CHAPTER ONE INTRODUCTION 1.0 Background of the Study Since the discovery of crude oil in Nigeria, farming activities has had its fare share of inconsistencies and relegation. Agriculture is a very important sector of Nigeria’s economy. Its role in economic development cannot be over emphasized; umar 2004 opined that between 1960-1976 alone, agriculture accounted for 40 to 60 percent of the national income and about 50 to 80 percent of the labour force is engaged in agricultural production. Agriculture has some major roles to play in Nigeria’s economic development. These are, to increase the supply of food for domestic consumption and export and to create more jobs. Despite the crucial roles of agriculture in the country’s economy, agriculture has had its fair share of problems which has led to the decline and poor performance in agricultural sector. The cardinal problem is the lack of adequate funding. Agricultural activities in Nigeria have undergone a constant decline this is as a result of more financing by government and other corporate organizations like commercial banks. Efforts have been made by previous governments in Nigeria to resuscitate agriculture activities in Nigeria by making provisions for loans so that agriculturists a vast majority of them being average Nigerians can have access to these loans to improve their production base and employ labour. Agricultural financing in Nigeria has proven to be fairly successful when it comes to getting these funds to the actual rural farmers who are in dare need of this assistance. The effect of adequate agricultural loan on agricultural activities cannot be over emphasized. For agricultural loan system to be effective again a lot of things have to be gotten right. Agricultural loan is considered as a catalyst that activates other factors of production and makes under-used capacities functional for increased production (Ijere, 1998). Thus agricultural loan plays an important role in agricultural and rural development as it enables farmers reap economies of scale, venture into new fields of production, employ new technologies and empower them to provide utilities for a widening market. 1.1 Statement of general problem In a developing country like Nigeria, they’ve not been a defined way of properly financing agricultural activities; this is because most of these farmers are rural dwellers. Another problem is the challenges faced by these farmers in accessing these loans from government since most of them are peasant. A Major problem leading us to this research is to know the percentage of success recorded in assistance of farmers especially those ones in the villages with loans. An equally major problem is to know if increased agricultural loan assistance would actually end unemployment and increase productivity. 1.2. Aims and Objectives of the study The chief objective or aim of this study is to know the level of success recorded in assisting rural farmers to increase productivity. To know the difficulties encountered by those farmers in assessing these loans To know which institutions have been really supportive in assisting the farmers to increase productivity. To know if increased assistance would mean increase in employment and productivity. To know if there is a relationship between agricultural credit or loan and the level of productivity in Nigeria. We are also interested in knowing the nature of this relationship if any. To know if there is equally a relationship between agricultural loan and the employment level in Nigeria. The nature of this relationship ( if any ) is also important to us. 1.3. Significance of the study A major significance of this study is to know the level of success in assisting farmers in the rural areas. Another significance of the study is to know if there is a relationship between increased governments financial assistance and the level of their productivity. The following are the other significances of this study: a) How are loans disbursed? b) What are the causes and effects of default in loan repayment? c) What methods have the bank developed in recovering their loans? d) What are the problems faced by farmers in obtaining this loans and what is their attitude towards repayment? e) Do farmers generally like assessing these loans? f) To know how successful agricultural financing has been in recent years and reasons. g) Does adequate agricultural funding increase employment? h) how does agricultural loans increase farming activities. 1.4. Scope and limitation of the study This study is basically on the effect of agricultural loan on farming activities in Nigeria a case study of ohaofia local government area of Abia state. Another scope of the study is to know how agricultural loan in Nigeria has a relationship to employment and finally to know the level of satisfaction of the end users of this loans. Limitation It is pertinent to mention the limitations of this research work, chief among the limitations is the difficulty in administering the questionnaire in ohaofia local government area, respondents response wasn’t as expected in that they were some information required that weren’t given. Notwithstanding, in the highlighted limitation above, it is hoped that this research will be useful to the Nigerian government, its citizens, farmers and agricultural organizations that may be interested in this work. 1.5. Definition of terms Loan: Money that an organization such as a bank lends and somebody or group of people borrows. Agriculture: The science or practice of farming. 1.6. Research Hypotheses The research hypotheses are as follows: HYPOTHESIS 1 H0: There is no significant relationship between agricultural loan system and employment level in Nigeria H1: There is a significant relationship between agricultural loan system and employment level in Nigeria Level of significance: 0.05 Decision rule: reject H0 if p-value is less than the level of significance. Accept H0 if otherwise. We are also interested in knowing the nature of this relationship, if any. HYPOTHESIS 2 H0: There is no significant relationship between agricultural loan system and agricultural output in Nigeria. H1: There is significant relationship between agricultural loan system and agricultural output in Nigeria. Level of significance: 0.05 Decision rule: reject H0 if p-value is less than the level of significance. Accept H0 if otherwise. We are also interested in knowing the nature of this relationship (if any) HYPOTHESIS 3 H0: There is no significant relationship between agricultural loan system and farming activities in Nigeria. H1: There is significant relationship between agricultural loan system and farming activities in Nigeria. Level of significance: 0.05 Decision rule: reject H0 if p-value is less than the level of significance. Accept H0 if otherwise. We are also interested in knowing the nature of this relationship (if any).