The significant role agriculture plays cannot be underestimated in any nation.
Apart from being the source of feeding of the populace, it also account for the
source of income for other developmental activities. It is in line with these its
fundamental role that this study make a giant stride to assess the contribution
of Nigerian Agricultural Co-operation and Rural Development Bank to the
development of this important sector viz-a-viz the economic growth. The main
objective is to ascertain whether the bank which was purposely set up for the
financing of agricultural activities in Nigeria has actually fulfilled the object.
Multiple regression is used as a tool of analysis for the study. It was found that
the bank has not lived up to expectation in funding the agricultural activities in
Nigeria. The aim of setting up the bank is therefore not attained because of
bureaucracy that engulfed the whole procedures and process in its operation. It
was recommended that government should intensify effort to ensure there is
adequate monitoring of the operation of the said bank so that they actually
fund the project that it was set up for.




Title Page – – – – – – – – – – i
Declaration – – – – – – – – – – ii
Certification – – – – – – – – – iii
Dedication – – – – – – – – – – iv
Acknowledgement – – – – – – – – – v
Abstract – – – – – – – – – – vi
Table of Contents – – – – – – – – – viii
1.1 Background of the study – – – – – – – 1
1.2 Statement of the Problem – – – – – – 5
1.3 Objectives of the study – – – – – – – 8
1.4 Research Hypotheses – – – – – – – 9
1.5 Scope of the study – – – – – – – – 9
1.6 Significance of the study – – – – – – – 10
2.1 Introduction- – – – – – – – – 12
2.2 Historical Development of Banking in Nigeria – – – 12
2.3 Development Banking – – – – – – – 15
2.4 Community Banking – – – – – – – 17
2.5 Regulatory Framework of Nigeria Banking System – – – 19
2.6 Development of Nigerian Agricultural Co-operation and Rural
Development Bank – – – – – – – 28
2.7 Issues on Economic Development – – – – – 29
2.8 Nigerian Women in Agricultural and Economic Development – 34
2.9 Agricultural Sector and Nigeria’s Development – – – 37
3.1 Introduction – – – – – – – – 47
3.2 Research Design – – – – – – – – 47
3.3 Population and Sampling Techniques – – – – – 47
3.4 Methods of Data Collection – – – – – – 48
3.5 Techniques of Data Analysis – – – – – – 48
3.6 Justification of Methods Used in this Study – – – – 50
4.1 Introduction- – – – – – – – – 51
4.2 Data Presentation – – – – – – – – 51
4.3 Presentation and Analysis of Result – – – – – 52
4.4 Analysis of Coefficient of Determination – – – – 55
4.5 Discussion of Results – – – – – – – 59
5.1 Summary – – – – – – – – – 60
5.2 Conclusions – – – – – – – – – 62
5.3 Recommendations- – – – – – – – 63
5.4 Limitation of the Study – – – – – – – 66
5.5 Areas for Further Research – – – – – – 67
Bibliography- – – – – – – – – 68
Appendixes – – – – –




1.1 Background of the Study
Prior to 1980 in Nigeria as well as in many developing countries, successive
governments have implemented various agricultural and rural development
policies, all in an effort to address perceived shortfall in rural credit, stimulate
rural employment and enhance agricultural productivity. Under these rural
credit schemes, institutional resources, programme efforts and government
agencies – based top – bottom interventions, to implement mostly supply-led
financial development strategies. That is the channeling of government funds
to rural entrepreneurs and small farmers to enhance the contribution of
agriculture to economic development (Yaron, 1992).
The above aim prompted the government in Nigeria to establish the defunct
Agricultural and Co-operative Bank (NACB). The objective of NACB is to finance
agricultural project through loans to farmers. Others like the Nigeria Bank for
Commerce and Industry (NBCI), People Banks for Nigeria (PBN) as well as
Special Banks for Local Areas – Communities banks (CBs) were also established
for similar objective and purpose. Government also made it mandatory for
commercial banks and merchant banks to finance agricultural sector through
loans. There was also the rural banking scheme of the Central Bank, the Nigeria
Agricultural Guarantee Scheme, National Agricultural Scheme, National
Agricultural Land Development Authorities, the Family Economic Advancement
Programme (FEAP) and the National Economic Empowerment Development
Strategies (NEEDS), which were all formed in lieu of promoting agricultural and
rural development.
The Nigeria’s Vision 20, 2020 is designed to make the country among the first
twenty developed nations by the year 2020. Although, manufacturing and the
service sectors are set up as a driving force of the economy but the agriculture
sector will still remain an important contributor, especially in the food
production. The percentage contribution of agriculture to gross domestic
product (GDP) is declining, in terms of absolute value, perhaps the amount is
increasing geometrically. The agriculture sector has contributed significantly
to the growth of the Nigerian economy and for it to continue to significantly
contribute to the national economy; it has to be globally competitive. The
Third National Agricultural Policy, which covers the period 1998 to 2010,
provides the policy framework for the future growth of the agricultural sector
in the next decade.
The future of the rural and agricultural finance institutions in Nigeria including
Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB), rest
on its ability to meet the challenges for the purpose in which it was established
to as well as to remain a sustainable development and competitive in the
global financial institution. With the liberalization of the world trade including
the financial sector through the World Trade Organization (WTO) agreements,
the trade competition will be stiff amongst existing players and new
competitors from within and outside the nation. NACRDB must find ways to
strengthen its existence by having enough capital, improving its operation,
expanding its scope of business and operating normal banking business.
The bedrock of agriculture and agricultural development in developing
countries of sub-Saharan Africa is rural development, without which all efforts
towards agricultural development will be futile. A large majority of the farmers
operate at the subsistence, (smallholder level), while intensive agriculture
being uncommon. A characteristic feature of the agricultural production
system in such countries, Nigeria inclusive, is that a disproportionately large
fraction of the agricultural output is in the hands of these smallholder farmers
whose average holding is about 1.0-3.0 hectares, (Yaron,1992). Also, there is
very limited access to modern improved technologies and their general
circumstance does not always merit tangible investments in capital, inputs and
Household food and nutrition quality relies heavily on rural food production
and this contributes substantially to poverty alleviation. Consequently, the first
pillar of food security is sustainable production of food. Parkin, (1998), noted
that in the early 1980s, while the population grew rapidly, food production and
agricultural incomes declined in many African countries including Nigeria. In
most of the countries the diminishing capacity of agriculture to provide for
household subsistence increased the workload shouldered by populace as
investment by the financial institution withdrew their service from agriculture.
Evidently, development, food security and poverty alleviation will not be truly
achieved without rapid agricultural growth. Assisting the rural poor to enhance
their livelihoods and food security in a sustainable manner is therefore a great
challenge. Broadly put, increases in agricultural productivity are central to
growth, income distribution, improved food security and alleviation of poverty
in rural Africa.
In spite of efforts of the government less is achieved in the agricultural
productions. This is partly because the institutions were not designed to
function as “true” financial intermediaries that mobilize deposits to make
loans, they lack the obligation to operate under financial constraints, nor were
they driven by commercial financial performance criteria.
It is based on this premises that this study is undertaken to assess the
contribution of development banks to the development of Nigeria economy
using Nigeria Agricultural and Cooperative and Rural Development Bank as a
domain of the study.
1.2 Statement of the Problem
In recent years, the financial performance of development banks has
deteriorated sharply. The NACB’s indifferent lending performance is a
reflection of a number of external and internal factors that have plaqued the
institutions. First, since inception the NACB has been mandated to promote
the formation and funding of viable agricultural projects through policies that
have been numerous instances of external interference especially in loan
sanctioning and recoveries. Since interference hampered the bank’s
operational efficiency. Furthermore, the government also dictates areas of
investment, loan portfolio and interest rates to be charged.
Coupled with the direct interference are the government’s unstable
agricultural policies. The frequent changes in the political leadership and
subsequent changes in agricultural policies have given rise to inconsistent
policy objectives. For instance, changing polices on the importation of rice,
wheat, vegetable oil, inputs and input subsides made investments in
agriculture risky. Thus the bank’s scope of operations has been constrained by
not only political objectives but also hanging political regimes.
Secondly, the bank has been constrained by a lack of funds. The Federal
Government was able to provide soft loans to meet NACB’s growing demands
for affordable credit facilities by the large Nigerian farming population. The
bank was and currently is experiencing immense difficulties in sourcing cheap
funds to meet its primary objectives of delivery timely an affordable credit
facilities to the farming population. Today, he bank is limited to recycling
recoveries and is unable to satisfy the demand for credit.
Third, the devaluation of the Naira has placed an increased burden on the bank
to repay internationally sourced funds. At the time of taking these loans, the
exchange rate varied between N4.00 and N8.00 to one US Dollar. The
currency’s depreciation to about N120.00 to US$1 Has placed the bank under
considerable financial pressure. The problem rests with the f act that the
exchange risk cannot be borne by tie farmer because even with if interest rates
are increased to 100% high rates and thus funds need to be found elsewhere.
The low interest rates charged by the NACB, on instruction from the
government, exacerbates this problem. These rates a re hardly adequate to
cover the cost of funds, let alone the high cost of credit administration,
especially to small-scale, peasant farmers and their families, residing in remote
rural areas.
Fourth, the NACB has high loan delivery costs and this has contributed to much
of its financial problems and lackluster lending performance. For instance, the
NACB’s experience in implementing the popular small holder loan scheme
illustrated the high costs of administering credit facilities directly to the
numerous and scattered small-scale farmers in Nigeria. The NACB has been
plagued by low loan recovery rates. The root of this problem is the attitude of
the average Nigerian farmer, who regards NACB as an agency for them to get
their share of the “National Cake”. In fact, the negative effect t of this attitude
is such that even where the banks clients are known to have the means to
repay the loans as and when due they are frequently unwilling or highly
reluctant to do so.
Other possible reasons for low repayment levels include; Poor prices for
agricultural produce, project failure due to unstable macro economy policy and
high cost of inputs and poor extension services
It is indisputable that the comparatively low recovery rate and the high cost of
credit administration to the crucial farming population in Nigeria are two of
the most important reasons why conventional (both commercial and
merchant) bank have continued to shy away from agricultural lending.
1.3 Objectives of the Study
The main objective of the study is to examine the impact of development
banks’ operations on the growth of Nigerian economy.
Other objectives are:
1. To ascertain the contribution of total cash crop financing to gross
domestic product in Nigeria.
2. To determine the contribution of total mixed farming financing to
gross domestic product in Nigeria.
3. To identify the effect of total livestock financing to gross domestic
product in Nigeria.
4. To evaluate the contribution of total food crop financing to gross
domestic product in Nigeria.
1.4 Research Hypotheses
For the purpose of this study, the following hypotheses are formulated
in null form:
1. Total cash crop financing has no significant impact on gross domestic
product in Nigeria.
2. Total mixed farming financing has no significant impact on gross
domestic product in Nigeria.
3. Total livestock financing has no significant impact on gross domestic
product in Nigeria.
4. Total food crop financing has no significant impact on gross domestic
product in Nigeria.
1.5 Scope of the Study
The study is designed to cover a period of twelve (12) years i.e. 1997 –
2008 and is restricted to NACRDB as the major player in the economic
development of Nigeria. This period chosen is sufficient to lead this to logical
findings. The variables of the study consist of GDP as dependent variable and
total cash crop financing, total mixed farming financing, total livestock
financing and fixed crop financing constitute the independent variables.
1.6 Significance of the Study
NACRDB was established by an Act of Parliament. As a statutory body,
the Bank is responsible to arrange, provide, supervise and co-ordinate credit for
agricultural purposes in Nigeria. The idea for an agricultural bank is directly a
result of the government’s decision to embark on the massive agricultural
production that ensures food security for her populace. Hence, this study will be
of great importance to the followings:
Government at all level will benefit immensely as the study revealed to the
extent the NACRDB have aided the rural agricultural practice across the
country and to know if the desired objective of establishing the banks has been
In addition, the study will help to evaluate and reposition of Agricultural
Development Bank in rural areas as it brings to the attention of policy makers
and other regulatory bodies for the need for its funding.
Rural agricultural producers will equally find the study interesting as it abrades
them the opportunity available for them to explore as a way of accessing credit
facilities through the bank in order to expand the level of production.
The study will equally be of great importance to other researchers, scholars and
student as it adds to already existing literature and other literary work.



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