One of the major factors believed to restrict Nigeria’s food production is inadequate agricultural credit to smallholder farmers. Several researchers have found that commercial banks are only marginal suppliers of credit to this class of farmer and have urged the Federal Government to introduce measures to force these banks to lend to smallholder farmers.This paper looks into the problems faced by both the smallholder farmers and the commercial banks with regard to credit flow to the farmers. It was found that the smallholder food farmers had to travel long distances to reach the nearest bank, were generally illiterate—and hence could not deal adequately with the bank officials or fill in the appropriate forms—and were afraid of excessive debt as well as the bank’s ‘stringent’ loan conditions. The commercial banks complained of internal and external constraints, of smallholder farmers’ insincerity in filling in forms, of their failure to repay loans promptly and the high administrative costs per loan granted. Further, the relatively low interest rate for smallholder loans forced on them by the Federal Government has compounded their problems.This paper concludes, among other things, that the commercial banks are ill-equipped to give smallholder loans and that the smallholder food farmers must prove their ability to use agricultural credit through prompt repayment, adoption of improved management and cultural techniques and through less wasteful social ceremonies.
Agricultural Administration 05/1983; 13(1-13):1-9. DOI:10.1016/0309-586X(83)90018-3