AN APPRAISAL OF THE EFFECT OF CREDIT OPERATION ON THE PRODUCTIVITY OF SMALL SCALE COWPEA PRODUCERS
1.1 Background to the Study
Agriculture plays a significant role in the growth of Nigeria’s economy especially, as it contributes over 20.89 percent of the nation’s Gross Domestic Product (GDP), offers 66 percent employment to her populace, accounts for 50 percent of the sources of raw materials required by industries for further production, provides 80 percent food for man and market for other industrial goods as well as export earnings (NBS, 2014). Despite these, agricultural production in Nigeria is subsistence, as a result of low utilization of modern inputs by farmers, unavailability and inaccessibility of farm land as well as low mechanized nature of the prevailing agricultural production system. Therefore, to improve the national economy, farmers should be supported to expand their scale of production through financial resource, such as credit (Akpokodje and Olomola, 2000).
Okurut, Banga and Mukuga (2004) affirmed that associated with mechanization and acquisition of agricultural inputs is the issue of credit without which the envisaged agricultural production and development will be a mirage. Inadequate access to credit by the smallholder farmers has been identified as one of the contributing factors to poverty. Credit allows farmers to satisfy their cash needs induced by the production cycle which characterizes agricultural production.
Credit supply to farmers is widely perceived as an effective strategy for enhancing increase in agricultural productivity and transformation of rural economy (Philip, Ephrain, and Omobowale, 2008). According to Mahmood, Okpara, Rahji and Ogwumike (2009), the introduction of easy access and low interest rate credit is the quickest way for boosting agricultural production. The argument is that the agricultural sector depends more on credit than any other sector of the economy because of the seasonal variation in the farmer’s returns and requirement in transformation of subsistence to commercial farming.The provision of credit as noted by Rosemary (2001) has increasingly been regarded as an important tool for raising the income of the rural populace, mainly by mobilizing resources to more productive uses.
Cowpea is an important major staple food crop in sub-sahara Africa, especially in Nigeria. The seeds are major source of plant protein and vitamins to man and feed for animals. The young leaves and immature pods are eaten as vegetables. The sale of cowpea seeds and fodder earns income to the farmers. In Nigeria, farmers who cut and store cowpea fodder for sale at the peak of dry season have been found to obtain as much as 25% of their annual income by this means. Cowpea also plays an important role in providing nitrogen to the soil when included in crop rotation system (Okunmadewa, 2009).
In Nigeria, the greatest production comes from northern region with about 1.7million tonnes from 4 hectares. This represents over 60 percent of total production. The producing areas are Niger, Kano, Sokoto, Kaduna, Zamfara and Gombe State. Despite that cowpea yield is very low, grain yield range between 100-300kg/ha. This is due to several constraints such as weather, parasitic weeds, insect-pests and diseases (Olamola, 2009). In Niger State, cowpea production is rain fed, usually planted between the months of April-May for early variety and July-August for late variety. It is worth noting that cowpea production is dominated by small scale producers in the state who employ traditional practices and inadequate techniques with resultant negligible outputs and low supply of commodity despite its high demand (Adrew, 2012). Low production efficiency and inaccessibility of credit have been implicated as some of the culprits leading to low outputs.
1.2 Problem Statement
Against the backdrop of increased advocacy and policy efforts geared towards agricultural transformation, the injection of credit facility holds the potential and propensity of breaking the vicious cycle of poverty by enhancing farm incomes and developing market opportunities for producers and processors along the value chain.
More often than not, producers over rely on the usage of meager household resources which limit economies of scale and expansionary motives which credit has the propensity to resolve.
Poverty level is high among the small scale farmers who keep large family sizes, high level of non-literacy and strict adherence to traditional methods, low crop yields and low levels of income. This makes it difficult for them to meet their financial needs for agricultural production from personal savings. Hence, seeking for other sources of input becomes necessary in order to meet up with their agricultural demand. High cost of risks involved in agriculture as well as high default rate among small scale cowpea farmers has been identified as major constraints as to why commercial banks are unwilling to grant credit facility to small scale farmers (Okpara, 2010). In the same vein, untimely disbursement of agricultural loans, high level of office bureaucratic protocols involved in credit acquisition among others from formal sources have also been implicated, while high interest rates, small size of loan and short time duration for loan repayment had been identified in the case of informal sources of credit.
Non availability of adequate credit needs of small scale agricultural producers can constitute a hindrance towards the attainment of high levels of production. The Federal Government of Nigeria (FGN) had made provision of credit a major thrust of its agricultural policy since the 1970s when it introduced the Agricultural Credit Guarantee Scheme Fund (ACGSF) managed by the Central Bank of Nigeria. Under this scheme, Commercial Banks made available to small scale farmers small loans, which are guaranteed by the Federal Government. Also, banks were mandated to allocate a certain proportion of credit portfolios to agriculture. However, mandatory allocation of credit to agriculture was discontinued. This had far-reaching implications. The FGN as a follow-up cushioning measure recapitalized and repositioned the Bank of Agriculture (BOA) for better performance (Okunmadewa, 2009)
According to Miller (2012), lack of credit and other interventions were the major constraints haunting agricultural development and stressed the need for increasing the amount of capital in agriculture through the use of credit. Small holder farmers need credit for several purposes. The production of cowpea requires the adoption of improved production practices credit facility is therefore needed to purchase improved seeds, agrochemicals, fertilizers and to hire labour to ensure timeliness of farm operations. Despite the critical roles credit play in agricultural development however, the abuse and misuse of credit meant for agricultural purposes by farmers have been reported. The consequence is the non-realization of the objective credit was meant to achieve. This calls for an investigation in the study area with a view to enhancing credit utilization for intended purposes. Credit is also hard to come by for the poor resource farmers and even when available, it had been politicized whereby only farmers who are connected to politicians get access to soft loans which they divert to other ventures other than crop production (Okurut et al., 2004)
On the basis of the foregoing, the following research questions are pertinent:
i. What are the socio-economic characteristics of the small holder cowpea producers who are credit beneficiaries and non-beneficiaries in the study area?
ii. What are the sources of credit available to the small scale cowpea farmers in the study area?
iii. What effect did credit exert on cowpea productivity in the study area?
iv. What is the relative technical efficiency of credit beneficiaries and non-beneficiaries in production of cowpea in the study area?
v. What are factors limiting small holder cowpea farmers access to credit in the study area?
1.3 Objectives of the Study
The broad objective of this study is to evaluate the effect of credit use on the productivity of small scale cowpea farmers in selected Local Government Areas in Niger State, Nigeria. The specific objectives of the study are to:
i. describe the socio-economic characteristics of small scale cowpea farmers in the study area;
ii. identify the various sources of credit available to small scale cowpea farmers in the study area;
iii. analyze the effect of credit on small scale cowpea production in the study area;
iv. estimate the relative technical efficiency in cowpea production of credit beneficiaries and non-beneficiaries in the study area and
v. identify the problems limiting small scale cowpea farmer’s access to credit in the study area.
Ho: There is no significant difference between productivity of small scale cowpea farmer credit beneficiaries and non credit beneficiaries in the study area.
1.5 Justification for the study
The idea of alleviating poverty in Nigeria, especially among the grass root farmers through government credit policy is a welcome development for sustainable agriculture, particularly in cowpea production. Small scale farmers need credit in order to adopt new technologies and to procure production inputs. According to Tanko and Jirgi (2008), modernizing agriculture in Nigeria requires optimal infusion of funds to finance the purchase of inputs such as fertilizer, improved seeds, insecticides and additional labour. The outcomes of this research will be of tremendous benefit particularly to the small scale cowpea farmers in study area.
The research output will also be relevant to several other stake holders in credit delivery programmes that will enchance productivity of the small scale farmers. It will also serve as a guide for future credit policy formulation, implementation and evaluation. Moreove, the output of this study will enable the policy makers, financial lending institutions to reappraise past policies and formulate realistic agricultural credit policies that will assist the farmers to increase their production. The findings of this research study will also guide credit beneficiaries to select the most effective and efficient ways to utilize their loan in order to boost agricultural productivity especially, in cowpea production.
The findings may also be used by extension agents in their teaching and demonstration contents as it identified factors significantly affecting the technical efficiency of contact farmers they interact with.