CHAPTER 1

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Coronavirus has placed enormous strain on the world's health care systems and socioeconomic circumstances in the modern era. The crisis exposed and risked inefficiencies in countries' social protection systems, food security systems, trade and financing plans, and Nigeria is no exception (Nwankwo 2014). According to development analysts, Nigeria's economy will collapse by up to 2% of GDP, a level equal to the 1990s civil war and the global financial crisis. Since the early stages of the COVID-19 pandemic, and in response to the Minister's National Action Plan to mitigate the risk of COVID affecting Nigeria's farm loan development, UNDP, in collaboration with other UN sister agencies and development partners, has been assisting the Nigerian government with the procurement of critical medical supplies, assessing longer-term recovery needs, and assisting the country in developing an integrated and inclusive response to the pandemic and its impact on people (Nwankwo 2014).

Not only has loan been viewed as a key input in agriculture, but also as a powerful tool for economic transformation and poverty alleviation. The agriculture sector's performance is highly dependent on loan availability and credit facilities for farmers. Agriculture's performance is impacted by loans since they provide funds for input purchases and the adoption of new technology (Nwankwo 2014). Agricultural Loan plays an important role in amplifying the development of agriculture and the rural economy. As Oladeebo & Oladeebo (2014) explained, it functions as a catalyst or elixir that activates the engine of growth, allowing it to mobilize its inherent potentials and progress in the desired or anticipated path. Rahji (2010) also described loan/loanable fund or capital as more than just another resource. The limitations of self-finance, uncertainties in the level of output and time lag between inputs and output are justification for use of farm loan (Kohansal and Mansoori,2014).

To effectively act as a conduit for agricultural and rural development, however, loans should be available to farmers. According to Kohansal and Mansoori (2014), loan access is critical for increasing the quality and quantity of farm products, hence increasing farmer income and reducing rural-urban migration. On their side, benefiting farmers are expected to make the best or most productive use of the borrowed funds and to repay on or before the due date, allowing the loan administrators to extend the facility to further farmers in need. This has not always been the case, since loan administration has been beset by several difficulties, including the system's persistent cases of loan default in many parts of the Nigeria especially in Udu local government Area of Delta state (Osuji 2012)

The coronavirus pandemic wreaked havoc on Nigeria's economy, impacting both agricultural operations and family farm homes (Nwankwo 2014). Farm operations have been disrupted by demand and supply shocks resulting from the epidemic, trade uncertainties, and unfavorable weather events. Pandemic-related supply shocks were mostly caused by supply chain bottlenecks produced by meat processing factory closures or slowdowns. Furthermore, pandemic-related demand shocks were created by decreased demand for food consumed away from home as a result of social isolation and restaurant and school closures, which was only partially countered by food purchased for in-home consumption (Osuji 2012). Additionally, there was a temporary decline in demand for certain Agricultural commodities. For instance, demand for ethanol declined dramatically as a result of less travel, lowering resultant demand for corn (Osuji 2012). The pandemic's disruption of demand and supply channels contributed to the drop in commodity prices. Commodity prices have been impacted negatively in some cases prior to the COVID-19 epidemic, which was compounded by the pandemic. Finally, the majority of family farm households rely on income from outside the farm, and some may have been laid off as a result of the pandemic affecting other areas of the economy (Saleem 2014).

The coronavirus pandemic has had a significant impact on farmer repayment behavior, putting agriculture cooperatives' ability to get loans from financial institutions at risk since their payback capacity has dropped. The coronavirus outbreak is wreaking havoc on agriculture, both now and in the future. This is difficult since the Nigerian government has done nothing to improve farmers' livelihoods. The unanticipated lockdown has resulted in the suspension of agribusiness, affecting farmers' revenue and capacity to repay loans. Finally, this study goal is to examine the effect of covid 19 on loan repayment behavior among farmers.

1.2 STATEMENT OF THE PROBLEM

In Nigeria, the virus's current state of propagation is unknown. According to a news statement issued by the Minister of Health, Community Development, Gender, the Elderly, and Children, there were 509 confirmed instances of Covid-19 and 21 deaths as of May 2020. (URT, 2020). However, additional cases are predicted to occur from time to time due to the disease's contagious nature and residents' lack of seriousness in adhering to hygiene and other preventative measures recommended by health professionals. Nonetheless, containment of the COVID-19 pandemic will be impossible without a knowledge of and sensitivity to the ways in which individuals and their activities are impacted in numerous aspects of daily life. This is particularly true in light of the fact that the pandemic has heightened global tensions, prompting a variety of responses from various governments and actors.

Farm loans have been described as a necessary condition for farmers to enhance agricultural output during a country's agricultural development process, and they are also critical for sustainable agricultural development in any country on the planet. In Nigeria, agricultural loans have long been recognized as a critical component of agricultural growth (Nwankwo, 2014). Despite the critical importance of loans in agricultural output and development, farmers continue to face restrictions on access to farm loans as a result of their repayment behavior, which was exacerbated by the coronavirus pandemic. Awoke (2013), noted that its acquisition and repayment are fraught with a number of problems due to the covid 19 pandemic especially in the small holder farming. Osakwe and Ojo (2011) previously noted that a high default rate has been a persistent issue in the majority of agricultural credit schemes established or subsidized by the Nigerian government. The majority of defaults were caused by the financial crisis and unanticipated lockdowns due to pandemics, loan diversion, and refusal to repay loans. According to Saleem and Janm (2014), numerous academics have discussed the advantages, disadvantages, accessibility, and function of loans in increasing productivity. However, fast loan payback is required for loan eligibility.

Given that the majority of farmers are repaying high-cost loans, the study will examine how covid-19 disruptions and delays impacted loan repayment among cooperative farmers. The government will be able to adopt laws that protect farmers' welfare and avoid the negative implications of their collapse on the economy, agriculture market, security, and society in general. Lenders would be able to objectively assess the core reason of their declining revenue from farmers during pandemic outbreaks and devise futile countermeasures against their clients' disruptors. Finally, this study goal is to highlight the various effect of covid 19 on loan repayment behavior among cooperative farmers in udu local government Area of Delta state.

1.3 AIMS AND OBJECTIVES OF THE STUDY

Generally, this study examines effect of covid 19 on loan repayment behavior among cooperative farmers in udu local government Area of Delta state .The specific objectives of the study are to:

1) To highlight the benefit of loan among farmers

2) To evaluate the effect of covid 19 on loan repayment behavior among farmers’ cooperative farmers in Udu local government Area

3) To determine other factors affecting the farmers’ loan repayment ability

4) To examine the relationship between covid 19 and loan repayment of farmers in Udu local government Area

5) To recommend ways of improving farmers loan repayment ability

1.4 RESEARCH QUESTIONS

1) What is the benefit of loan among farmers?

2) What is the effect of covid 19 on loan repayment behavior among farmers’ cooperative farmers in Udu local government Area?

3) What are other factors influencing the farmers’ loan repayment ability?

4) What is the relationship between covid 19 and loan repayment of farmers in Udu local government Area?

5) What are the ways of improving farmers loan repayment ability?

1.5 RESEARCH HYPOTHESES

HYPOTHESIS 1

H0: There is no significant effect of covid 19 on loan repayment behavior among farmers

H1: There is a significant effect of covid 19 on loan repayment behavior among farmers

HYPOTHESIS 2

H0; There is no significant relationship between covid 19 and loan repayment behavior among farmers

H1:  There is a significant relationship between covid 19 and loan repayment behavior among farmers

1.6 SIGNIFICANCE OF THE STUDY

This study will be of immense importance towards highlighting the effect of covid 19 on loan repayment behavior among cooperative farmers in udu local government area. This study will also benefit government at all levels, policy makers, political leaders, and all related stakeholder in the quest of identifying the effect of covid 19 on loan repayment behavior among cooperative farmers in udu local government area Finally, findings from this study will benefit researchers and scholars who are interested on developing further research on the subject matter as this study will serve as future literature.

1.7 LIMITATIONS OF THE STUDY

FINANCIAL CONSTRAINT: Insufficient funds to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire, interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 SCOPE OF THE STUDY

This study is restricted to identifying the effect of covid 19 on loan repayment behavior among cooperative farmers in udu local government area

1.9 DEFINITIONS OF TERMS

Covid 19: an acute respiratory illness in humans caused by a coronavirus, capable of producing severe symptoms and in some cases death, especially in older people and those with underlying health conditions. It was originally identified in China in 2019 and became pandemic in 2020

Loan: a thing that is borrowed, especially a sum of money that is expected to be paid back with interest.

Loan payment: Repayment is the act of paying back money previously borrowed from a lender.  The principal refers to the original sum of money borrowed in a loan. Interest is the charge for the privilege of borrowing money; a borrower must pay interest for the ability to use the funds released to them through the loan.