Empirical Study of the Relationship between Available Forms of Finance and Performance of Intermediate Cocoa Processing Firms in Lagos state-Nigeria

Abstract

Studies have confirmed strong and positive correlation between finance sources and the performance of agricultural sectors. However the shift of the Nigeria Government attention to oil sector after her independence has caused a major setback in the finance of agriculture and agro allied industries. The thrust of this study is to investigate the relationship between available forms of finance and performance of cocoa processing firms in Lagos State, Nigeria. The study used purposive sampling technique to select six (6) out of eleven (11) intermediate cocoa processing firms identified on the registered list of Nigerian Export Promotion Council (NEPC) in south western part of Nigeria. The Pearson correlation analysis conducted indicated that there is strong association (R = 0.916) between the two main variables of cocoa export performance and available forms of finance. From the regression analysis, it was discovered that available forms of finance were able to account for up to 84% changes (R² = 0.840) in cocoa export performance of Nigerian intermediate cocoa firms. While the funds sourced through commercial banks inform of loans have strong effect on the changes in the performance of intermediate cocoa processing firms in Nigeria, retained profits have an effect that can be described as moderate. The contribution of funds sourced from NEXIM banks in a form of loan was less than satisfactory. The study suggested that Policy makers should route their intervention funds/assistance to agricultural sector through commercial banks for effectiveness but that interest rates charged by these commercial banks should be well monitored and controlled.

Keywords: Non – Oil Export; Performance; Cocoa Processing; Intermediate firms; Agro finance; Finance source