CONTRIBUTION OF BANKING SECTOR TO AGRICULTURAL PRODUCTIVITY IN NIGERIA 1981-2013.

CONTRIBUTION OF BANKING SECTOR TO AGRICULTURAL PRODUCTIVITY IN NIGERIA 1981-2013.

Chapter one

INTRODUCTION

1.1 Background of the Study 

Nigeria, which covers 924,000 square kilometres, is surrounded by the Gulf of Guinea, Cameroon, Benin, Niger and Chad. The geography varies from mangrove swampland on the coast to tropical rain forest and savannah in the north. Nigeria is endowed with abundant natural resources.

Nigeria, with its people and natural resource riches, has the ability to establish a wealthy economy while meeting the population’s basic requirements.

This large resource base, if carefully managed, could support a thriving agriculture sector capable of supplying raw materials to the industrial sector while also providing decent employment for the teeming people.

Nigeria’s vast people and material resource endowments position it to become Africa’s largest economy and a prominent player in the global economy.

Compared to other African and Asian countries, particularly Indonesia, which is similar to Nigeria in many ways, Nigeria’s economic development has been disappointing, and the country has become one of the poorest in the world.

Between the mid-1970s and 2000, oil exports generated over $300 billion, although per capita income was 20 percent lower than in 1975.

Inability to tap much of the enormous people and material resources can jeopardise achieving the Millennium Development Goals by 2015, since a country is endowed with vast land mass, excellent soil, and a decent topography conducive to agriculture.

In fact, when Nigeria gained independence in 1960, the country’s economy was still predominantly agricultural, accounting for approximately 64% of GDP and generating food for domestic use as well as cash commodities such as groundnut, cocoa, rubber, and palm oil for export (Iyoha 2003).

However, with the advent of the oil boom and its attendant free money from rents and royalties paid to the government by the multinational oil companies that dominated the sector in the 1970s

attention shifted from agriculture to the petroleum sector, resulting in the decay and gradual collapse of agricultural sector productivity, as well as the agricultural sector’s inability to maintain an independent output trend. This is because it has been seen that as petroleum sector output increases, agricultural sector productivity decreases.

There is a need to reverse this trend and increase agricultural output and productivity. The banking sector must play a key role in increasing agricultural output. The banking sector, often known as financial intermediaries, provides loans and credits to deficit units.

This sector is required to supply the necessary cash for the agricultural sector to acquire land, mechanised farming implements, raw materials, and so on, resulting in a rise in agricultural productivity.

Financing the agricultural sector is necessary because it has a multiplier effect on a country’s socioeconomic and industrial fabric.

A strong and efficient agricultural sector allows a country to feed its ever-growing population, generate employment, earn foreign exchange, and provide raw materials for industries (Ogen, 2009).

It also has the ability to serve as an industrial and economic springboard, propelling a country’s development, shaping the landscape, and providing environmental benefits. However, the agriculture industry cannot achieve this without the necessary capital.