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1.1 Background to the Study

Saving is of great importance in a developing economy like Nigeria. This is because of the direct bearing it has on the level of economic activity of the nation. Similarly, within the agricultural sector, the degree of progress attained will largely depend upon what the farmers do with the additional incomes generated year to year from their farming activities .This stems from the fact that the growth rate in the farming economy largely depends on the stock of capital built up in a farm organization and the ploughing back of such stocks in form of investment for further improvement of farm organization. If these increments are spent on house hold expenditure, without building up the necessary infrastructure, the future economic development of the nation will be hampered. Adequate integration of savings and investment programmes into development strategies is capable of improving resource allocation, promoting equitable distribution of income, and reducing credit delivery and recovery costs (Adeyemo and Bamire, 2005).

Agriculture in Nigeria is practiced at a subsistence level and is characterized by numerous farmers operating several scattered small-scale and fragmented plots of lands, using traditional methods such as land rotation, bush burning and crude implements (Odoemenem et al., 2013).

According to Olawepo (2010), majority of the rural populace in Nigeria either depend entirely on farming and farming activities for survival and generation of income, or depend on other non–farming activities to supplement their main sources of income. Olawepo (2010) posited that, over 90% of the country‟s of the local food production


comes from the small-scale farmers, about 60% of the population earn living from these small-scale farms which usually of the size of about 0.10-5.99 hectares (Olawepo, 2010). It could then be seen that most farmers have limited resources, a factor that limits their production, investment, savings and income. Agriculture plays an important role in employment and revenues generation as well as in the provision of raw materials for industrial development. However, the nation‟s agricultural potential are far from being fully realized and this has serious implications for food security, and sustainable economic development, the underdevelopment of the agriculture is indeed worrisome, given the fact that the country is naturally agriculturally well endowed.

Nigeria agriculture suffers greatly from low capitalization, it is dominated by millions of small-scale farmer who are predominantly subsistence in nature, and they produce primarily for consumption Ogungbile and Olukosi (1991). Crop sale is usually to generate income to meet other family expenses or purchase other goods that they do not directly produce. Ogungbile and Olukosi (1991) held that, low capitalization of farm sector had also been observed to translate into low income which in turns translates into low savings; low savings translates into low investment which in turns translates into low income or return, thus, forming a vicious cycle of poverty. Small holders in developing countries face the same problem; the ability to accumulate sufficient capital for new and costly investment is rather limited. Thus, outside financial help is requiring inducing more capital investment in the agricultural sector (Barau, 1991).

1.2 Problem Statement


One of the basic problems confronting the development of agricultural sector in Nigeria could be attributed to inadequate savings and investment by the small-scale farmers. Agriculture in Nigeria like in most developing countries is predominated by small farm producers, and several constraints and barriers which appears insurmountable, limit the overall farming activities. Low saving capacity of farm families is one of the predominant factors responsible for stagnation of agricultural sector in Nigeria Despite this problem policy makers have not really drawn up an adequate and comprehensive rural savings scheme that will ginger the farmers to use their capital productively (Odoemenem et a.l, 2013).

Savings is indispensable to economic development by virtue of its relationship with investment (Igben and Akande, 1988). According to Odoemenem et al, (2013), economic theory indicates a one to one correspondence between savings and investment so that the size distribution of savings indicates investment potentials and possibilities. If investment remain localized in accordance to size of savings generated in a specific area, there are likely to be more investment in the areas of much savings than in those of meager savings. Savings according to Igben and Akande (1988), is preferred more in the financial form which makes funds readily available to investors and others needing money to expand their business operations. It has been shown that savers in developing countries, particularly in rural areas, prefer to save their money in terms of physical or tangible assets, such as land, building and livestock. This practice leads to scarcity of monetary savings for investment purposes. Savings as a determinant of economic growth and economic development was emphasized by classical economists.


However, there has been no consensus on factors which naturally affect the proportion of income that is saved. Several variables have been indicated as influencing saving and these include current income, permanent income, wealth, interest rates, the price level, demographic characteristics and a host of other variables (Odoemenem et al., 2013).

This study therefore is designed to provide answers to the following research questions:

i. What are the socio-economic characteristics of the farmers in the study area?

ii. What are the socio-economic factors that influence savings and investment in the study area?

iii. What are the levels of savings and investment in both in farm and off-farm activities in the study area?

iv. What are the constraints associated with savings and investment in the study area?

1.3 Objectives of the Study

The broad objective of this study is to determine the saving and investment behaviour of small-scale farmers in Kauru and Lere Local Government Areas of Kaduna State. However, the specific objectives are to:

i. describe the socio-economic characteristics of the small-scale farmers,

ii. determine the socio-economic factors that influence savings and investment in the study area,

iii. Evaluate the level of savings made by the small-scale farmers and the level of investment in both farm and off-farm activities in the study area, and

iv. Identify and describe the constraints associated with savings and investment in the study area.


1.4 Justification of the Study

It has been contended that the level of capital investment in the agricultural production process is a clear index of the magnitude of its growth and development (Abalu et al., 1981). This reasoning is based on the fact that as agriculture becomes modernized, more off-farm technologies must be identified, procured and then injected into the production process. The fact is still remaining that, a large number of our populace who engage in agriculture are poor without necessary funds to invest in their agricultural ventures and other activities to increase their income.

According to Odeomenem et al. (2013), the bulk of capital injection by this category of farmers comes from owner‟s equity and informal credit sources. The attractiveness of agricultural investment must be major consideration, if it is going to compete with other industries or sectors for resources (Onucheyo, 1998). The importance of this study is underscored by the lack of empirical work on the savings and investment of farmers in the study area.

1.5 Hypotheses

The null hypotheses (Ho) tested are:

i. There is no significant relationship between savings and investments of small-scale farmers in Kauru and Lere local government Areas of Kaduna State.

ii. There is no significant relationship between the socio-economic characteristics of small-scale farmers and their savings and investments in Kauru and Lere Local Government Areas of Kaduna State.

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