Loan Type, Credit Capacity, and Profitability Outcomes in Equipment-Financed Agro-Processing Firms in Southwest Nigeria.
Agro-processing firms maintain a strategic position in agricultural industalisation in Nigeria by adding value to raw agricultural products, creating jobs and reducing post-harvest losses. These businesses are dependent on the type and nature of modern processing equipment available. Agro-processing firms in Southwest Nigeria are mostly hampered by lack of access to adequate funds to purchase processing equipment; and hence constrain productivity, product quality and profitability, and thus preventing these firms to be competitive in the domestic and international markets. The impact of equipment financing on agro-processing firms in Southwest Nigeria was explored in this study. The survey research design was employed and the sample of 384 agro-processing firms was drawn from 6 states in the Southwestern Nigeria. Structured questionnaires were used to collect the data and the data were analysed using descriptive statistics and Partial Least Squares Structural Equation Modelling (PLS-SEM). The results showed that equipment financing has a strong significant aggregate influence on agro-processing firm profitability (R=0.354, p<0.001). Loan type ( =0.266, t=4.356, p<0.001) and credit capacity ( =0.288, t=8.439, p<0.001) has a significantly strong positive influence on profitability, interest rate ( =0.099, t=2.007, p=0.045) and loan tenure ( =0.124, t=2.263, p=0.024) have weak positive influences on profitability. This study recommended that the CBN and BOI should establish policies to support a well expanded scheme on equipment leasing as well as reinforce credit facilitation to these firms.
Keywords: Agricultural industrialisation, Agro-processing, Credit Capacity, Loan types.
