Full Project – Reasons why cooperative societies fail – case study of Ekwusigo lga of Anambra state

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CHAPTER ONE

INTRODUCTION

The introduction of modern cooperative business into Nigeria dates back to the year 1935 following the acceptance, by the Colonial Administration of Mr. C.F. Strickland’s report on the prospects of cooperatives in Nigeria. After seventy-four years of operation, the cooperative movement in Nigeria can boast of a membership of more than five million persons distributed in more than thirty-six thousand cooperative societies (FMA & RD, 2002). Unfortunately, cooperative businesses in Nigeria are still contending with problems that have hampered their development. One such problem is the lack of access to investment credit.

The government has interviewed several times to inject credit into the cooperative sub-sector of the economy. One intervention was the change in 1976, of the Nigerian Agricultural Bank Ltd to Nigerian Agricultural land Cooperative Bank Ltd so as to give special attention to cooperative activities (CBN Annual Report, 1976; Ukpanya, 1997). Furthermore, in the year 2000, the government renamed the Nigerian Agricultural and Cooperative Bank (NACB) Ltd to become the Nigeria Agricultural Cooperative and Rural Development Bank (NACRDB) Ltd to reflect the rural nature of cooperative activities in Nigeria (FGN Budget, 2000). In the year 2005 the Federal Government domiciled the sum of N50 billion with the NACRDB Ltd to lend to cooperatives and other farmer organizations at concessionary interest rates. A recent study of the patterns of disbursement of the N50 billion intervention fund showed that more than 75% of the fund went to private farmers and other farmers’ organizations that are not cooperative societies (Onyeagocha, 2008).

Some factors have been responsible for the poor access of cooperative societies to the intervention fund domiciled with the NACRDB Ltd. Socio-economic characteristics of cooperative societies have been singled out as the major constraints to cooperative societies’ access to services of agencies established to help them in Nigeria (Ijere, 1977; Okafor, 1979). Such socio-economic characteristics include membership size, the cooperative’s asset base and membership participation. As part of the conclusions from his study of the use of women cooperative societies for transfer of cassava technology Agbo (2000), emphasized that the socio-economic characteristics of cooperatives that hinder cooperatives access to development resources include the sex of cooperative members, the age of the cooperative society, and the distance the cooperative society has to cover to get to the location of the services provider. Botomley (1989) adds to the list of such socio-economic characteristics to include the type of cooperative, the sector of the economy where cooperative intervention is implemented, the levels of functional and cooperative education possessed by cooperative members, as well as the quality of cooperative management available. In his own study, Ambruster (2001) isolated, among others, the system of delivery of the services needed by cooperatives, the process used to determine the sector that needs intervention, and the mode of selection of beneficiaries as the most critical factors affecting cooperatives’ access to development resources.

To provide empirical evidence on what has actually been responsible for the poor access to N50 billion credit mediated by the NACRDB Ltd, this study became necessary. Moreover, since NACRDB Ltd still remained the most important government owned development finance institution through which official financial services were provided to farmers’ cooperative societies, organizers of cooperative societies could also draw lessons from the result of the study to improve upon those socio-economic characteristics that have hindered access to the services of NACRDB Ltd.

1.1 GENERAL OVERVIEW OF THE STUDY

Cooperative has been in existence in Nigeria right from the pre-colonial days. Infact, cooperative started as early as there was communal life. Cooperative were not as sophisticated as as they are not, yet they served useful purpose which characterized communal living of the people. Through cooperative movements officially dated from 1935, after the submission of the strict land report in 1934 on the establishment of cooperative society ordinance in 1935. This period from 1955 was attributed to the period of modern cooperative than the movement became formalized and consolidated.

In addition, the various governments have made different attempts at improving the existing cooperatives and ensuring that they do not fail, especially in their main or major objectives. Some of these encouraging and frantic efforts made by governments include the establishment of federal ministries of employment, labour and productivity and ministry of agriculture respectively, the establishment of three cooperative colleges in the country, formation of agricultural cooperative marketing association among others. All these are aimed at ensuring that cooperative do not fail or assume a backward position in the economic transformation of the country. A lot of cooperative societies at different levels that is apex, secondary and primary have been set up in the country recently. Also government official are usually assigned to monitor and inspect these societies to ensure their compliance with the national standards for cooperative societies and to ensure their viability to the nation. Despite these works cooperative societies tend to record failures in their operation such as low productivity poor membership, low patronage, inability to better the living standards of the people, over depending on government aids and sponsorship, etc.

1.2 STATEMENT OF THE PROBLEMS

The state problem in this is the main objective of this project work, which is to find out why cooperative societies fail in Nigeria developing countries at large. Though it has been suggested earlier in this book that the present state of the economic hardship is telling on this faces of all business organization in the country and the cooperatives forms of business are not on exception. Though is pertinent to note that in time of such economic hardship, cooperative societies and to be the best and soliciting form of socio-economic activities especially for the middle class and of course the poor class or present/citizens.

Given the population of Nigeria, there is evidence of high propensity to consume but cooperatives have not been able to meet the nation demand for essential goods and services. Observations of such a lucrative business form that is yet to make noticeable impact on the country’s income calls for investigations to why-cooperative continue to folk up, fail in operation, escalate in forms of bankruptcies and liquidations from investigation and research carried out in some cooperative institutions and cooperative executive in the process of this project work the following reasons were got as to why cooperative societies fail in the country.

INADEQUATE FINANCE

A chronic shortage of finance, both for the financing of projects and procurement of necessary facilities and for meeting the running expenses of the societies in one of the most widespread and typical characteristic problems of any business enterprise that is self-reliant or that at least claim so. Since most of the cooperative societies (at local level) in developing countries in general are made up of present farmers, labourers, low class workers, traders and rural community dweller operating in a low-income economy, they are unable.

1.3 OBJECTIVE O THE STUDY

The aims and purpose of this study is to concisely describe the cause of failure in cooperative societies especially in our present day economic turbulence. This is an appraisal of cooperative societies from the grassroots to the top, which is aimed at diagnosing the cause of failures of cooperatives, their remedies and solutions. It is not meant to be a mere work of literature, but is aimed at informing and cautioning cooperative officials and other prospective problems of cooperatives are not caused by “what is not being done” but rather “who is not being employed” or elected to handle the hems of aflinre. This study will therefore assist readers to ascertain the root of failures in cooperatives and the way out.

1.4 SCOPE OF THE STUDY

Nevertheless, the study has some limit because materials are not sufficient enough and they are not easily available. As a result of his scarcity and insufficiency of materials, there were not exhaustive, dates and information as regards to the subject matter. Also, the research does not cover a wide range of cooperative societies due to certain financial and bureaucratic constraints.

It is also presumed that whatever problem encounter with the Ekwusigo will also affect the state and even the county as a whole.

1.5 RESEARCH QUESTIONS

What are internal problems of cooperative societies?
What are the external problems of cooperative societies?
What are the risk joining cooperative societies?
How does a cooperative society get their source of fund?
What are the present problems affecting cooperative societies in Anambra State?

1.6 SIGNIFICANT OF THE STUDY

The study is written under five chapters, which opens door to entirely new relation matters. The first chapter deals on cooperative background in Nigeria, this general objectives of this study. Then second chapter attempts to define cooperative society, its principles and types as obtainable in the country. Then it looks into the cause of failure in cooperative societies.

Chapter three concentrates on a case study of a primary society in Enugu State. It treats the dosing of the research and methodology the sources of data and then finally the functions of the cooperative society used in the research. The last chapter, which is chapter four, deals with the summary of causes of failures in cooperatives, the general findings and the suggested solution to the problems. The chapter five deals with the conclusion of the work done.

1.7 LIMITATIONS OF THE STUDY

The main limitation of this study is the unwillingness of some people to recover the questionnaire and also enabling of some people to comprehended in the oral interview. A result of this only one primary society was used thereby making certain data and information confirmed to most societies. But it is assumed that this problems highlighted in this book in however experienced by almost every cooperative society in Nigeria as so are very authentic and valid. Though most of the information in this book are not only based on the research findings but from books and journals available in libraries and during seminars on cooperative matters.

1.8 DEFINITION OF TERMS

In a broad sense, the term “cooperative” is derived from the verb “to cooperate” and from its noun “cooperation” the term cooperation is a generic term used to cover the wide area of activities in which two or more people or institution join together either formally or informally on present or temporal basis, to achieve some anus (which are usually economic in nature).

The term “cooperative” has generated some debates and arguments among cooperative professional as to its accurate definition. This multiplicity of definition is attributed to the fact that cooperation has a flexible nature. However according to the international labour conference of 1966, a cooperative society is an association of persons who have voluntary joined together to achieve a common and through the formation of a democratically controlled organization, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in which members actively participate. Also, according to Prof. Eberhard Deielfer of this the University of Marburg, West Germany, he defined cooperative as a voluntary and democratic association of persons, with variable membership and variable capital who have pooled themselves and their resources together on mutual seeks to solve the socio-economic problems of their members by directly providing goods/services to them in their capacity as other the owner/customer or owner employers of the cooperative enterprise.

According to Prof. Paul Lambert definition of cooperative societies, he define cooperative society as an enterprise formed and directed by an association of user applying within itself this rules democracy and directly intended to serve both its own members and the community as a whole.

However, a cooperative society should be open:

A self organization based on mutuality.
A socio-economic entity.
An organization whose members are seen as owner worker/users or as owner-employers.
An organization which basic aim is the direct promotion of this members economic interest, a service oriented business organization rather than profit oriented.

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