Informal Credit and Rice Production in Benue State, Nigeria

Abstract

The study examines the effect of informal credit on rice production in Benue State, Nigeria. Primary data were collected through a structured questionnaire administered to small-scale rice farmers in the study area. A cross-sectional research design was adopted, and a sample size of 403 farmers was determined using the formula proposed by Cochran (1977). Out of the distributed questionnaires, 372 were successfully retrieved and analysed using Ordinary Least Squares (OLS) regression. OLS was employed because the model is linear in parameters and provides efficient and unbiased estimates under the classical regression assumptions, which were also tested in the study. The results show that access to informal credit has a negative and statistically insignificant effect on rice output. This indicates that although farmers access informal credit, it does not translate into a measurable increase in rice production within the study area. Other key variables such as farm size, labour, fertiliser and agrochemicals were found to significantly influence rice output, suggesting that productivity is mainly driven by input use rather than credit access. Although informal credit is not statistically significant, it remains an important financial support channel for farmers. However, its effectiveness appears limited, possibly due to non-productive use of funds or weak financial structure. Therefore, policy should emphasise linking credit systems directly to input supply channels to reduce the risk of cash diversion.