1.1 Background to the Study

Agriculture plays a significant role in the growth of Nigeria’s economy especially, as it contributes over 20.89 percent of the nation’s Gross Domestic Product (GDP), offers 66 percent employment to her populace, accounts for 50 percent of the sources of raw materials required by industries for further production, provides 80 percent food for man and market for other industrial goods as well as export earnings (NBS, 2014). Despite these, agricultural production in Nigeria is subsistence, as a result of low utilization of modern inputs by farmers, unavailability and inaccessibility of farm land as well as low mechanized nature of the prevailing agricultural production system. Therefore, to improve the national economy, farmers should be supported to expand their scale of production through financial resource, such as credit (Akpokodje and Olomola, 2000). Okurut, Banga and Mukuga (2004) airmed that associated with mechanization and acquisition of agricultural inputs is the issue of credit without which the envisaged agricultural production and development will be a mirage.

Inadequate access to credit by the smallholder farmers has been identified as one of the contributing factors to poverty. Credit allows farmers to satisfy their cash needs induced by the production cycle which characterizes agricultural production. Credit supply to farmers is widely perceived as an effective strategy for enhancing increase in agricultural productivity and transformation of rural economy (Philip, Ephrain, and Omobowale, 2008). According to Mahmood, Okpara, Rahji and Ogwumike (2009), the introduction of easy access and low interest rate credit is the quickest way for boosting agricultural production. The argument is that the agricultural sector depends more on credit than any other sector of the economy because of the seasonal variation in the farmer’s returns and requirement in transformation of subsistence to commercial farming.The provision of credit as noted by Rosemary (2001) has increasingly been regarded as an important tool for raising the income of the rural populace, mainly by mobilizing resources to more productive uses.

Cowpea is an important major staple food crop in sub-sahara Africa, especially in Nigeria. The seeds are major source of plant protein and vitamins to man and feed for animals. The young leaves and immature pods are eaten as vegetables. The sale of cowpea seeds and fodder earns income to the farmers. In Nigeria, farmers who cut and store cowpea fodder for sale at the peak of dry season have been found to obtain as much as 25% of their annual income by this means. Cowpea also plays an important role in providing nitrogen to the soil when included in crop rotation system (Okunmadewa, 2009).

In Nigeria, the greatest production comes from northern region with about 1.7million tonnes from 4 hectares. This represents over 60 percent of total production. The producing areas are Niger, Kano, Sokoto, Kaduna, Zamfara and Gombe State. Despite that cowpea yield is very low, grain yield range between 100-300kg/ha. This is due to several constraints such as weather, parasitic weeds, insect-pests and diseases (Olamola, 2009). In Niger State, cowpea production is rain fed, usually planted between the months of April-May for early variety and July-August for late variety. It is worth noting that cowpea production is dominated by small scale producers in the state who employ traditional practices and inadequate techniques with resultant negligible outputs and low supply of commodity despite its high demand (Adrew, 2012). Low production efficiency and inaccessibility of credit have been implicated as some of the culprits leading to low outputs.

1.2 Problem Statement

Against the backdrop of increased advocacy and policy efforts geared towards agricultural transformation, the injection of credit facility holds the potential and propensity of breaking the vicious cycle of poverty by enhancing farm incomes and developing market opportunities for producers and processors along the value chain. More often than not, producers over rely on the usage of meager household resources which limit economies of scale and expansionary motives which credit has the propensity to resolve. Poverty level is high among the small scale farmers who keep large family sizes, high level of non-literacy and strict adherence to traditional methods, low crop yields and low levels of income. This makes it difficult for them to meet their financial needs for agricultural production from personal savings. Hence, seeking for other sources of input becomes necessary in order to meet up with their agricultural demand. High cost of risks involved in agriculture as well as high default rate among small scale cowpea farmers has been identified as major constraints as to why commercial banks are unwilling to grant credit facility to small scale farmers (Okpara, 2010). In the same vein, untimely disbursement of agricultural loans, high level of office bureaucratic protocols involved in credit acquisition among others from formal sources have also been implicated, while high interest rates, small size of loan and short time duration for loan repayment had been identified in the case of informal sources of credit.

Non availability of adequate credit needs of small scale agricultural producers can constitute a hindrance towards the attainment of high levels of production. The Federal Government of Nigeria (FGN) had made provision of credit a major thrust of its agricultural policy since the 1970s when it introduced the Agricultural Credit Guarantee Scheme Fund (ACGSF) managed by the Central Bank of Nigeria. Under this scheme, Commercial Banks made available to small scale farmers small loans, which are guaranteed by the Federal Government. Also, banks were mandated to allocate a certain proportion of credit portfolios to agriculture. However, mandatory allocation of credit to agriculture was discontinued. This had far-reaching implications. The FGN as a follow-up cushioning measure recapitalized and re-positioned the Bank of Agriculture (BOA) for better performance (Okunmadewa, 2009).