1.1. Introduction
According to akinsami o. (1993) page 2” agriculture can be defined as the cultivation of load for the purpose of producing food for main feed for animals and fiber or raw materials for industries; it is also preparation of plant and animals products for preservation and disposal by marketing.
Agriculture is the oldest occupation and the entire world depends mostly on it for good requirements. Food is the essential thing among the human needs. It is believed that without food nobody can exist. This is as a result of the benefit of agriculture. About 70% of the populations are farmers and agriculture contributed about 65% of the gross domestic product (GDP) in the 1960s proving the country with foreign exchange for the financing of capital projects.
Series of polices and financial institution have been set up by government in Nigeria to enhance the flow of finance to agriculture investment. The policies include concessionary interest rate on loans to agriculture and agricultural related investments. Tax holidays rural banking scheme and agricultural financial institutions include Nigeria bank for commerce and industries, Nigeria industrial development bank, directive of food and rural infrastructure among others.
In spite of these financing measures in Nigeria the contribution of agriculture to national development has not been encouraging because of the continuing apathy of financial institutions in giving loans to agricultural ventures. Agriculture which uses to dominate other sectors in terms of its contribution to gross domestic project (GDP) in the sixties is currently the least contributor to Nigeria economic development.
Nigeria economy is an agrarian economy and the nation is blessed in terms of natural resource for farming and other agricultural activities. Because of the nature or method of production, that is, the use of traditional method such as hoes and cutlasses, the productivity in this sector is very low.
Agriculture is said to be back bone of the economy, because it employed 30% of the production, it supply goods and export items for foreign exchange, but with the advent of the mineral particularly oil boom, agriculture lost its prime position in the economy.
In order to solve the problems of agriculture, the government decided to establish agricultural credit institutions like the Nigerian agricultural and co-operative bank limited, Anambra co-operative and financing Agency limited and supervised agricultural credit scheme to finance agriculture in the state.
The government in its committed effort to ensure that development in agricultural sector, require the bank to grant grace periods in these loans, according to central bank of Nigeria ( CBN) credit policy guidelines circular 24, 1990, the grace period on the bank loans to the under listed categories of agriculture are as follows:
- For small- scale peasant farmer growing stapler and seasonal cash crops such as gains, cotton and groundnut, the grace period shall be one year.
- For medium and large scale mechanized farming involving large outlay, the grace period is seven years.
- The loans to farmers investing in new plantation of cash crops with relatively long gestation period such as oil palm, rubber and cocoa plantation, the grace period shall be seven years.
These benefits are given to farmers to enable them improve on agricultural production and also to repay the loan on time.
Despite government policy guidelines which favors agricultures as “preferred sector” the bank have remained adamant in meeting up with the guidelines. So obtaining credit has been one of the most difficult things for farmers over the ears. This is as the result of the year banks have on farmers not being able to repay the loan. The problem facing the development o f local agriculture made farmer at times not able to repay the loan given to them. The problem farmers use to face include land tenure, that is, in − sufficient land for the holder of capital to invest in because land is acquired through inheritance other problems like poor tools, change in whether, draught, pest, flood, erosion are likely problem that makes banks reluctant to finance agriculture.
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