MANAGEMENT OF FARMERS MULTI-PURPOSE CO-OPERATIVE SOCIETIES

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MANAGEMENT OF FARMERS MULTI-PURPOSE CO-OPERATIVE SOCIETIES

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Agriculture accounts for about 20 percent of GDP in the West African sub-region (World Bank, 2005); two thirds of the people derive livelihoods and 40 per cent of exports commodities come from this sector (World Bank, 2000). Despite the importance of the agricultural sector, its performance over the last 30 years has been disappointing: agricultural and food production per capita in West Africa has stagnated in the last ten years (FAO, 2005), yield of grain crops are less than half those of other developing regions in Asia and South America. If Africa is to feed itself, lift its people out of poverty and attain a satisfactory level of sustainable growth, the poor performance of its agricultural sector must be addressed. It is the dominant sector in the rural areas of Nigeria as it provides employment for about 60 percent of the work force (Manyong, et al 2005). For instance, less than 50% of the country’s cultivable agricultural land is under cultivation particularly because smallholder and farmers who use rudimentary production techniques cultivate most of this land with resultant low yields. The smallholder farmers are constrained by many problems including those of poor access to modern inputs and credit, poor infrastructure, inadequate access to markets, land and environmental degradation, and inadequate research and extension services (Oluwatayo, et al 2008). In an effort to overcome some of these issues, donor agencies and governments have reemphasized cooperatives as a strategy to promote collective action to strengthen small holders’ livelihoods by linking them to national and international markets. Cooperatives are defined as autonomous associations of persons who unite voluntarily to meet their common economic and social needs and aspiration through a jointly owned and democratically controlled enterprise (International Cooperative Association, (ICA) 1995). Cooperatives are established by like-minded persons to pursue mutually beneficial economic interest and they provide a unique tool for achieving one or more economic goals in an increasingly competitive global economy. These goals include achieving economy of size, improving bargaining power when dealing with other business, purchasing in bulk to achieve lower prices and obtaining products and services otherwise unavailable. Develtere (1995), described cooperatives as a medium through which services like provision of farm input, farm implements, farm mechanization, agricultural loans, agricultural extension, members education, marketing of members farm produce and other economic activities and services are rendered to members. Cooperatives can be multi-purpose or focused on one area. An example of the latter is farmers’ cooperatives. Grounded in theories of social cohesion and social capital, farmers’ cooperatives provide small holder farmers with economies of scale by facilitating cheaper and more efficient access to inputs, production technologies, market information and markets. Today in an era where many people (especially small-holder farmers) feel powerless to change their lives, cooperatives can serve as a strong, vibrant and viable economic alternative. They are based on the powerful idea that together; a group of people can achieve goals that none of them can achieve alone. It has been considered as a third force, an alternative and countervailing power to both big business and big government (ICA, 1995).

Agricultural cooperatives encourage members to engage in joint cultivation of food and cash crops among others. In view of the low financial capacity and high level of underdevelopment, an individual farmer cannot achieve the desires for large-scale production. It is therefore; in the farmers’ interest that resources are pulled together so as to gain a tremendous collective advantage and thus widening the industrial base of the economy and the management techniques of the farmers (Enikaselu et al, 2005). Group projects are increasingly being relied upon by national governments, bi- and multilaterals and non-governmental organizations (NGOs) as the preferred model for rural development project implementation and poverty alleviation (Grootaert, 1998; Harris, 1997; World Bank, 1997). Thus, despite the low performance of cooperatives, the World Bank (1997) claims they remain the preferred form of organization, and perhaps the only organization with which rural people are familiar (Hussi 1993:12). For instance, farmers’ cooperatives societies are formed to bring in more agricultural inputs and product marketing services to members, increase competition in the agricultural service sector and provide savings and credit to members, among many other functions (Porvali, 1993). Small holder farmers stand a better chance with the formation of agricultural cooperatives. The cooperative as a social organization began early in human development. Cheney (1999) opined that cooperatives were always inspired by the ancient doctrine of human fellowship, by the new spirit of social service and by a firm faith that the time would come when people would work for the whole community, instead of their own gains. Ghosh and Maharjan (2001), modern cooperatives started in 1904 in British India when the cooperative societies act was enacted. The purpose of the cooperatives at inception was to provide cheap credit to the farmers. Cooperatives was introduced into Russia in mid-19th century from Germany (Lohlein and Wehrheim, 2003), but the exact year was not stated. However, Lohlein and Wehrheim (2003) reported that by 1883, there were about 981 cooperatives in Russia. Those in rural areas are called credit cooperatives while those in the urban centres are refer to as credit union. Furthermore, before Rochdale, cooperative pioneer societies had practised most of the Rochdale principles. Gates (1998) found profit sharing and surplus sharing cooperatives between workers and owners, as far back as 1795 and (as might be expected) the genius of the Rochdale cooperative was that they actually developed principles, which they then practiced and popularised. Subsequently, following the guiding principles of cooperative promotions by the ICA, various cooperatives rapidly developed worldwide-both in developed and developing countries – and this made an immense contribution to social and economic development (ICA, 2008). The evolution of cooperatives has shown that the cooperative movement has been influenced by its social and economic conditions. Cooperatives were created by their members to deal with their own difficulties, in relation to aspects of economic change (Fairbain, 2004a). Djik (1997) summarised the historical reasons to set up cooperative firms, which included the need for counterbalancing power; to gain access to industrially produced goods and services; efficiency by economies of scale; risk management; and the improvement of members’ income and the rural economy.

Illiopulous and Cook (2004) over-viewed the historical development of farmers’ cooperatives in America and divided them into two main types which included ‘traditional’ cooperatives and ‘new generation’ cooperatives. Traditional cooperatives often refer to producer-owned, controlled with open membership, and risk capital generated primarily by means of retained earnings from member patronage and illiquid equity ownership rights. New generation cooperatives (NGCs) often adopt “a property rights structure that enables them to partially ameliorate the aforementioned constraints” (lliopoulous & Cook, 2004). Cook and Burress (2009) further research also proposed a dynamic life cycle framework to show the evolution of agricultural cooperatives. This life cycle framework includes five phases of economic justification: organisational design; growth; glory and heterogeneity; recognition and introspection; and choice (Cook & Burress, 2009). The early cooperative societies in Nigeria were established to facilitate cocoa farming which led to the establishment of the Cooperative Registrar of the Colonial Government in 1935. Later, these cooperative societies began providing financial intermediation to members (World Bank, 2000). Eventually, multi-purpose cooperative societies were designed to simultaneously solve several problems facing members, such as input supply, farming and marketing of farm produce. Consequently, one could arguably state that the need to reduce shortage of loans to the low-income farmers among the members thus promoting agricultural development brought about cooperative societies in Nigeria (Oluyombo, 2010). The operation of cooperative within and outside Africa varies from one nation to another. In some countries, there are rules and regulations guiding the operation of cooperatives which they are expected to comply with. The regulation may require the cooperative to be under the direct control of the central bank of such nation or a separate agency may be created to monitor and control the affairs of cooperative depending on what the country deems acceptable to do (Henry and Schimmel, 2011). The survival of cooperative societies in any country depends largely on the overall political and economic environment of such nation because cooperatives exist within the wider economy of the particular country where it operates (Calkins and Ngo, 2005). The practice of cooperative has grown over the years across the globe either as formal or informal institutions. The regulation of farmers’ cooperatives is a function of the roles they are expected to perform in such economy vis-a-vis the level of economic development and poverty in such a nation (Oluyombo, 2010). Cooperatives with track records of prudent management and cohesive membership stand to play a major role in agricultural and rural development in Nigeria. International organizations such as the United Nations (UN), the World Bank and the International Labour Organization (ILO) are convinced that agricultural cooperatives can play a vital role in achieving sustainable rural development. UN (2008) noted that cooperatives are by nature concerned with democratic and human values, as well as caring for the environment. Successive governments in Nigeria recognize that cooperative societies are essential for the development of the agricultural sector. This laudable goal was supported by the establishment of the Agricultural Development Programmes (ADPs) and the River Basin and Rural Development Authorities (RBRDAs). Both ADPs and RBRDAs always organize farmers under their programmes into cooperative groups for better co-ordination of the farmer’s activities. The cooperatives approach to group action has been effectively utilised by these two programmes. Although, the primary objective of forming group farming cooperatives in ADPs and RBRDAs is to increase agricultural outputs, it has been possible to get them involved in marketing of their produce as well. Farmers are the single largest group of users and managers of land, water, and other ecological resources throughout the world. Most small holder farmers regardless of gender require services and information obtainable through membership of agricultural cooperative. Such information includes appropriate technology and sound technical advice not only to increase their agricultural productivity and incomes but also to make farming and rural life richer and more sustainable.

1.2 Statement of the Problem

Small-holder farmers remain the bedrock of agricultural production especially in the developing countries including Nigeria. It accounted for over 90% of all agricultural output in Nigeria (World Fact Book, 2011). The farmers are burdened with high cost of farm inputs, inefficient farming techniques, inadequate infrastructure, poor producers’ prices and heavy constraints in obtaining credits and insurance. Benson (2004) remarked that the situation is further compounded by the general economic downturn and governments drive to remove all subsidies on inputs such as fertilizers, vaccines and foundation stock. Consequently, the cooperative option comes into focus as a viable way to effectively mobilize farmers to form groups and pool resources so as to become more effective in agricultural production. In addition to the values and principles of cooperatives, Veerakumaran (2005) explained that cooperatives serve as fundamental tool for achieving food security at household level. Cooperatives are the best institutional intervention for attaining food security in any country. The developed nations like United States of America, Canada, Australia, almost all European countries and Socialist country like China have attained food self-sufficiency through cooperatives (Chambo, 2009).

Gertler (2001), using the probit model studied the potential impact cooperatives have in sustaining regional economies in Canada. The results show that cooperatives are practical vehicles for cooperation, collective action and they build and reinforce community, stabilize regional economies and provide a favourable climate for further investment. Cooperatives reduce inequality and promote equitable sharing of the cost and benefits of development. Cooperatives can promote economic democracy and the empowerment of marginalized groups- a hallmark of sustainable development and a precondition for shared responsibility.

Adefila (2012) examined the factors influencing the performance of farmers’ cooperatives organization in Gurara Area of Niger state, Nigeria using multiple regression. The results from the regression analysis revealed that famers’ cooperative organizations are variously involved in agricultural development and that factors’ influencing their role performance include annual income, experience in farming, leadership training and membership size. The author concluded that cooperatives in whatever form are seriously viewed as catalyst in the process of rural socio-economic development and the law should empower cooperatives to perform certain functions, such as strengthening their bargaining power as effective agents of socio-economic rural transformation.

Ojiako and Ogbukwa (2012) examined loan repayment capacity of small – holder cooperative farmers in Yewa North Area of Ogun State, Nigeria using regression technique. The results show that farm credits played vital roles in the socio-economic transformation of the rural economies. However, loan acquisition and repayment were characterized by numerous challenges including high levels of default among beneficiaries. The study concludes that promoting smallholder cooperative farmers’ loan repayment capacity would require conscious use of policies directed at increasing loan size and farmers’ farm holdings and/or reducing household size. Similarly, Ofuoku and Urang (2009) assessed the effects of cohesion of farmers’ cooperatives societies on loan repayment among members in Delta State, Nigeria using Spearman’s rank order correlation analysis. The study observed that there was almost perfect positive relationship between rates of loan repayment perception and cohesion. Consequently, they recommended that extension agents should take advantage of the effect of cohesion on loan repayment to promote cohesion in upcoming cooperative societies. In evaluating agricultural credit utilization by cooperative farmers in Benue State, Nigeria, Okwoche et al (2012), observed a significant difference between the agricultural output and income of farmers’ before and after the utilization of loan acquired. The t-test analysis shows that farmers joined the farmers’ cooperatives societies mainly to access credit. The study recommended that the farmers should be adequately motivated with needed credit facilities as this will further enhance agricultural production. However, considering various studies (Gertler, 2001; Veerakumaran, 2005; Ofuoku and Urang, 2011; Adefila, 2012; Ojiako and Ogbukwa, 2012; and Okwoche, 2012), this research will seek to assess the extent to which cooperative membership has transited farmers from subsistence to mechanized agriculture.

1.3 Objectives of the Study

The main objective of this study is to determine the management of farmers multi-purpose co-operatives. Specific objectives include;

i. To examine the socio-economic status of the farmers’ cooperatives in the study area.

ii. To identify the reasons for joining farmers’ cooperatives.

iii. To assess the benefits members, derive from their cooperatives.

1.4 Research Questions

The study attempts to address the following research questions:

i. What is the current social and economic status of farmers’ cooperatives in the area?

ii. What are the reasons for joining famers’ cooperatives in the area?

iii. What is the impact of farmers’ cooperatives on agricultural development?

iv. Are there constraints to agricultural productivity among cooperatives in the area?

1.5 Research Hypotheses

Hypothesis I

H0: There is no significant impact of socio-economic status of the farmers’ cooperatives in the study area.

Hi: There is a significant impact of socio-economic status of the farmers’ cooperatives in the study area.

Hypothesis II

H0: There is no significant impact of joining farmers’ cooperatives.

Hi: There is a significant impact of joining farmers’ cooperatives.

Hypothesis III

H0: There is no significant impact of the benefits members derive from their cooperatives.

Hi: There is a significant impact of the benefits members derive from their cooperatives.

1.6 Significance of the Study

In recognition of the worsening food situation in Nigeria, successive governments have instituted different policies, programmes and projects directly or indirectly connected with agricultural production. These programmes include, the National Accelerated Food Production Programme (NAFPP of 1973), the Nigerian Agricultural and Cooperative Bank (NACB in 1973) transformed to Nigerian Agricultural and Rural Development Bank (NACRDB) in the year 2000 to reflect the rural nature of cooperative activities in Nigeria (FGN Budget, 2000), the Agricultural Credit Guarantee scheme Fund (ACGSF of 1976), the Agricultural Development Projects (ADPs in 1975), Operation Feed the Nation in 1976), the River Basin and Rural Development Authority (RBDA in 1976), the Green Revolution in 1979 and very recently Presidential initiatives on food production, National Fadama programmes among others. Despite these programmes, policies and schemes instituted by the government to improve agricultural development, the sector remains backward. Moreover, as governments around the world cut services and withdraw from regulating markets, there is the need to continuously evaluate strategy that involves the re-organization of rural producers into viable cooperatives (ICA, 2007). Cooperatives constitute the most appropriate institutional mechanism for reaching the millions of scattered peasant producers in the rural areas for ensuring their access to suitable markets and credit sources; for introducing new technologies; skills and development-oriented attitudes; for protecting these peasant farmers from exploitation of the middlemen and money lenders and for ensuring effective participation by the peasants in the development process (Njoku, 1998). In other words, cooperatives are considered the most effective instruments for mobilizing the peasant farmers for rural development and for ensuring that they benefit substantially from the development process. This study concentrates on variables of agricultural productivity that makes for agricultural development. This helps to trace the role of cooperatives to ownership of farm assets, enterprise assets, enterprise profitability and increase in farm income to determine their contribution to agricultural development. This study seeks to contribute to the emerging body of knowledge on how best to make rural farmers’ cooperatives to be more productive. It will deepen the understanding of the values and principles of cooperatives, incorporating them into competitive strategies, relying on cooperation, trust, loyalty as coordinating forces of economic activities and as sources of competitive difference in agricultural system. The underlying argument of the study is that cooperatives, based upon some principles, represent a unique third way of social organization that enhances technology development and extension, market information and organization, and government policy. It is particularly useful in cases of simultaneous market and government failure to assure adequate credit, input delivery, technology training, output delivery and social development in poor areas of Africa (Brayerman, et al 1991). The findings of this study will help to suggest to government and non-governmental agencies how social institutions like farmers’ cooperatives could overcome the problem of low agricultural productivity and betterment of living conditions.

1.7 Scope of the Study

The content scope of the study focuses on the influence farmers’ cooperatives have in gradual but sustained substitution of local implements with improved or modern ones and local species with improved ones. That is gradual transformation from subsistence farming culture to commercial farming. The choice of the study area is centred on the fact that farmers’ cooperatives are better and efficiently organized in those areas. In addition, the study area is dominated by poor peasant farmers who come together with the common goal of influencing the value-chain with respect to agricultural production, distribution, transfer and marketing. This study also covers cooperatives that had existed not later than five years.

1.8 Limitations of the study

The demanding schedule of respondents made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaires in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all research under this study but is restricted to the selected respondents used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided. Other limitations include;

Financial constraint: Insufficient fund tends 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 and 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.

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