THE ROLE OF BANKS IN AGRICULTURAL DEVELOPMENT IN NIGERIA

By

NNAM SYLVESTER CHINWEOKE

Presented To

Department of Accountancy

TABLE OF CONTENTS

Cover page I

Approval page II

Title page III

Dedication IV

Acknowledgement V

Table of Content VII

CHAPTER ONE

Introduction 1

Definition 3

Background of the Nigeria Agricultural Bank 3

CHAPTER TWO

Identification of problems 11

The government efforts towards these problems 14

Distinction between Agricultural banks and other banks 18

CHAPTER THREE

Recommendation 20

Conclusion 23

Bibliography 26

CHAPTER ONE

INTRODUCTION

The Agricultural sector is always one of the leading sectors in any developing country. In Nigeria before; the oil boom of the 1970,s Agriculture formed the basic of Nigerians economy as than 85% of the revenues come from this sector. With the discovery of oil, this section of the economy (Agriculture) Started to ware.

However, ;despite various efforts made by both present and former administrations the Agricultural Section is still nothing to write home about. This has led to hunger, scarcity of raw materials for our industries and massive importation of foods, by the government instead of exporting as it was in the 1970's.

The central Bank of Nigeria (CBN) has tried to come to the rescuer of this sector by releasing Auricular guarantee credit scheme for the populace interested farmers

However, this is done in conjunction with the Federal Government for example Agricultural credit guarantee scheme (ACGS) which was introduced in the year 1977 to guaranty some of the problems associated with Agricultural funding in Nigeria, was owned 60% by the Federal Government while 40% was for central Bank of Nigeria. This and other banks like Nigeria Agricultural cooperative and Rural Development Bank (NACRADB) has been established to promote agriculture production, especially in rural areas. With all the revenues opened for these banks to generates funds, it still faces serious frustration and disaffection with the system of agricultural credit delivery to the farmers. The Nigerian Agricultural Cooperative and Rural Development (NACRDB) has contributed a lot to Nigeria Agricultural development with us operation decentralized by the establishment of several branches, it offers a wide range of services to agro-allied industries.

DEFINITION OF AGRICULTURAL BANKS

Agricultural banks can be defined as those banks established Agricultural bank can be defined as those banks established by the government for agricultural development purposes was established to provide financial support to agricultural and also to educate the farmers. They are to build agro-allied industries for preservation of agricultural products. They also finance industrial processing and marketing of agricultural products.

HISTORICAL BACKGROUND OF NIGERIA AGRICULTURAL BANKS; The history of development in Nigeria started as far back as 1950's Although banking in Nigeria started since the beginning of the country. Nigeria Agricultural co-operative and Rural Development Bank (NACRDB) which was formally the Nigeria Agricultural Cooperative bank (NACB) the main development financial institution in agricultural development faced decades of frustration and disaffection. With the system of Agricultural credit delivery in Nigerians, it originated in the waste of an upsurge of development of financial institution, which the Nigeria Banks for commerce and industry (NBCI) was mainly set up to lend support and translate the spirit of indigenisation decree into practical reality.

The Nigerian Agricultural cooperative and Rural Development Bank inauguration was preceded by a detailed feasibility study with technical assistance provided by the world Banks International Bank for Reconstruction and Development (IBRD), the united nation Development programme (UNDP) which contributed immensely to the success of the bank at its formative years. The preparatory work which commenced in 1972 with the registration of memorandum and articles of association under the company decree of 1968 was brought by Stoneham in 1969 to systemized the creation of the Nigerian Agricultural Bank (NAB) as it was first known.

The central Bank of Nigeria and the federal government owned (NACB) ;currently Nigerian Agricultural cooperative Rural Development Bank (NACRDB) ;and it is the first Federal Government Agricultural Credit institution which is a limited liability company. As ;at the time of the bank's inauguration, the paid up share capital was 50 million . This is subsided in the ration on 60% by the Federal Government and 40% by the (CBN) it is charged with the responsibility of credit ;delivery for the development of agriculture ;and other agro-allied industries including marketing of agricultural products.

Unlike other financial institution, Nigerian Agricultural cooperative and Rural Development ;Bank (NACRDB) assist all it clients to adopt modern agricultural productivity technology and good management through the advise from specialist among its staff. Through these activities, the bank has contributed immensely to the development of the agricultural sector. The bank decentralized it operations by establishing twenty more branches in country to make it thirdly seven. Today through the lending schemes the bank offers a wide range of services to agricultural and agro allied industries in Nigeria through consultancy services division

OBJECTIVE OF THE STUDY

The aim of this term paper work is to review and revaluate the performance of Nigerian Bank with particular reference to its role and functions as they reflect to the Agricultural Sectors of Nigeria economy. To exam to what extent these functions and objectives for which the bank was established have been felt so far in the Agricultural Sector. The question of finance and technical actives ;to Agriculture has been a major problem in the economy. How far the bank responded to the aspiration of the agriculture in items of growth expansion.

Also to exam problem areas such as bottleneck on the part of the bank and Agricultural Section in achieving the desired goal. To exam such areas as operational polices and orientation, disbursement procedures and time agricultural projects required before assistance and other areas involving managerial assistance to Agricultural. In ;addition, to evaluate the attitude of farmers towards Agricultural credit repayment.

Finally, to evaluate the performance of the bank and make contribution to the knowledge as regards operating.

FUNCTIONS OF AGRICULTURAL BANK IN NIGERIA

The bank was established as a development bank especially for credit delivery to agricultural sector of the economy through;

1. provision of loans to individual formers, cooperatives organization, limited companies states and Federal agencies provided they are for Agricultural improvement.

2. Provision of guarantees in exceptional cases locally or from abroad.

3. provision of finance for industrial processing and marketing of agricultural products.

4. provision of finance by direct investment in the equity capital of major agricultural and agro-allied industrial ventures.

5. supervising the implementation of projects financed by it requesting progress reports and visiting the project sites.

6. identification of investment bottlenecks in Nigeria Agricultural economy, thereby helping to determine investment priorities.

CONDITIONS OF BORROWING MONEYFROM NIGERIA AGRICULTURAL BANKS.

A farmer wishing to raise money from the Nigerian Agricultural cooperative and Rural Development Bank (NACRDB) is expensed to meet the following conditions.

a. VIABILITY OF THE PROJECT; The project for which the loan is sought should not in conflict with any state or federal policies or acts. It should be commercially viable and capable of showing satisfactory returns on investment made it should be economically desirable, theses show a clear development value the nation. It should be generate and adequate fund to repay the loan in full and in accordance with the loan - stipulated terms and conditions.

b. STATUS OF APPLICATION; the applicant or the management of the proposed project must satisfy the band of this ability to manage the project in a sound and competent manner over a minimum period which must equal to the duration of the loan. The Agricultural production, processing and marketing should be the main objective of the application. The applicant must satisfy the bank that he is of good character and ;reputation.

c. BORROWING POWERS AND ABILITY TO REPAY LOAN; clients or applicants should keep within the frame work of their financial capabilities when applying for loan limited liability companies can only borrow within the provisions of their memorandum and articles of association. An individual borrowers ability to repay the loan will be determined by his income after operating and living expense are me.

d. AVAILABILITY OF LAND; In any agricultural project there should be land in which the project should be established. Therefore land should available before a client applies for loan, as the bank does not give loan for acquisitions of loan, in addition to providing land, an applicant is required to make a minimum contribution of 15% of the total project cost in cash or in kind.

e. SECURITY; While loan will be granted against at least 40% security, the main emphasis will be on creation of repayment capacity of the borrower as a result of technically and economically sound use of investment funds provided this is property provided by the client to be taken by the borrower anytime the client could not pay up