Miller & Jones, 2010). Various authors have given various definition from different perspectives to the definition of agricultural finance, however, for this research, agricultural finance will be highlighted as it refers to the financial services provided for agricultural production, processing, and marketing (IFC, 2011); ranging from the institutional/formal and non-institutional/informal financial sources, to short term, medium term, and long term loans, to leasing. Agricultural finance ―is a process of obtaining control over the use of money, goods and services (for agricultural purposes) in the present in exchange for a promise to repay an agreed amount at a future date‖ (Ejiogu, 2018, p. 10). It is also having access to credit for use to improve the efficiency of farm production and as a means of adopting better technology (IFC, 2011). A combination of the two definitions of agricultural finance indicate that agricultural finance entails the availability of a source of finance, the accessibility to the fund, utilization of the fund for agricultural purpose, and a plan to repay the fund in the future.
Smallholder farmers have limited access (ability and entitlement to borrow from a credit source) and/or participation (the actual borrowing) in credit/loan facilities (Diagne et al, 2001; Akramov, 2009; Okojie et al, 2010) thereby complain of inadequate production resources. Due to limiting financial conditions and failure to obtain loans from formal sources, farmers sometimes venture into borrowing from informal sources that charge exhorbitant interest rates- thus leaving them with a discouraging net farm income at the end of the production season. The meagre income made from farming undertaken is usually used in consumption smoothing leaving nothing for farm capital investment (Park et al, 2003; Sadiq et al, 2015).
Mgbakor et al, (2013) asserted that this situation causes capital constraints for productive activities, inability to increase production levels and also diminishes household risk bearing ability. As a result, the farmer is unable to upgrade from peasantry to large scale agriculture which is a most desired transition especially at this period of agricultural development efforts to increase self-sufficiency in food production and diversify the country‟s economy from its mono-commodity status.
A typical Nigerian farmer is indeed credit constrained (Omonona et al, 2010) and has difficulty in obtaining formal loans (Oluwasola and Alimi, 2007; Anyiro, 2015). These conditions (partly) explain the state of the nation‟s food crop production subsector (Lipton, 2013) and the current economic recession.
Statistical evidences suggest that the Nigerian economy needs urgent revamping to rescue it from recession. Unemployment rate has risen to 12.10% (with youth unemployment at 25%), gross domestic product (GDP) by expenditure stands at 2.11%, poverty rate at 61%, inflation rate at 12.77% and food price index at 11.22% (Central Bank of Nigeria (CBN) 2016; National Bureau of Statistics (NBS) 2016).
Virtually all sectors of the economy are hobbled while risks and uncertainties are high. The inability of the country to attain self-sufficiency in food production has also taken its toll on the economy. The CBN reported annual food import to be over 630 Billion Naira (CBN 2015). This volume of food importation is alarming and retrograding to domestic agricultural production and foreign exchange. Development analysts have shown that for a sustainable growth in the economy, there must be a repositioning of the agricultural sector to a major revenue base of the country (Okojie et al, 2010; Okuneye and Ayinde, 2011; Agbonlahor et al, 2015).
The ability of a developed agricultural sector to revamp Nigeria‟s economy is evidenced in history: Agricultural sector prior to the advent of crude oil, contributed about 70% to Nigeria‟s GDP, employed about 70% of the population and made up 90% of foreign exchange earnings (Adedipe, 2004). Despite the neglect and irrational focus of government on oil, agriculture has remained the single largest non-oil contributor to the Nation‟s GDP (though currently below 30%), employing more than two-third of the nation‟s active labour force, contributing to foreign exchange and providing raw materials for local industries (Oni et al, 2009; NBS 2017).
In a bid to develop the agricultural sector and achieve the corresponding benefits, Nigerian Government through its institutions has been providing support largely in the form of financial interventions to farmers. The focus on financial aid is not surprising since limited finance and credits are some of the major problems faced by the agricultural sector (Food and Agriculture Organisation (FAO), 2016). Moreover agricultural credit is believed to increase agricultural productivity as well as efficiency of land, water, capital and human resources (Carter, 1989; Siddiqi et al, 2004; Okulegu et al, 2014).
Nigeria has embarked on a series of sector specific financial interventions in the form of micro credit schemes/programmes and development finance institutions (DFI) to help improve the productivity and livelihood of the poor (CBN 2005) who are predominantly rural farmers. Notable among the agriculture specific institutions was the Nigerian Agricultural Bank (NAB) established in 1973. Through a series of policy changes, restructuring and merger of notable financial institutions in the country, NAB‟s nomenclature has changed over the years and evolved into the Bank of Agriculture (BOA) Limited in 2010. Given the several years of restructuring and its premier agricultural financial institution status in the country, BOA is expected to provide services that guarantees the financially less privileged farmer the opportunity of participating in its loan scheme.
Nevertheless, as government strive to promote agricultural development through credit provision obtainable from BOA (Olagunju and Adeyemo, 2008), farmers‟ continued resource limitation and failure to participate in the loan scheme call for concern. Between December 2016 and May 2017 the BOA disclosed making over 23 Billion Naira available for farmers as part of its agricultural development efforts. But are the smallholder (rural) farmers- the „real food crop producers‟ able to participate in this fund?
Agricultural financial analysts believe that many times, it is not the lack or insufficiency of credit facility that is a major problem. But rather that the farmer is sometimes not poised to benefiting from available credit due to certain socioeconomic constraints such as level of education, accessibility to financial institution, farm size, membership of associations, contact with extension agents, and so on (Akramov, 2009; Essien and Arene, 2014; Anang et al, 2015; Agbo et al, 2015).
1.8. Statement of the Problem
One of the major constraints confronting agricultural production is inadequate funding. Other constrains include lack of sufficient allocation of funds to finance the various programmes of action and violation of set goals by farmers.
Most of the institutions bombarded with millions of naira have performed below expectation. Some have performed reasonably well, while some have not. A few agricultural credit programmes have not expanded beyond the trial project phase. Many have run into serious loan repayment problems and still, others have served people not included in the original target group.
Trending banks were reluctant to lend to agriculture because of the high rate of defaulters resulting from the uncertainty by risk inherent in agricultural production. The farmers were also confronted with inability to provide the needed security as collateral.
It is in the light of the above that the following research questions were raised:
1.9. Research Questions
In order to have a guide for the research, the following research questions were postulated which answers will be provided for at the end of the research:
1. Who are the smallholders in the study area?
2. What have the smallholders use the finance for?
3. What are the challenges faced by the smallholders in financing agriculture in the study area?
4. What are the possible solutions to the problems identified by the smallholders in financing agriculture in the study area?
1.10. Purpose of the Study
The main, purpose of this study is to investigate agricultural financing with particular attention to smallholders in Pankshin local Government Area of Plateau Sate.
Other specific objectives of the study are:
1. To determine the socio-economic characteristics of the respondents in the study area.
2. To identify challenges of farmers in financing their businesses?
3. To ascertain the importance of agricultural financing to smallholders in the study area.
4. To proffer possible solutions to the challenges towards financing agriculture in the study area.
1.11. Significance of the Study
The importance of this study cannot be underemphasized especially for the fact that agriculture is one of the live wires of every nation. The study shall be of importance to financial policy makers, small scale farmers, it will serve as a source of contribution to knowledge and also the general public shall benefit from the study as well.
1.12. Scope/Delimitation of the Study
This study covers agricultural financing. It is restricted to smallholders in Pankshin Local Government Area of Plateau State. However, despite the fact that it is restricted to the selected local government area, of the state, its findings can be generalized to other parts of the state and country at large.







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