COMMERCIAL BANK CREDIT AND AGRICULTURAL OUTPUT IN NIGERIA: (1982-2007)

ABSTRACT
This research examined the impact of the commercial bank credit for agricultural production in Nigeria using macroeconomic variables (bank credit to commercial and agricultural output). The overall objective of the study is to examine the extent to which the commercial bank credit had supported agricultural production Nigeria. The specific objectives are: (i) to determine the impact of commercial bank credit for agricultural production in Nigeria, and (i) to determine the impact of agricultural production on economic growth in Nigeria. The methodology adopted for the study was chi-square test  (chi-s), to test the significance of the individual parameter estimate, After the hypotheses, the result shows that: firstly, agricultural production and the commercial bank credit to agriculture and the real interest rate have contributed to economic growth in Nigeria. Second, there is general agreement that Nigeria agricultural sector is severely underfunded.
TABLE OF CONTENTS
CHAPETR ONE
1.0   INTRODUCTION
1.1        Background of the study
1.2        Statement of problem
1.3        Objective of the study
1.4        Research Hypotheses
1.5        Significance of the study
1.6        Scope and limitation of the study
1.7       Definition of terms
1.8       Organization of the study
CHAPETR TWO
2.0   LITERATURE REVIEW
CHAPETR THREE
3.0        Research methodology
3.1    sources of data collection
3.3        Population of the study
3.4        Sampling and sampling distribution
3.5        Validation of research instrument
3.6        Method of data analysis
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.1 Introductions
4.2 Data analysis
CHAPTER FIVE
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
Appendix
CHAPTER ONE
INTRODUCTION
    Background of the study
Agriculture is the first and most thriven occupation of mankind. From its early form of wild fruits, leaf, root, snail and insect gathering, fishing and hunting, to its present mechanized and almost automated form, it has undergone a lot of development. Agriculture is conceived asthe cultivation of land, raising animals for the purpose of production of food for man, feed for animals, and raw materials for our industries. It also consists of crop production, forestry, livestock and fishing. It is also essential for expansion of employment opportunity, reduction of poverty and improvement of income distribution, speeding up industrialization and easing the pressure of balance of payments disequilibrium. The role of agriculture in transforming both the social and economic frame work of an economy cannot be over emphasized. Anyanwu posits that “agriculture has been the main source of gainful employment from which Nigeria nation can feed its population, providing the nation’s industries with local raw materials and as a reliable source of government revenue. The major agricultural export commodities in Nigeria include cocoa, coffee, cotton, groundnut, groundnut oil, palm kernel, soya beans, ginger, rubber, benign seed and chili pepper. There are other commodities that are being demanded in the world market such as cassava and cassava products, banana, plantain and so on. The Nigerian economy, until today is still dependent on primary products both as foreign exchange earner and contributor to gross domestic product. Agriculture is of two types, the subsistence agriculture and commercial agriculture-: the subsistence agriculture is the type of farming which involves the farmer and his family, that is, the farmer produces for himself and his family with little or none to sell in the market, it is practiced in small scale system. It involves only alittle amount of money to practice unlike commercial farming that involves huge amount of money to practice. It does not involve the use of machine to carry out, since the land is very small and fragmented. The second type is commercial agriculture, and this is where a farmer produces his crops and sells them in the market. It is carried out in large scale with enough land and machines. These machines are used in cultivating crops. It involves a lot of capital and time, and also increases the farmers’ income. Commercial farming helps farmers to engage in the cultivation of different varieties of crops, since the money, land and equipment could easily be used. In agriculture, fund is needed to enable the farmer purchase more land, buy his inputs at the appropriate time and to pay for hired labor or farm machinery. Unfortunately, credits are not easily available for most of the farmers because of collateral and other documentation that are usually required by the commercial banks and other credit institutions. This makes it impossible for most of the farmers in Nigeria to access the required capital for investment in large scale agriculture, hence the reason for the recent low agricultural productivity. With the recent move by the leading economies of the world to diversify their economy and Nigeria in a bid to join the rest of the developed economies is conscious of the danger signals observed both within and outside the country that underscores the need to move away from total reliance on petroleum related revenues. These signals according to Soludo include the ongoing global economic crisis that is threatening the growth and development agenda of the present administration, the current decline in crude oil prices, and the frightening revelation that the united states of America, the highest buyer of Nigeria crude oil, Brazil and several other countries have seriously engaged in alternative source of energy. Hence, the need to diversify Nigerian economy, especially through agricultural sector that has for long, been neglected. Nigeria is endowed with huge expanse of fertile arable land, and graze land, as well as a large active population that can sustain a high productive and profitable agricultural sector. Adubi admits that this enormous resource base if well managed could support a vibrant agricultural sector capable of ensuring self-sufficiency in food and raw materials for the industrial sector as well as, providing gainful employment for the teeming population and generating foreign exchange through exports. In spite of these endowments, the sector has continued to record a declining productivity. The capacity of the sector to fulfill its traditional role in the Nigerian economy has been constrained by various social-economic and structural problems. These include unavailability of credits to local farmers, discovery of oil, high interest rates on loans to farmers, rural- urban migration and ineffective institutions charged with policy implementations. Not until recently, government has seriously developed a policy to mobilize potential credits for the rural farmers. Commercial banksthemselves have given little attention to the approval of loans to farmers for fear of defaults. Where credits are received from other sources apart from government and commercial lending, the interest rates have been too high. These reported high interest rates are blunt realities to the peasant farmers. The question deducible from the above is how have the credit institutions, especially commercial banks credits, been able to impact on the level of agricultural output in Nigeria? The broad objective of the study is to investigate the extent to which bank credit had supported agricultural output in Nigeria. This study is delineated to the impact of bank credit on agricultural output in Nigeria, investigating bank credit, bank lending rate and industrial output and, their roles on agricultural output in Nigeria. This study covered the period, 1970 to 2013.
STATEMENT OF THE PROBLEM
In Nigeria, agriculture remains the mainstay of the economy since it is the largest sector in terms of its share in employment (Philip, Nkonya, Pender and Oni 2009). In an effort to diversify her oil base economy, Nigeria is placing much emphasis on financing other sectors most especially agricultural sector, since agriculture has the potential to stimulate economic growth through provision of raw materials, food, jobs and increased financial stability. It follows that agriculture financing is one of the most important instruments of economic policy for Nigeria, in her effort to stimulate development in all directions. Finance is required by agricultural sector to purchase land, construct buildings, acquire machinery and equipment, hire labour, irrigation etc. In certain cases such loans may also be needed to purchase new and appropriate technologies. Not only can finance remove financial constraints, but it may also accelerate the adoption of new technologies.
 OBJETIVE OF THE STUDY
The objectives of the study are;
    Ascertain the impact of commercial bank credit on Agricultural output
    Identify the constraints militating against the agricultural financing in Nigeria
    To ascertain the relationship between agricultural financing and Nigeria economic growth
    Examine whether the impact of agricultural financing have reflected on the growth and development of agricultural sector in Nigeria
RESEARCH HYPOTHESES
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
H0:  commercial bank credit has no impact on agricultural output in Nigeria
H1:commercial bank credit has  impact on agricultural output in Nigeria
H02:there is no relationship between agricultural financing and Nigeria economic growth
H2:there is relationship between agricultural financing and Nigeria economic growth
SIGNIFICANCE OF THE STUDY
This study, which is primarily aimed at explaining agricultural financing and economic growth in Nigeria, will provide an insight into the problems associated with agricultural financing and Nigeria economic growth. This report would be of great benefit for agriculture sector and Nigeria, to expose them to benefit of financing agricultural sector for economic growth of the Nation.The findings will be useful for researchers to further generate knowledge in the field
SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers commercial bank credit and Agricultural output in Nigeria. The researcher encounters some constrain which limited the scope of the study;
a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.  
DEFINITION OF TERMS
AGRICULTURAL FINANCING: Agricultural finance refers to financial services ranging from short-, medium- and long-term loans, to leasing, to crop and livestock insurance, covering the entireagricultural value chain - input supply, production and distribution, wholesaling, processing and marketing
ECONOMIC GROWTH: Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows
Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study