THE CONTRIBUTION OF BANKING SECTOR TO AGRICULTURAL GROWTH IN NIGERIA A CASE STUDY OF UNION BANK, ENUGU BRANCH

Background of the Study: Nigeria faces serious poverty challenges. Two out of every three Nigerians live below the poverty line of $1 per day in income. Poverty in Nigeria is concentrated in rural areas, which are home to more than 70 percent of the nation’s poor. Development indicators for rural areas lag behind those for urban areas: incomes are lower, infant mortality rates are higher, life expectancy is shorter, illiteracy is more widespread, malnutrition is more prevalent, and greater proportions of people lack access to clean water and improved sanitation services. For the foreseeable future, the welfare of rural populations in Nigeria will be tied to agriculture. Agriculture is the backbone of the rural economy, generating about 35percent of gross domestic product (GDP) and providing by far the largest source of rural employment. Growth in Nigeria’s agricultural sector, while better than the growth achieved in many other African countries, has fallen short of expectations. Value added per capita in agriculture has risen by less than 1 percent per year for the past 20 years, and food production gains have not kept pace with population growth, resulting in rising food imports and declining levels of national food selfsufficiency. Blessed with abundant land and water resources, Nigeria’s agricultural sector has a high potential for growth, but this potential is not being realized. Productivity is low and basically stagnant. Farming systems, which are mostly small in scale, are still predominantly subsistence-based and for the most part depend on the vagaries of the weather. The country’s vast irrigation potential remains largely unexploited. Most farmers produce mainly food crops using traditional extensive cultivation methods, while commercial agriculture based on modern technologies and purchased inputs remains underdeveloped. The capacity of the agricultural research system has eroded in recent years, as has that of the extension service, so, even when improved technologies are available, often they fail to reach farmers. Farmers’ lack of technical knowledge is compounded by deficiencies in input distribution systems, which limit the timely availability of improved seed, fertilizer, crop chemicals, and machinery. Where inputs are available, farmers’ ability to use them is often compromised by a lack of credit, because rural financial institutions are in general poorly developed. Farmers who produce surpluses frequently lack access to reliable markets, and the high cost of transporting produce to distant buying points over bad rural roads reduces their competitiveness. The welfare of rural populations in Nigeria will be tied to agriculture for the foreseeable future, as the vast majority of this population derives its livelihood primarily from agricultural activities. Getting agriculture going in Nigeria will require a coordinated strategy comprising policy reforms, institutional restructuring, and well-targeted strategic investments to upgrade degraded rural infrastructure, boost productivity, and stimulate increased competitiveness (World Bank 2005). Recognizing these challenges, the Federal Government of Nigeria has identified the modernization of the agricultural sector as a major priority. Former President Obasanjo, one of the founding members of the New Economic Partnership for Africa (NEPAD), has repeatedly expressed a commitment to meeting the NEPAD goal of investing at least 10 percent of the national budget in agriculture and related activities. The National Economic Empowerment and Development Strategy (NEEDS) also explicitly recognizes the strategic importance of the agricultural sector and lists a number of special initiatives that the Federal Government intends to pursue in promoting increased food and agricultural production. Current President Yar’Adua also identified food security and agriculture as one of its seven-point agenda. The current government intends to diversify the country’s resource base and also to increase the level of export of primary products with some emphasis on adding value to primary products. While there is interest in modernizing agriculture, there is insufficient knowledge about the growth potential of the agricultural sector in Nigeria. Some still ask if it is appropriate to focus on agriculture and source of growth in Nigeria In this paper we have applied the most recent version of the GTAP framework to estimate the growth potential of agriculture in Nigeria. Recently the 1999 Nigeria Input-Output statistics was included in the GTAP database.1 1 The GTAP framework is fully documented in Chapters 2-5 in T.W. Hertel (ed.), Global Trade Analysis: Modeling and Applications, Cambridge, Cambridge University Press, 1997; and in B.V. Dimaranan and R.A. McDougall, Global Trade, Assistance, and Production: The GTAP 6 Data Base, Center for Global Trade Analysis, Purdue University, 2005. The next section discusses recent findings of the Nigeria Agriculture Public Expenditure Review. Diagnostic of agricultural public expenditures in Nigeria gives a clear assessment of low priority government has given to agriculture over the past several years.  Every nation aspires to develop its urban and rural areas. Policies are formulated to ensure the achievement of the overall development of the nation. For instance, in Nigeria reasonably number live in the rural areas and so the issue of developing the rural people in these areas in question are predominant farmers, who produce the highest percentage of the nations food and yet there is no significant development of the rural areas.

There are no good roads, electricity enough water

supply and other social amenities in recognition of these problems the various national development plans providing for the development of these areas. However, rural development has been given various interpretations by various Nigeria governments. During colonial administration, the attempt in developing rural areas were limited to those that benefits the colonial administration thereby making them up the more attention in building up the transport and communication system to  enhance easier exploitation and movement of natural resources from the rural areas to the cities. The administration neglects the condition of the rural people who produce the bulk of these resources (Agricultural products).

Since independence, efforts have been made to correct this neglect. The various natural development plans formulated recognized that development of both the urban and rural areas will establish a solid base for long-run economic and social development of the country. However, the development of rural areas was interpreted to mean the development of Agriculture. Believe was that since the major occupation of the rural people is believed to be Agriculture, so the Government should develop the Agriculture as the case may be.

Consequently, such crucial problems of rural development such as good means of transportation, good means of communication, availability of vehicles to move rural people and their goods to the urban areas. Banking services were not provided in the rural areas, recognizing the importance of banking services in the rural areas