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The study examined the impact of Commercial Agriculture credit scheme on the performance of beneficiaries in Anambra State, Nigeria. Simple random sampling technique was applied in selection of respondents for the study. The sample was drawn from members of All Farmers Association of Nigeria (AFAN). AFAN has a total of 548 members, out of this member 200 of them have so far benefited from the scheme while 348 are yet to benefit. Thus from 200 beneficiaries, 150 were randomly selected. 150 farmers were also selected from those that have not benefited and this gave a total of 300 farmers for the study. The data were analyzed using descriptive statistics, propensity score matching and probit model. Results of the data analysis showed that the average age of farmers was 47 years, majority (67.2%) were male while 32.8% were females. Majority (66.8%) of the farmers were married. The farmers spent 11 years in school on the average. Average household size was 5 persons while 10 years was their average farming experience. The farmers have average farm size of 525.03 ha. 99.2% of them own bank account and majority of them agreed they needed credit in their farming business. The result further showed that personal saving and cooperatives were their major source of credit. The mean capital base of the farmers was N 1,500,000. 66% of the farmers that accessed the loan engaged in crop production while 30% and 4% of the farmers that accessed the loan engaged in livestock and agro-marketing respectively. The t-cal (2.19) was greater than the t-tab (1.96). This result implies that the Commercial Agriculture Credit Scheme (CACS) has had a significant positive impact on the output of the beneficiaries. For the regression result, increase in the profit of the farmers after accessing the CACS, amount received from CACS, capital base of the farmers , farm size of their farms, years of experience, education level of the farmers and output of the farmers increased farmers ability to repay the loan borrowed. The result of the analysis further shows that the farmers accepted the lack of awareness and access to the scheme due to delays as well as stringent measures by participating banks, collateral requirements and farmers education levels were the major problems encountered by the farmers but agreed weakly to lack of awareness as a problem encountered by farmers in accessing the scheme.



1.1         Background Information

Agriculture contributes immensely to the Nigerian economy in many ways, namely; in the provision of food for the increasing population, supply of adequate raw materials to growing industries, a major source of employment generation, foreign exchange earning; and provision of market for the products of industrial sector (FAO, 2006). Over the years, the inability of this sector to expand and as well contribute meaningfully to the growth of the Nigerian economy may be due to inadequate financing. Also the problem of rapid agricultural development in Nigeria indicates that efforts directed at achieving expanded economic base for farmers were frustrated by scarcity of and restrictive access to loanable fund (Nwankwor, 2013). One of the reasons for the decline in the contribution of agriculture to the economy is formal national credit policy that can assist farmers (CBN, 2010).

Agriculture, as a sector, depends more on credit than any other sector of the economy because of the seasonal variations in the farmer`s returns and a changing trend from subsistence to commercial farming (Mahmood, Khalid & kouser, 2009). This is in view of the fact that credit plays an important role in enhancing agricultural productivity, especially in developing countries (Iqbal, Munir & Abbas, 2003). The unpredictable and risky nature of agricultural production, the importance of agriculture to the national economy, the urge to provide additional incentives to further enhance the demand by lending institutions for appropriate risk aversion measures in agricultural lending provide justification for the establishment of the Commercial Agriculture Credit Scheme.

Consequently provision of appropriate financial policies and enabling institutional finance for commercial agriculture is capable of facilitating agricultural development with a view to


enhancing the contribution of the sector in the generation of employment, income and foreign exchange (Olomola, 1997). Although some specialized development schemes and intervention programmes were initiated and implemented to boost agricultural development in the last decades, (both in the deregulated and regulated era), notably, National Accelerated Food Production Programme (NAFPP), River Basin and Rural Development Authorities, Green Revolution Programme, Agricultural Development Programme (ADP), and credit Guarantee scheme, the performance of the sector is still sub-optimal. Currently, agriculture is still dominated by small holder farmers with low production capacity and more than 90% of agricultural output is accounted for by households with less than two hectares under cropping (Federal Ministry of Agriculture and Natural Resources, 2008). At the current growth rate of the population of 3.0% per annum, the population is expected to double from 140 million to 240 million by 2030, farming can never meet the need for adequate quantities of food, for the teeming population.

Therefore in order to promote Commercial Agriculture in Nigeria, the Federal Ministry of Agriculture and Natural Resource, in collaboration with the Central Bank of Nigeria (CBN) introduced the Commercial Agricultural Credit Scheme (CACS) in 2009. The main aim of the fund is to complement other special initiatives of the Central Bank of Nigeria in providing concessionary funding for agriculture such as the Agricultural Credit Guarantee Scheme (ACGS) which is mostly for small scale farmers, Interest Draw Back Scheme, Agricultural Credit Support Scheme, etc.

The objectives of the scheme are:

a.                  To fast track development of the agricultural sector of the Nigerian economy by providing credit facilities to commercial agricultural enterprises at a single digit interest rate.

b.                  To enhance national food security by increasing food supply and effecting lower agricultural produce and product prices, thereby promoting low food inflation and to reduce


the cost of credit in agricultural production to enable farmers to exploit the potentials of the sector.

c.                   To increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

The key agricultural commodities to be covered under the scheme are cultivation of target crops (rice, cassava, cotton, oil palm, wheat, rubber, sugar cane, jatropha carcus, fruits and vegetable), livestock (dairy, poultry, and piggery), and fisheries. Credit support to the target commodities shall be administered along the entire value chain of production, storage, processing, market and enterprise development. For the purpose of this scheme, a commercial enterprise, according to the CBN (2009), is any farm or agro- based enterprise with agricultural assets (excluding land) of not less than N350 million for an integrated farm with prospects of growing the assets of N500 million within the next three years and N200 million for non-integrated farms/agro-enterprise. This however, does not apply to loans obtained by state governments for on-lending. The Central Bank of Nigeria selects through a competitive process, the banks that will participate in the scheme with adequate considerations for the bank’s capacity, assets, branch network, liquidity, experience in agricultural lending, credit risk exposures, etc. The banks bear the credit risk of the loans.

The Central Bank of Nigeria (CBN) has put the total amount disbursed to beneficiaries under the Commercial Agriculture Credit Scheme (CACS) as at the end of the first quarter 2014 at N228.093 billion. The CACS was established to finance large ticket projects along the agriculture value chain. The scheme is being administered at a single digit rate of nine per cent to beneficiaries for a period of seven years. State governments, including the FCT can access a maximum of N1 billion each for on lending to farmers’ cooperatives or other areas of agricultural intervention.


A breakdown of the amount showed that it comprised N199.831 billion released from the CACS receivable account for 273 projects and the sum of N28.262 billion released from repayment account. It also showed that 30 state governments and the Federal Capital Territory accessed the sum of N39 billion from CACS fund from inception to March, 2014, while N1.304 billion was recorded as repayments by four banks in respect of five projects during the period under review, bringing the total fund repaid to N32.928 billion in respect of 68 expired projects. Therefore, the balance of CACS receivable account fund as at the end of March, 2014 was N169 million, while the balance in the CACS repayment account stood at N4.665 billion.

From inception in 2009 to March 2014, 165,510 jobs were created; two out of the 269 private projects are owned and managed by women. Analysis of CACS performance by value chain showed that out of the 274 CACS private sector sponsored projects (from both receivable and Repayment Accounts), production dominated the activities funded with 50.73 percent, followed by processing which accounted for 38.59 percent, while marketing, storage and Input supplies accounted for 5.47 percent, 4.74 percent and 0.36 percent respectively. In terms of the volume of funds released, processing accounted for 50.2 percent, followed by production which accounted for 34.8 percent. Marketing, storage and input supplies accounted for 10.6 percent 4.2 percent and 0.3 percent respectively.

1.2       Statement of the Problem

Lack of access to adequate formal production credit in Nigeria has continued to impair the harnessing of the economic potential of the productive sector, particularly the agricultural sector and hence its contribution to growth and development. One of the main challenges facing the country today is the need to devise appropriate mechanism for enhanced flow of credit and indeed, other financial services to empower the agricultural sector of the economy to better the lives of people and contribute to development of the nation. As part of efforts to further enhance credit


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