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THE ROLE OF ACCESS TO CREDIT IN COCOA PRODUCTION IN NIGERIA
The economic growth of Nigeria is based on agricultural production. Cocoa production has contributed to the foreign exchange earnings of the country. However, most of the cocoa farmers rarely have access to credit which has made it impossible for them to invest in cocoa business. Several credit programmes initiated by the government to enable farmers to have access to credit had little or no positive effect on cocoa production. The objective of the study is to assess the role of access to credit in cocoa production in Nigeria, a case study of Ondo State. Through a structured survey, data were collected from 138 farmers selected purposively from Odoe Idanre, Ondo and Abojupa districts in Ondo State using questionnaires. Descriptive statistics have been used to analyse the socio-economic characteristics of the respondents. According to results, farmers in the districts examined were mostly old, had a low level of education, with large household size and low income. Further analysis on the sources of credit available to farmers in the study area showed that they mostly have access to the informal source (from large buyers) and shy away from borrowing from formal sources because of lack of collateral, high-interest rates and fear of loan default. However, all the respondents confirmed that there was an increase in the production of cocoa after accessing credit from the large buyers but the credit was insufficient for the purpose for which it was obtained. Results from the binary logistic regression model to determine factors affecting cocoa farmers’ access to formal credit from both marginal effects at means(MEM) and average marginal effects (AME) showed that farmers with high level of education, savings and age between 31- 40 are most likely to have access to credit from formal institutions. The mediation analysis result also showed a positive and significant relationship between credit access and productivity but no mediation effect of savings on access to credit and cocoa production. Based on these results the formal institutions should endeavour to reduce the bureaucracy bottlenecks and minimize the demand for collateral securities involved in access credit from the institutions. In addition, the government should invest in the sector by providing subsidy on the interest rate charged by the banks and also provide a means of educating the illiterate farmers. More youths involvement is needed in the sector, therefore the government should create awareness on the importance of the cocoa to the economy and provide resources for start-ups. The policymakers also have a role to play by increasing and encouraging privatesector-led development in the cocoa sector. With access to formal credit, cocoa farmers have access to factors of production such as seeds, skilled labour, fertilizers to increase their productivity. These study results are useful for formal institutions, policymakers, farmers and the government towards a sustainable cocoa production through access to formal credit in Nigeria.
Keywords: Productivity, credit, informal credit, formal institutions, accessibility.