THE ROLES OF BANKING INDUSTRY IN THE AGRICULTURAL SECTOR OF NIGERIAN ECONOMY

 

 

1.1       Background of the Study

The real sector is where goods and services are produced through the combined utilization of raw materials and other production factors such as labour, land and capital. It therefore forms the main driving force of any economy, and the engine of economic growth and development. The real sector comprises agriculture, industry, building and construction, and services. Agriculture can be further broken into crop production, livestock, forestry and fishing, while industry comprises crude petroleum & mineral gas, solid minerals and manufacturing.

Services are made up of transportation, communication, utilities, real estate & business service, education and health. Specifically, the sector is important for a lot of reasons. First, the sector produces and distributes the tangible goods and services required to satisfy aggregate demand in the economy. Its performance is a gauge or an indirect measure of the standard of living of the people. Second, the performance of the sector can be used to assess the effectiveness of macroeconomic policies. Government policies can only be adjudged successful if they impact positively on the production and distribution of goods and services and therefore raise the welfare of the citizenry. Third, a vibrant real sector, particularly the agricultural and manufacturing activities, create more linkages in the economy than any other sector and thus would reduce the economic pressures on the external sector. Fourth, the relevance of the real sector is also manifested in its capacity building role, as well as in its high employment and income generating potentials. In order for the real sector of the economy to optimize these potentials, however, it has to be supported by an efficient financial system.

There are ample theoretical and empirical evidence that well-developed financial systems play very crucial and indispensable role in promoting long-run economic growth. Basically, the essence of the financial system is to mobilize and channel financial resources via institutions or intermediaries from the surplus economic units to the deficits units. A well developed financial system enhances investment by identifying and funding good business opportunities, mobilizing savings, enabling trading, hedging and diversifying risk, and facilitating the exchange of goods and services. These functions result in a more efficient allocation of resources, rapid accumulation of physical and human capital, as well as foster technological progress, which lead to economic growth. Therefore, an efficient financial system is one of the foundations for building sustained economic growth, which can spur employment generation and economic development.

 

The specific problems to be treated in the study are:

 

-  To find out whether banking have positive effect on agriculture.

 

- To investigate the appropriate loan scheme to us and improve agricultural production.

 

- To examine the reason some farmers were successful.

 

- To examine various and types of loan scheme adopted by some farmers.

 

 

Some of the aims and objectives of the study are as follows:

 

1. TO TRANSFORM AGRO-ALLIED SECTOR: The study is to help in the agro economy of the rural areas through provision of investment finance with establishment of microfinance bank in rural area, farmers have opportunity of investing their money and in turn they have access to loan on a fairly low rate. Therefore leading to investment on a viable project.

 

2 .TO ENCOURAGE BANKING HABIT: Establishment of microfinance bank makes rural dwellers get enlightened on the importance of cultivate a saving (habit) attitude instead of spending money accrued to them on non-profitable activities and show them importance of rural saving scheme and some of the benefits derivable from doing such.