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									AN EXAMINATION OF THE ROLE OF COMMERCIAL BANKS

IN FINANCIAL OF AGRICULTURAL PROJECTS IN ENUGU

    STATE ( A CASE STUDY OF FIRST BANK NIGERIA




                                                 1
                               ABSTRACT

It has because very imperative to examine the role of commercial Bank in

financing of A agricultural projects PLC, (1999 – 2003), is s topic so

crucial that interested parties in the work many.

      It is very vital considering the role of commercial banks in general

and first Bank in particular play in financing of Agricultural. Project in

Enugu state, in sustaining the Economy.

      This creditable role being played by the above bank in sustaining

the economy of Enugu state and the position of agriculture in the building

of a venture find a self reliant nation attracted the attention of the

researcher. The instrument with which the Central Bank of Nigeria

Central the commercial Banks in general and first Bank in particular in

terms of Agricultural loans were examined. With credit guidelines which

comes out every year, Central Bank of Nigeria specifies, the minimum

percentage of loan of agricultural sectors. Secondarily, the Federal

Government of Nigeria and the Central Bank of Nigeria established the


                                                                         2
Agricultural credit guarantee the value fund by which the farmers who

receive loan under it are guaranteed by the Central Bank of Nigeria. The

liability of CBN is the case of default is up to 75%.

      The study tried to find out whether the decline in agricultural output

within the state has link with the absence of credit facility made available

to formers by commercial banks in general and first bank in particular in

financing of Agricultural projects in Enugu state, in doing so first Bank of

Nigeria (FBN) PLC with Bank office and area offices within Enugu state

were selected for studies, and because of size three local Government

treas were also selected for study and the include Enugu East and Enugu

South.. Cluster sampling was used to selected farmers on which

questionnaire were administered.

      Also used in collecting data was interview method because there

were some farmer who were not very literate. The data collected was used

testing the two hypothesis for the topic. The hypotheses included that

carry out feasibility study to Agricultural farmers do not have any effect


                                                                           3
on commercial Banks in general and Bank in particular in financing of

agricultural project in Enugu state, and commercial Banks aim general

and first Bank in particular do not respond adequately to farmers in

financing needs of agricultural project in Enugu state.

         In testing the above hypothesis, chi – square test was used. The test

concluded that carrying out feasibility study to Agricultural farmers in

Enugu state do not have any effect.. It was also concluded that

commercial Bank in General and first Bank in particular do not respond

adequately to farmers in financing need of agricultural projects in Enugu

state.

         Other mirror issues in the researcher questions in the project were

weighted to percentages.

         In conclusion, commercial banks in general and first Bank in

particular should be more encourage to assist agricultural sector and

appropriate staff expansion recommended for effective supervision to

avoid both loan default and diversion in Enugu state.


                                                                             4
                       TABLE OF CONTENTS

Title page                                 ii

Approval page                              iii

Dedication                                 iv

Acknowledgement                            v

Abstract                                   viii

Table of contents                          xi

List of tables                             xv

List of figures                            xv

List of abbreviation                       xv

CHAPTER ONE

Introduction                               1

1.1   Background of study                  1

1.2   Statement of the problem             4

1.3   Purpose / objective of the study     6

1.4   Research question                    7


                                                  5
1.5   Research hypothesis                                       8

1.6   Significance of study                                     8

1.7   Scope, limitations and delimitations                      11

1.8   Definitions of terms                                      12

      References                                                14

CHAPTER TWO

Review of related literature                                    16

2.1   The meaning of agricultural finance                       16

2.2   Financing agricultural projects in developed country      17

2.3   Agricultural finance in Nigeria as a developing country   21

2.4   Problems facing agricultural project finance in Nigeria

      commercial bank (first bank of Nigeria plc)               24

2.5   Agricultural financing in Enugu state                     31

2.6   Evaluation of commercial banks (first bank

      f Nigeria plc) performance in granting agricultural loans 31

2.7   Sources of agricultural finance in Enugu state            34


                                                                     6
2.8   An overview of the federal government assistance

      in relation to agricultural finance                35

      References                                         40

CHAPTER THREE:

Research design and methodology                          42

3.1   Research design                                    42

3.2   Area of study                                      43

3.3   Population                                         43

3.4   Sample and sampling techniques                     44

3.5   Instruments of data collection                     46

3.6   Methods of data presentation                       48

3.7   Methods of data analysis                           49

      References                                         51



CHAPTER FOUR

Data presentation and analysis                           52


                                                              7
4.1   Presentation of questionnaire         54

4.2   Discussion of result                  70

      References                            73

CHAPTER FIVE

Findings, recommendations and conclusions   74

5.1   The findings of the study             74

5.2   Recommendations                       77

5.3   Conclusions                           80

      Bibliography                          81

      Appendix                              87

      Questionnaires                        88




                                                 8
LIST OF TABLES

4.1     Administration of questionnaire

4.2     Feasibility study table

4.3     Contingency table on loan application

4.4     Save custody respondent

4.5     Advisory services respondent

4.6     Conditions specified by banks

4.7     Respondent on granting of loan to agricultural projects

LIST OF FIGURES

4.1     Graph showing acceptance and rejection region

4.2     Graph showing level of significance

LIST OF ABBREVIATION

Acgsf -       agricultural credit guarantee scheme funds

Camd -        company and allied matter degree

C.B.N -              central bank of Nigeria

Fao -         food and agricultural organization


                                                                  9
Fbn -   first bank of Nigeria

Nig -   Nigeria

Plc -   public liability company

X2 -    chi – square




                                   10
                                PROPOSAL

      It has become very imperative to examine the role commercial

Banks play in financing Agricultural project in Enugu state. This

creditable role being played by the above bank in the economy of Enugu

state and the position of agricultural in building of a virtue and self –

reliant nation will attract the attentio0n of the researcher.

      The instruments with which Central Bank of Nigeria (CBN) control

the commercial banks in terms of agricultural loans will be examined.

With credit guideline which comes every year, CBN specifies the

minimum percentage of loan to agricultural sector.

      This study will find out whether the decline in agricultural output

within the state has link with the absent of credit facility made available to

farmers by commercial banks in financing agricultural project in Enugu

state. In doing this, First Bank of Nigeria with the Enugu Zonal Office

and area offices within Enugu State will be selected for the study.

Because of size, three Local Government treas will be selected for the


                                                                           11
study and they are Enugu North, Enugu South and Enugu East Local

Government treas. Cluster sampling will be sued to select farmers on

which the question will be administered.

      Also, interview method will be used in collecting data because

there are some farmers who are not very literature. Data that will be

collected will be used in testing the hypothesis of the topic. In the testing

of the above hypothesis, chi – square test will be used.

      The finding and recommendation of this will be made based on the

analyzed data.


                             CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF STUDY

      In the immediate past decade and this present decade, there have

been seminars, conferences, articles, Journals and various publications by

both local, national and International Organizations on the sharp decline



                                                                          12
in Agricultural production on these various programmes, some of these

workshops, conferences and seminars include the followings:

-     The 13th Annual workshop of the South – West Research Extension

      Farmers impute Linkage system (REFILS) helped at the Institute of

      Agricultural Research and Training (I.A.R.T), Moor plantation

      Ibadan in March 2000 with topic “Adaptive Research and Method

      in Agriculture”.

-     An Annual conference Organized by Agricultural Extension society

      of Nigeria (AESON) held at university of Ibadan Conference

      Society of Nigeria Centre, Ibadan on 10 – 12 April, 2000.

They emphases on the need to promote agricultural production to reduce

the unguided population explosion which is at geometrical progression

(G.P) while Agricultural production was only growing in an arithmetical

progression. These seminars, workshops, conferences also reminded the

populace world wide of the impending danger posed by the continuous




                                                                     13
deforestation practices of our forest reserve, bush burning overyrazury,

continuos coming and other environment gradation hazards.

      They panted out little or on concerted effort are made in replacing

the deforested areas. They called on the need to embark on a national

forestation scheme and forest conservation

      In Nigeria, there bad been various campaigns for to inhabitants

nationally to plant at least one tree crop in his vicinity annually (tree

planting compaign) All these would have been uncalled for but for the

indispensable role played by agriculture in Nigeria economy, justly this

project work, Agriculture sector in developing and under – developed

countries. It provides foods required for the teeming population in both

the rural land populace. It also provides raw materials for our agricultural

industries like Cotton to our textile industries.

      Agriculture provides employment for about 60% of the labour force

in developing countries. Agriculture also provides incomes to individuals,

states, and the nation, to the peasant farmers and traders aluce. It provides


                                                                           14
money as income and means of live holds to the farmer who sells this

farm wares to the populace. To the states, like Enugu state the cashew

plantation at Ohhe not only provides raw materials to industries but also

provide income to the state government and to the nation, it provides a

means of export, thereby learning foreign exchange and consequently

reducing the chorus balance of payment deficit prevalent in these region.

      In 1969, Agriculture contributed 31% the cross Dmester product

(GDP) in sierra Leone, 1957, it contributed over 61% to GDP in Nigeria

and in the year 2001, proceeds from sales of grain (Agricultural product)

in Nigeria amount to over N2.5N Billion (CBN Bullion Jan / March 2001)

The percentage contribution of Agricultural sector to the national has seen

declining since when the petroleum sector started contributing heavily to

the national income. Presently, agriculture has assured a wider scope as

against those days when agriculture was viewed as a narrow feed which

includes the propagation of seeds and crops and the rearing of animals for

man use. This does not fully inculcate all the relevant aspect of


                                                                         15
agriculture. Some agriculture in of seeds and crop, include souring and

buying of farm input like seedlings machinery’s etc and the selling of its

output (agricultural marketing) and the use and provision of credit in

agricultural – financing). This later view is more prevalent now especially

among the literate populace. The use and provision of agricultural credit

will equally assist us in appreciating the role of commercial banks in

financing agricultural project in Emugu state their problems and

prospects. This forms the course of this project.

1.2   STATEMENT OF THE PROBLEM

      The major concern of this study us to know from the lender (First

Banks as the Commercial Bank) and the recount (Farmers and

Agriculturists) loan effectively agricultural project are Financed in Enugu

State a result of the donnreeening and indispensable role of commercial

banks. Since the establishment of the bank in 1894, they has been carry

out financial assistance to agriculturist.




                                                                         16
        Farmers encounter various difficulties when trying to get financial

aids from commercial banks - some of these difficulties are as follows:

(i)     Agriculturist / Farmers do not get financing aids such as Bank

        Loans / credit when they need it.

(ii)    Commercial banks granting loan to farmers due to adequate

        collateral for such loan .

(iii)   Illiteracy among the farmers also crenate a very difficulties because

        of this farmer do not o to banks to receiving advisory services

        which might help then to increase their productivity.




1.3     PURPOSE / OBJECTIVE OF THE STUDY

1.      To find out whether carrying out feasibility studies for agricultural

        project is one the roles commercial banks plays in the financing of

        Agricultural projects in Enugu state..


                                                                           17
2.        To investigate whether provision of credit facilities to farmers is

          one of the first banks play in financing of agricultural projects in

          Enugu state.

3.        To find out whether opportunity of safe custody of fund is one of

          the roles which First Banks play in financing of Agricultural

          projects in Enugu stare.

4.        To find out whether provision of financial lease to farmers in

          Enugu state is one of the roles First Banks play in financing of

          agriculturist project in Enugu state.

5.        To find out whether rendering advisory services to farmer is a role

          which First Banks plays in financing Agricultural project in Enugu

          state from 1999 –2003.

1.4       RESEARCH QUESTIONS

1.        Is carrying out feasibility studies for Agricultural project one of the

roles of commercial banks play in financing agricultural projects in Enugu

state ?


                                                                               18
2.    Is provision of credit faculties to farmers one of the roles of the

First Bank play in financing of Agricultural project in Enugu state ?

3.    Is commercial banks in general and first bank in particular save

      funds realize by farmers in Enugu state.

4.    Is provision of financial lease to farmers in Enugu state one of the

      roles First bank play in financing of agricultural project in Enugu

      state.

5.    Is rendering of industry services to farmers in Enugu state one of

      the which First bank in particular and commercial bank in general

      play in financing of agricultural projects in Enugu state 1999 –

      2003.



1.5   RESEARCH HYPOTHESIS

H0:   Absence of feasibility study do not affects the farmers chance of

securing loan in Enugu state.




                                                                        19
Hi:   Absence of feasibility study affects the farmers chance of securing

loan in Enugu state.

H0:   First bank in particular commercial bank in general do not respond

adequately to the financial needs of agricultural projects in Enugu states.

Hi: First bank in particular and commercial banks general do respond

adequately to the financial needs of agricultural projects in Enugu state..

1.6   SIGNIFICANCE OF STUDY

      The study will benefit a lot of lot of people due to the astronomical

population growth presently with out a correspondent growth in

agricultural productivity to feed for the growth in population, especially in

the developing countries the people who benefit more from this study are

the national, state government especially Enugu state the commercial

banks with emphases on First bank, the farmers the renders and

prospective future researcher on this topic.

THE GOVERNMENT :The federal government stands to gain from this

study by understanding the impact of the various monetary places on the


                                                                              20
effective running of commercial banks in relation to loan granted to the

farmers. The state government especially Enugu state, in th same vein,

stands the extent and effect on commercial bank lending policies in

relation to farmers in the state and the various ways they can help in

amehoreting the plight of farmers in elation to securing loans and

consequent increase in productivity in the state.

THE COMMERCIAL BANK: This commercial bank with great

emphases on First bank, it will enable them to know the most suitable

loan to be issue to different categories of farmers to reduce the changes of

bad debt arising from non – repayment of loans granted to farmers, the

type of incentive necessary to reduce non – repayment record, recorded

on farmers part and on the need to recruit more agricultural credit officers

do as to bridge the gap create by farmers knowledge of banking activities.

FARMERS:           On the part of farmers,          it will enlighten the

agricultural sector, the collateral expected of them and the repayment




                                                                          21
period to the prospective researcher, it will serves as a fertile ground to

update and expand this study.

READERS: To the reader, it will help them appreciate and evaluate the

efforts the Federal and their arms of government in boasting agricultural

productivity. It will also enable them to assess how effective and efficient

the loan responding to agricultural financing.



       In summary, the findings may help in redirect and reorienting our

farmers on the right direction as to loan available and requirement.




1.7.   SCOPE , LIMITATION AND DELIMITATION OF STUDY

       The scope of this study were limited by the various factors, same of

which are classified as secret nature of banking industry, inadequate

finance , time constraint the magnitude of illiterate farmers, the dispersed


                                                                          22
nature of their settlement and the unwillingness on the part of respondents

in sacrificing their time.

      Under limitation of this study classified nature of banking industry;

since banking activities are mostly not assessable to members of public,

most of the required data for this project could not be reached. The

shortage of finances experience by the researcher especially in the present

economic recession prevented the research from reaching out to as many

respondents and First Bank as possibly.

      Time constraint also militated against this project due to the 2003

/2004 academic year calendar, the short period therein was inadequate

time for the academic work which equally affected this project due to this

time constraint some text books and journals which would have added

space to this project were non – used.

      Under the deli9mation of the study, the study is on the role of

commercial banks in financing of agricultural project in Enugu state. The




                                                                         23
study is such that it concern the farmers as the agriculturist and the bank

as financial institutions.

       The researcher would have loved studying all other banks and

states in the same category but due to some constraining factors, he has

limited on First Bank of Nigeria PLC

1.7    DEFINITIONS FO TERMS

1.     FINANCE: This         is the efficient   sorcery, application     and

management of fund to maximize wealth. Finance can also be explained

as the possession of funds when it is needed for investment. This

explanation indicates that finance does not just mean the usage of fund but

as well included the souring required funds at the right time and sharing

of return (Iloh; 1999)

2.     AFGRICULTURE :             This is the scientific propagation of plant

and rearing of amounts which is meant for scouring and application of

fund ( Credit Facilities to make it available for use) and the marketing of

its out put (Agricultural marketing) for man uses .


                                                                           24
3.    COMMERCIAL BANKS:                These are those banks concerned

with lending of money to businessmen, firms co-operation etc. for a short

periods on the strength of liquid securities, they also play the role of safe

custody of find and the valuable items.

4.    PROJECT :           This is plan when making a research work, or

tools that are necessary for work making which involves the investment

of scare human and material resource which can be quantitative and

qualitatively analyzed with a primary objectives of assessing the

economic returns which accrue to that venture inflows.




                             REFERENCES

Emado A. B. C. (1995); Comprehensive Agricultural Science for West

Africa Senior Secondary Schools Onitsha; De – diamond Publishers

Revised Edition PP 39 - 48


                                                                          25
Oriji John (1996); Banking Operations in Nigeria, Enugu, Je - Rohi

Publishers PP 2

Ukemenam C. O. (2001);           Practice of Banking for students and

professionals, Enugu Otek Publishers PP . 6

Udeh S.O (2000); Business Finance, Enugu Malik Enterprises Nigeria

PP. 186 – 188

Odike J. C. (2001) , Managerial Economics Enugu, JTC Publishers PP

303 – 306

First Bank (2002); Business and Economic Report PP 10

Orjih   John    (2000),   Portfolio   Management,   Enugu   Splashmedia

Organization PP. 15

CBN Bullion (2001) Vol 25 N0 1 Jan / March

Iloh J.V.C (1999), Business Finance (Issues and Application), Enugu,

Glance venture PP . 2 .




                                                                     26
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