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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
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Like many other African countries， Nigeria is primarily agrarian with its abundant land and water resources. Despite the rapid growth of the oil industry over the years， agriculture still accounts for 40% of GDP and provides employment (both formal and informal) for about 60% of Nigerian’s 150 million people. Nigeria’s agriculture remains largely subsistence-based with about 80% of agricultural output coming from rural farmers living on less than a dollar per day， earned from farming less than one hectare (2.47 acres). Nigeria has diverse agro-ecological conditions that can support a variety of farming models to create its own green revolution. However， successive administrations neglected agriculture over the years and failed to diversify the economy away from overdependence on the capital-intensive oil sector. Nigeria was once a large net exporter of agricultural products and the sector was the major foreign exchange earner before the advent of oil in 1970s. Nigeria is currently a huge net importer of agricultural products， with such imports exceeding $3 billion in 2010. The country has the potential to return to its previous position if adequate attention is given to agricultural growth policies， finance and provision of rural infrastructure. The fact of the matter is most of the smallholder farmers lack access to capital to acquire the needed inputs to increase their productivity and incomes and reduce their poverty. Farmers require credit to purchase seeds， fertilizers， herbicides， and buy or rent mechanized equipment and related services. Nigerian agricultural policy recognizes the vital role of agriculture finance in attaining the much desired green revolution. A major focus of the policy is to establish a system of sustainable agricultural financing schemes， programs and institutions that could provide micro and macro credit facilities for the small， medium and largescale producers， processors and marketers. However， public expenditure on agriculture which serves as the bedrock of financing for the sector has consistently fallen short of recommendations. It is therefore not surprising that these policies have failed to achieve the set goals of food self-sufficiency， self reliance， poverty reduction and rural development. Importantly， Nigeria agriculture is abysmally under-financed. At a public forum in early 2011， the Governor of the Central Bank of Nigeria (CBN) was quoted to have said “currently agriculture accounts for 40 percent of the GDP， yet it receives only one percent of total commercial bank loans.” This is significantly below the level of other developing countries， e.g. Kenya and Brazil which reportedly registers 6 percent and 18 percent， respectively. Nigeria’s agricultural development is constrained by the lack of access to credit for the predominantly smallholder farmers. Efforts by successive governments to address the problem have been largely unsuccessful. Commercial banks in the country perceive agricultural finance to be high-risk. The Central Bank of Nigeria is making efforts to de-risk the sector and encourage banks to lend to farmers. This research work tends to asses the impact of bank credit on agricultural development with special reference to First bank Nigeria Plc. The role of the Central bank of Nigeria (CBN) and some other commercial banks will also be examined.
