CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
Agriculture is still regarded as one of the main stay of Nigerian economy, before and after independence with the production of food for vast teaming population. It contributes immensely to the production of raw materials which has translated into increased foreign exchange earnings, better social life and higher standard of living of people. For instance it has constituted about 70% of the country’s gross domestic product (GDP), provides increased food surplus (raw material) to the rapidly expansion of Nigerian industrial sector and account for the bulk of the non-oil export (Eke 1997). Therefore wise nations all over the globe make agriculture a priority by developing and exploiting this sector for the survival of the nation. This is done by formulating policies by the government of different countries.
The term agriculture is derived from the Latin word “Ager” (field) and “cultura” (cultivation). This means field cultivation. This is not a complete definition of agriculture since agriculture has to do with animal production. Therefore agriculture can be defined as the art and science of cultivating the soil, producing livestock, preparing livestock feed, processing crops and livestock products for man and the process of selling excess crops and livestock. Agriculture may also mean just the production of crops, rearing of animals and general management of the soil. Agriculture also involves the science of preparing soil for the production of crops and rearing of animals for human use. It also embraces various preparations and processing of plant and animal products as well as the disposals of these produce through marketing (Cheghu 2004) observed that the sector generates employment for the teeming population over the years, the agricultural production has witnessed a drastic decline in productivity. This could be due to low impact on loan acquisition, lack of credit availability, lack of adoption of new technology and land fragmentation among other constraints to agricultural development (Nyong, 1993).
Recently, due to current decline in the world oil market price and economic down turn which has also affected the oil sector in Nigeria; there is a realization of the importance of agricultural sector to get its former pride of place. Therefore, there is need for efficient credit facilities and a great impact of the acquisition of loan for increased productivity in the sector, since agriculture development require amongst other things increased used in modern input. Such as fertilizer, tractors, increased seeds (Ajakaiye, 1990). General impression about the agricultural sector opined that, local farmers as small scale operation characterized by low productivity and low income due to their capital formation. The inability to purchase the modern requisites needs to be supplied with loans from banks and other credit facilities which will be used to increase production. These facts have often led the Nigerian government to promote and support the supply of credits (loans) to farmers and make loan acquisition easy enough for farmers hence, enhance or increase agricultural productivity at a large scale.
In the past years, the Nigerian government has lent financial intermediation through the establishment of lending agencies in addition to formal credit sources such as banks. This was done in the hope that such programs would have led to an effective supply of financial services in advances of demand for them from the sector. In spite of all these intermediations by the government, the impact of loan acquisition is still low and the demand for credit is still higher than the supply (Ago 2002).