Effects of Credit Accessibility on Performance of Tomato Market in Osun State, Nigeria

Thesis Overview

<p> <b>1.1 INTRODUCTION&nbsp;</b></p><p>Tomato is a highly nutritious food ingredient used in the preparation of many foods. Tomato is virtually used by every tribe in Nigeria. As an important source of minerals, vitamins and health acids, tomato (Lycopersicon esculentum Mill) is one of the most important vegetable crops of solanaceae grown universally with the production of 124.75 million tonnes (FAO, 2007). Tomatoes are nutritious and low in calories. One mediumsized tomato provides 57% of the Recommended Daily Allotment (RDA) of Vitamin C, 25% RDA of Vitamin A and 8% RDA of Iron yet it has only 35 calories. Tomatoes are available in a wide variety of shapes, sizes and colours. While red tomatoes are the most common, yellow, orange and pink tomatoes are sometimes grown. Tomatoes may be round, slightly flattened or pear-like in shape. Sizes range from the bite size cherry types to the giant beef steak tomatoes. Besides being eaten fresh, the versatile tomato can be used in soaps, salads and sauces (Lerner, 2001). Onion, tomato and chilies are most common and important kitchen items cooked as vegetables, used as condiments and salad. The consumption of tomato and onion has high income elasticity of demand. Thus, there will be more demand for these vegetables with population growth, economic growth, and urbanization (Fateh, 2009). The problems militating against tomato production and marketing were identified to be high cost of fertilizer, pest and disease problems, and inefficient transportation network resulting in spoilage of output and inadequate credit facilities (Afolami and Ayinde, 2002). Marketing is one of the vital aspects of agriculture since agriculture entails the production of goods and services, and production is said not be completed until the commodity produced reaches the final consumer. Hence, there is need for efficient marketing channel and system. Aminu (2009) pointed out that in a typical vegetable marketing, retailers were observed to sell both tomato and onion at the same time in addition to other vegetables like hot pepper, sweet pepper, cabbage, salad and in some cases chilies pepper. Tomato marketing is characterized mainly by the problem of seasonality and perishability amongst others. Market performance is how well process of marketing is carried out and how successful its aims are accomplished. Specifically, market performance is concerned with technological progressiveness, growth orientation of agricultural firms, efficiency of resources use, as well as product improvement and maximum market service at the least possible costs (Adegeye and Dittoh, 1985). Marketing efficiency is a measure of market performance and is defined as the movement of crops and livestock from the producers to consumers at the lowest cost consistent with the provision of the services desired by consumers. Dittoh (1994) opined that in the past the federal, state and local government of Nigeria paid little attention to the marketing of vegetables such as pepper, tomato, onions, garden eggs, okra and leafy vegetables despite the fact that they need spatial marketing facilities. The losses are accentuated by improper packaging and handling. Losses of 40-50 percent occur for many fruits and vegetables in the marketing system because of spoilage from poor handling, inadequate transportation, and lack of cooling facilities. <br></p><p> Agricultural activity is a major contributor to Nigeria’s GDP and small-scale farmers, processors and marketers play dominant roles in this contribution but their productivity, efficiency and growth are hindered by limited access to credit facilities. Credit institutions can be categorized into three groups. The first one is regarded as formal, such as commercial banks, microfinance banks, the Nigeria Agricultural and Cooperative Rural Development Bank (NACRDB), and state government-owned credit institutions. The second is semiformal, such as nongovernmental organizations-microfinance institutions (NGO-MFIs) and cooperative societies. The third is informal, such as money lenders, and rotating savings and credit associations (RoSCAs). Enhancing Financial Innovation and Access EFInA (2008) noted that 23 percent of the adult population in Nigeria has access to formal financial institutions, 24 percent to informal financial services, while 53 percent are financially excluded (Badiru, 2010). The rural financial market in Nigeria covers the formal banks, credit unions, non-governmental institutions, self-help groups and private lenders. They advance credit and render other financial assistance or services (CBN, 1999). Micro-credit is helpful as it creates scope for further investment and helps the poor and lower income group to get funds for their business. Micro-credit or known as micro-lending is defined as an extremely small loan given to impoverished people to help them become self-employed. Micro-credit was given to the poor individuals for income generating activities that will improve the borrower’s living standards.&nbsp;</p><p>The loan characteristics are too small, short-term (a year or less), no collateral required, weekly repayment, poor borrowers and mostly those that are not qualified for a conventional bank loan (Sharrif &amp; Nawai, 2010). For agricultural practice to be meaningful, one of the enabling factors is addressed by availability of adequate credit to finance agricultural production. The agricultural lending market in any country is made up of the participating financial institutions and units that can effectively lend resources to facilitate the production and marketing of farm produce, crops and livestock (Adetiloye, 2012). The lack of bank accounts, collateral, and information regarding the procedure for accessing credits from banks limit rural people’s access to credit from formal institutions. Loan default could limit access to credit and the complex mechanism of commercial banking is least understood by the small-scale farmers, and thus limits their access. The limitations on imperfect and costly information problems encountered in the financial markets, credit rationing policy and banks’ perception of agricultural credit as a highly risky venture; while high interest rate and the short-term nature of loans with fixed repayment periods do not suit annual cropping, and thus constitute a hindrance to credit access. The location of banks in urban centers is also a limiting factor.&nbsp;</p><p>Financial lending Institutions in Nigeria often shy away from giving loans to farming households because of the high cost of administering such loans and the perceived high default rates among farming households (Badiru, 2010). The low level of marketing agricultural products and development in Nigeria had been attributed to many factors. Principal among these factors is the dearth of funds with which to finance marketing activities. In spite of the sustainability of climatic conditions for agriculture in Nigeria, the level of agricultural production and marketing is still very low. Lack of access to credit has plagued marketers for many years. Farmers and marketers need credit to allow investments in their small businesses to increase production and reduce their vulnerability to weather and economic stock. Because they have little access to formal financing institutions, people follow sub-optional risk and consumption strategies and rely on costly informal credit sources (Majolagbe, 2005). In the light of the above, it is very crucial to conduct a study to survey the accessibility of tomato marketers to credit. The general objective is to examine the effects of accessibility to credit on tomato marketers’ performance in Osun State of. Nigeria. The specific objectives of the study are to describe the socioeconomic characteristics of tomato marketers in the study area, identify the sources and characteristics of credit available to the marketers in the study area, investigate the factors affecting access of tomato marketers to credit in the study area, estimate the cost and returns to tomato marketing in the study area and examine the challenges faced by tomato marketers in the study area. Two hypotheses were tested. The first one estimated relationship between selected socio-economic characteristics of respondents and access to credit, while the second estimated relationship between socio-economic characteristics and marketing efficiency of respondents.&nbsp;<br></p>