1.1 BACKGROUND OF THE STUDY
Agriculture constitutes a significant sector of Nigeria’s economy. The sector is significant in terms of employment of labour, contribution to Gross Domestic Product (GDP) and until early 1970, agricultural exports were the main sources of foreign exchange earnings (Amaza, 2002). During the 1960’s the growth of the Nigerian economy was derived mainly from the agricultural sector. However, in more recent years, there has been a marked deterioration in the performance of Nigeria’s agriculture. The contribution of agriculture to the GDP which stood at an average of 56% in 1960 – 1964 declined to 47% in 1965, 1969 and more rapidly to 32% in 1996 – 1998 (Amaza, 2002).
Smallholder agriculture is the dominant occupation of rural Nigerians. The rural dwellers earn low income from their economic activities and as a result they save less. Low savings bring about low investment which leads to low capital formation (Umebali, 2004). Based on the foregoing, the rural dwellers are poor (Umebali, 2004). Evidence in Nigeria reveals that the number of those in poverty is on the increase. The number of those in poverty increased from 27% in 1980 to 46% in 1985. It declined slightly to 42% in 1992. In 1999, it was estimated that more than 70% of Nigerians lived in poverty (Ogwumike, 2005). Therefore, reducing rural poverty has been on the agenda of international development agencies as well as governmental and non-governmental organizations for a long time.
It should however, be noted that poverty is largely caused by inadequate access to productive resources such as land for the majority of producers and low productivity of agriculture resulting in low levels of income. The formation of cooperative societies has since been recognized as one possible way of promoting access to production resources and markets in rural areas (Hoyt, 1989; Ortmann and King, 2007).