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AEC00117 - EFFECT OF AGRICULTURAL COOPERATIVE ON YIELD IMPROVEMENT AND POVERTY ALLEVIATION IN ORIRE LOCAL GOVERNMENT AREA OF OYO STATE


CHAPTER ONE

INTRODUCTION 

1.1       Background of the Study

            Agricultural cooperative is defined as an autonomous association of people united voluntarily to meettheir common economic, social and cultural needs and aspirations through jointly-owned anddemocratically-controlled enterprises (Ilo, 2002).

Agricultural cooperative is crucial for yield improvement and alleviating poverty. Access to institutional credit of wore famers and appropriate quantity and quality of agricultural credit of wore famers and appropriate quantity and quality of agricultural credit are crucial for realizing the full potential of agriculture as a profitable activity. Modern agricultural production systems are capital intensive as, such as large portion of capital used in farming is borrowed (Koeing and Doye, 2000).Agriculture is a big business and it is capital intensive in nature. It is the most important enterprise in the country (Nigeria) employing over 50% of the total labour force and providing over 40% of the country Gross Domestic Product (GDP). But despite these contribution of agriculture to the Nigerian economy. It is still characterized by low farmers, income, low level of capacity to satisfy food and fiber needs of the country, low income from foreign exchange and it manifest the typical symptom of a present agriculture.

            Agricultural financing involves the provision of sound agricultural credit faculties, with effective monitoring of the utilization of the credit given. (Adegeye and Ditton, 1985). Agricultural credit can be divided into the formal and informal credit. While the informal credit sources have well defined guidelines with regards to the interest rates charged. They include Banks and other financial institutions.

            Government demand it wise to establish the Agricultural Credit Guarantee Scheme Fund (ACGSF) in order to serve as an inducements to the conventional banks to increase their, purveyance of credit facilities to the Nigerian farming population. This created a positive effect after its inception but the effect was not to last for too long. The number of banks that are participating in the ACGSF has continued to dwindle, following the deregulation of the national economy by 1997, only your banks (namely: First Bank Plc, Union Band of Africa Plc) participated to the scheme (Isa Tahir 1998).

            The Nigerian Agricultural co-operative and Rural Development Bank (NACRDB)was established in 1973 (Formally the Nigerian Agricultural Co-operative Bank) (NACB) to provide credit facilities in cash and kind of small scale, medium scale and large scale farmers to increase.

            Agricultural productivity (NACRDB Brochure). NACRDB was formed as a result of merger of NACB, people’s banks and family economic advancement programme (FEAP) in October 2000.  Since the independence in 1960, the Agricultural system has been largely unstable. This instability stems from the frequent changes in government as each government invariably emphasized different aspects of agriculture and food production priorities. In consequence over the years the contribution of agriculture to the national economy seemed to have declined.

            The agricultural sector continued to manifest symptoms of a typical peasant farming system in which small scale farmers whose tools and mode of operation were largely traditional and primitive dominated the sector. Other symptoms were low productivity as a result of low mechanization, inadequate and coordinated research and extension services, poor access to credit and low public and private investments in agriculture. The major symptom, which seemed to affect the sector was lack of funds and credit (Oni, 1993).

            In April 1978, there was an establishment of fund, which was the agriculture credit guarantee scheme fund. This was done by the Federal military Government under the agricultural credit guarantee scheme Fund decree (1977) (Decree No 20) and as amended on 13” June 1988. The fund is under the management of the agricultural credit guarantee scheme found heard and the Central Bank of Nigeria is the managing agent for the administration office scheme. The work relating to the scheme at the Head Office of the Central Bank is handled in the development department of the Bank headed by the Director. In order to avoid delay, much of work relating to the operations of the scheme will be done at the Central Bank level in the state in which any transaction under the scheme takes place.

            The decree originally provide a fund for N100 million subscribed by the Federal Military Government (60 percent) and the Central Bank of Nigeria (40 percent). The share and called up capital of the fund has been 3.0 billion in March 2001. The purpose of the fund is to provide guarantee in respect of loans granted by any bank for agricultural purposes with the aim of increasing the level credit to the agricultural section. ‘Loans’ under the decree includes, overdrafts and any credit facility. The Agricultural purposes in respect of which loans can be guaranteed by fund are these connected with become better organization and more. Efficient by forming themselves in cooperative societies registered according to the law.

1.2       Statement of Problem

            The level of input supply into agricultural to a large extent determine the output. This means for agricultural business to forward, there should be adequate supply of input especially monetary aspect. For individual farmer with view asset, asses to formal or institutional services are limited because of cumbersome loan procedure and required collateral. These farmer have access to only informal financial services, which include loan from relative, money lender and loan from cooperative. Out of these three, cooperative is the most reliable, because the other two could lent little with high rate of interest which is turn increase rural indebtedness (ICA, 1995).

            Since the independence is 1960, the Agricultural system has been largely unstable. This instability stems from the frequent changes in government as each government invariably emphasized different aspects of agriculture and food production priorities. In consequence, over the years the contribution of agriculture to the national economy seemed to have declined.

            The agricultural sector continued to manifest symptoms of a typical peasant farming system in which small scale farmers whose tools and mode of operation were largely traditional and primitive dominated the sector. Other symptoms were low productivity as a result of low mechanization, inadequate and coordinated research and extension services, poor access to credit and low public and private investments in agriculture. The major symptom, which seemed to affect the sector was lack of funds and credit (Oni, 1993).

            In April 1978, there was an establishment of fund, which was the agriculture credit guarantee scheme fund. This was done by the Federal military Government under the agricultural credit guarantee scheme Fund decree (1977) (Decree No 20) and an amended on 13” June 1988. The fund is under the management of the agricultural credit grantee scheme found heard and the Central Bank of Nigeria is the managing agent for the administration office scheme. The work relating to the scheme at the Head Office of the Central Bank is handled in the development department of the Bank headed by the Director. In order to avoid delay, much of work relating to the operations of the scheme will be done at the Central Bank level in the state in which any transaction under the scheme takes place.

            The decree originally provide a fund for N100 million subscribed by the Federal Military Government (60 percent) and the Central of Nigeria (40 percent). The share and called up capital of the fund has been 3.0 billion in March 2001. The purpose of the fund is to provide guarantee in respect of loans granted by any bank for agricultural purposes with the aim of increasing the level credit to the agricultural section. ‘Loans’ under the decree includes, overdrafts and any credit facility. The Agricultural purposes in respect of which loans can be guaranteed by fund are these connected with.       Despite the facts that majority of farmers are basing there hope on cooperative, it has not been totally sufficient in meeting the entire farmer aspiration, there is need for the following research questions to be answered.

1.3       Research Question

  • (i) What are the socio-economic characteristics of agriculture cooperative in the study area?
  • (ii) What are the factors that affecting Agricultural Cooperative against yield improvement?
  • (iii) What are the challenges in accessing credit in agricultural cooperative in the study area?
  • (iv) What are the factors roles of agricultural cooperative  with regards to yield improvement and poverty alleviation in the study area?

1.4       Objectives of Study      

            The main objective of this study is to analyze the effect of cooperative on agricultural yield improvement and poverty reduction in OrireLocal Government Area of Oyo State.The specific objectives of the study are as follows:

  1. Examine the mean socio-economic characteristics of agriculture cooperative in the study area
  2. Determine the factors affecting Agricultural Cooperative against yield improvement
  • Determine the step taking in accessing agricultural credit in the study area
  1. Determine the roles influencing agricultural cooperative on yield improvement and poverty reduction.

1.5       Hypothesis of the study

            There is no significant relationship between agricultural cooperative and yield improvement.

1.6       Justification of the Study

Cooperatives have been regarded as one of the main institutional machineries for empowering the economically weak members of the society. With this official recognition and the determination of government (at all levels) to transform agricultural production and raise the standard of living in the rural areas, many agricultural cooperative societies have been formed all over the country. Despite the efforts of government at such a target, it appear that a significant proportion of rural farmer are either unaware of the existence of such cooperative societies or are lacking in the basic socio-economic characteristic that from the prerequisite for asking such question is further strengthened if the roles played by farmer in agricultural production are considered. It was in an attempt to address such problem that the study was designed.