Agricultural Economics and Extension Project Topics

Effect of Credit Acquisition and Repayment on Agricultural Production Cross River State

Effect of Credit Acquisition and Repayment on Agricultural Production Cross River State

Effect of Credit Acquisition and Repayment on Agricultural Production Cross River State

Chapter One

Research Objectives

The broad objective of this research is to study the effect of credit acquisition and repayment on agricultural production.

Specifically the study is designed to:

  1. Determine credit disbursement and recovery strategies of agricultural credit
  2. Access and compare agricultural production among beneficiaries and non beneficiaries of credit schemes.
  3. Identify the factors that affect loan acquisition by farmers
  4. Identify the factors that affect loan repayment by farmers
  5. Compare agricultural production among loan defaulters and non-defaulters.
  6. Make policy recommendations based on the result of the findings



Agricultural Development

Agricultural development is the growth in the overall technology of agriculture and hence total output (Ruttan and Hayami, 1977). They asserted further that agricultural development is the acceleration of the rate of growth of agricultural output and production, consistent with the growth development of other sectors of a modernizing economy. Other sectors of the economy must be co-opted into or allowed to bear in the agricultural sector, if the development of the sector must be achieved.

The non-agricultural sectors plays very significant role of provision of necessary modern technical input (industrial sector.) necessary for agricultural development (Mkandawire, 1987). A common base for achieving rapid growth in agriculture production is the capacity to generate ecologically adapted and economically viable agricultural technology. Ruttan and Hayami (1997) however posited that for the non-agricultural sector to rapidly transform agriculture, two things must be done: the sector (industrial sector) must be repositioned to transmit increased technology to agriculture, through cheaper sources of power, production of plant nutrients, etc. the second thing to be done is for non-agricultural sector to maintain a sequence of innovations in agriculture and general education for farmers and maintain institutions to be consistent with the new growth potentials of the agricultural sector. Gerald (1996) noted that for this to be done, the critical element in the process is an effective system of market and non-market information linkages among farmers, public research institutions, private agricultural supply firms and the market for factors and products.

In the past the traditional farmers have been able to feed the nation and have a history of agricultural prowess. But over the years, agriculture in Nigeria has not been able to attain desirable goals of sufficient food production for home and export use (Ijere, 1995). Agriculture has been insufficient to satisfy demands generated by the growing population. In spite of this situation, the contributions of the agricultural sector are enormous. This is accepted by Nwagbo and Famoriyo (1991) that agriculture still remains important in absolute terms, contributing in slower pace. There is therefore urgent need to develop the agricultural sector, in other to lessen the misery, threat of meager food supply, hunger and malnutrition, etc. By so doing, the startling paradox of about 2/3 of Nigerians being poor despite living in a country with vast potential wealth would be addressed (N.E.E.D.S, 2005). It is hoped that the proposed intermediation by National Economic Empowerment AND Development Strategy (N.E.E.D.S.) in cultivation of improved higher yielding crop varieties, provision of extra support to agricultural credit research and training and provision of agricultural credit would be a step in the right direction in increasing agricultural production.

Concept of Credit.

Credit has a technical meaning even though it is used interchangeably as meaning about the same thing as borrowing, in financial cycles. Okorji (1987), sees credit as such assistance offered to farmers either in cash, kind or both for the purpose of agricultural production, the repayment of which the beneficiaries are expected to make at a future date with or without interest rate. Credit means also the ability to command the capital of another in return for a promise to pay at some specified time in future.

Besley (1994) however asserted that before the command of the capital stated above, three basic questions called 3R’S of credit should be considered by the farmers as they plan for credit, and the lender and borrower together must answer the questions in the affirmative, as the credit application is studied, they include; returns, repayment capacity and risk-bearing ability.

The credit should be sufficient to produce returns, the borrowers should be capable and willing to repay and the borrowers should be able to have the ability to contain the risk and uncertainty involved in using the credit.

Credit also involves having use of or possession of goods and service without immediate payment (Bannock, 1990). In most usage, especially in developing countries, credit is classified as micro, if it is of limited size, time and credit for self employment which is designed to enable the poor to have access to production capital. This is based on the fact that micro credit will lead to investment, income, reinvestment and more capital until the borrower is promoted out of poverty (Berger, 1989).

Project, be it a farm business or any other type needs to be carefully evaluated before credit can be extended. This would reveal the prevailing economic situation, its viability and capacity to payback. Martha (1992) identified three basic principles that can guide careful evaluation of credit; these include safety, suitability and profitability.

  1. Safety: There must be reasonable certainty that credit granted can generate enough profit and cash flows from the business used, so that a farm business would be able to repay the loan, for In addition to safety, the business enterprise should be able to produce acceptable security, which would serve as a fallback, in case the expected source of repayment fails.
  2. Suitability: Credit institutions exercise prudence to ensure that credit used by the borrowers does not conflict with the economic policies of the regulatory agencies as well as own
  3. Profitability: Any farm business that is not making profit may not be classified as viable for extension of credit. Therefore a profitable venture is more likely to attract the attention of




Sampling Procedures

Multistage random sampling technique was adopted. From the three zones, which the state is divided into, two local government areas each were selected randomly by the use of sampling without replacement. This gave total number of local government areas in the sample to be six.

In stage two, two farming communities were selected from each of these two local government areas earlier selected. This was achieved by random sampling of all the communities in the two local government areas. This gave a total number of farming communities in the sample to be twelve.

In stage three, ten farmers were randomly selected in each community of the sample, five beneficiaries and five non-beneficiaries of agricultural credit. It was achieved by listing all the farmers in each community and then using the select –and- not return method. This gave a total number of 120 farmers, who will form the respondents. Also 5 credit officers from each local government area of the sample were selected to respond to the section of the questionnaire meant for them, this would give 30 respondents.

Data Collection

Data required for the study were collected from both primary and secondary sources. The primary data were obtained through the use of structured questionnaire to capture information on the socio-economic characteristics of respondents. The secondary data came from published books related to agriculture and agricultural finance, Journals of agricultural research and finance, agricultural annual reports, agricultural finance bulletins, financial institutions progress report and from relevant public agencies. The financial institutions’ progress report showed the organizational and management structure of the credit scheme.

The first part of the questionnaire gave general information of the farmers like sex, age, name of village, marital status, etc. Accessibility to agricultural credit by farmers formed the second part of the questionnaire, while the use of credit by farmers formed the main thrust of part three of the questionnaire. The last part of the questionnaire posed question on the potential factors affecting loan repayment. While questions directed to bank staff concluded the questionnaire. Because language problem existed during the administration of the questionnaire, 3 literate assistants were engaged as interpreters.



Sections A

This section showed socio-economic characteristics of respondents to capture objective three which stated that: identify the factors that affect loan acquisition by farmers and objective four which stated that: identify the factors that affect loan repayment respectively.




The study was carried out to study the effect of credit acquisition and repayment on agricultural production in Cross River State. To be able to draw comparism between production of credit beneficiaries and non-beneficiaries, 120 farmers were interviewed 60 each of credit beneficiaries and 60 non beneficiaries and data were collected in the study area. The main objective of the study was to study the effects of credit acquisition and repayment on agricultural production. Specifically, the study was designed to:

Determine credit disbursement and recovery strategies of credit institutions.

Determine and compare agricultural production among beneficiaries and non-beneficiaries of credits.

Identify factors that affect credit acquisition by farmers.

Identify factors that affect credit repayment.

Identify socio-economic factors that affect credit acquisition and repayment by farmers. Make policy recommendations based on the result of the findings.

The study was necessitated by the seeming fact that there is no marked difference between production output of credit beneficiaries and non-credit beneficiaries, in some cases, in the study area. Data were collected on socio economic variables like, age, sex, educational background, etc. for both beneficiaries and non-beneficiaries to evaluate their effects on agricultural production when credit is either used or not.

The study revealed that the main output of credit beneficiaries was 1520kg and that of non- beneficiaries 967kg. This difference in output can be attributed to the fact that credit beneficiaries were found to posses more funds for investment in agriculture, are more in the productive age (30-50) as against 50-60 years of non-beneficiaries. Majority of credit beneficiaries have 5 dependants as against 10 of non-beneficiaries, majority of beneficiaries have basic education, while that of non-beneficiaries do not have. The farm size of beneficiaries is mostly 3 hectares while that of non-beneficiaries is 2 hectares etc.

Result of regression indicated that of the entire dependant variable hypothesized as influencing the rate of repayment, age, level of education, household size and farming experience are insignificant; hence do not conform to apriori expectation. However, there was direct and significant relationship for farm size distance from source of credit, income and fund size to repayment rate, as their f-values were positive.

Values of R2 or coefficient of multiple regressions was 0.803 for credit beneficiaries indicating that the model was significant. This implies that the independent variable regressed have 80.3 percent influence on the rate of credit repaid. For non beneficiaries R2 was 0.739 this shows that the independent variables regressed have 73.9 percent influences on rate of repayment. For both farmers R2 value was 0.628 this show that all the independent variable regressed have 62.8 percent influence of credit repaid. The most significant of the relationship was shown by high values of Fe, which was Fe 21.75. This implies that we should reject the four hypotheses.

The study also revealed that credit disbursement and recovery strategies of agriculture credit institution exacerbate the problem of farmers obtaining and making proper use of credit, because of late arrival of funds, extortion, poor administration of credit, etc.


Based on the study carried out on effects of credit acquisition and repayment on agriculture production in Cross River State, the following conclusions are made.

Findings showed that agricultural production is still of minimal output in the study area. This is because most farmers do not obtain credit for agriculture, either out of their own making or the credit institutions and government policies. Even for those who acquired and use credit, their production output is still not commendable because of imperfections in the delivery system and the problems emanating from the farmers themselves.

Findings further showed that among other factors, the socio-economic characteristics of credit beneficiaries influenced the rate of repayment and for non-credit beneficiaries influenced the acquisition of credit. Also there is significant difference in output between farmers who use credit for farming and those who do not.

Finally, if the problem of acquisition of credit is addressed, more credits would be available to many farmers and in sufficient amount, which would enhance agricultural production.


Agricultural credit acquisition and repayment is one sure way of improving agricultural output in Cross River State in particular and Nigeria in general for this feat to be achieved, the following are recommended based on the result of this study.

  • Agricultural credit should be given more to farmers who are within the productive age bracket of 30-50 This is because according to this study, this age bracket is associated with high agricultural output and repayment.
  • Agricultural credit officers should consider the aspect of household size and avoid extending credit to those with large size. This study showed that beneficiaries with large household size more often divert the loans to household contingencies, leaving it main purpose to suffer.
  • This study also showed that farmers with basic education can purposefully engage agricultural credit. With this education they are aware of innovations in agriculture which they can channel this loan to. Hence this category of farmers should be considered in loan extension for increased agricultural production and repayment.
  • The government should review the present land tenure system (the communal land tenure system) which does not accord enough farm lands for purposeful agriculture and agricultural credit collateral. Free title system is recommended, which can ensure enough land for agriculture and collateral, for increase output and for security of credit
  • Consideration should be given to farmers with more years of farming experience in extension of agriculture credit. It has been shown by this study that more years of farming experience, affords the farmer the wherewithal to meet the requirement for credit acquisition: guarantors, security, initial deposit, etc.
  • Agricultural credit institutions like the NACRDB, ADP, and ACGSF should be overhauled and repositioned to make adequate credit available. This study showed that there is more flexibility in these institutions than other sources of agricultural finance like the commercial banks, private lenders, etc.
  • The following when properly addressed would ensure more beneficiaries of agricultural credit:
  • Citing of credit institution in the urban towns far removed from farmers in the rural
  • Small loan amount to the agricultural sector due to competition in demand from other
  • Stringent conditions of
  • High interest rate
  • However, what this research study consider as key contributions to knowledge are:
  • Increase in credit amount to farmers because of the inflationary period we are
  • Allowance of up to 2 years as gestation period to allow farmers prepare well before repayment
  • Reduction in interest rate to at most 5 percent to get more farmers attracted to


  • Adegeye, J and J. S. Dittoh (1985) Essential of Agricultural Economics.University of Ibadan Press.
  • Adekanye, Femi (1999): The Element of Banking in Nigeria: 3rd edition, Institute of Bankers Publishers, Lagos.
  • Ali, Anthony, (1996) Fundamentals of Research in Education: Meks Publishers, Enugu.
  • Ali, Madu, (1991) Economic efficiency of small scale farmers in a changing world, Journal of integrated dev. Lagos. 17 (9 ; 43-45
  • Amemiya, T. (1981) qualitative Response Models: A Survey Journal of Economic Literature. Ibadan. 19(13); 17-18
  • Anyanwu, J. C. (1997) The Structure of the Nigeria Economy (1960-1997). Joanee Education Publisher Ltd. Onitsha, Nigeria
  • Arene, C. J. (1990) “An Appraisal of the Supervised Agricultural Scheme in Anambra State”, Nigeria. Unpublished Ph.D. Dissertation. Dept. of Agric Econs U.N.N.
  • Arene, C. J. (1990) An Appraisal of the supervised Agricultural Scheme in Anambra state”, Nigeria. Unpublished ph.D. Dissertation. Dept. of Agriccons U.N.N.
  • Arene. C. J. (1992) “Loan Repayment and Technical Assistance among small Holder Maize Farmers in Nigeria”. African Review of Money, Finance and Banking, No. 1PP. 160.
WeCreativez WhatsApp Support
Our customer support team is here to answer your questions. Ask us anything!