ABSTRACT
This study examined
the effect of agricultural financing on agricultural output in Nigeria.This study is necessitated by
the fact that agricultural practices have not been given full attention they
deserve in Nigeria knowing truly that the country by nature is gifted in
agriculture and its neglect is our bane in terms of food production and revenue
yield. The research relied on secondary data that was used, which concentrated
on banks credit and Government funding of the agricultural sector within the
time frame of 1980 to 2015.In this analysis,annual time series,unit root test, co-integration, CBN statistical bulletin, ordinary least square (OLS)
and
Augmented Dicker-Fuller(ADF) where part of tests used. Based on the results obtained, the estimated results showed that there
was a positive and significant relationship between agricultural credit
guarantee scheme fund and agricultural output in Nigeria.This means
that an increase in agricultural credit guarantee scheme fund could lead to an
increase in agricultural output in Nigeria.Again,there was a positive and significant relationship between
government expenditure on agriculture and agricultural output in Nigeria. This is because an
increase in the rate of interest charged farmers for funds borrowed discouraged
many farmers from borrowing and thus less agricultural investment. At this end, there was the need for the government to continue to guarantee
loans lent to farmers as this would encourage the banks to lend more to farmer.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study.
Agricultural
financing is a financial service
ranging from short, medium and long- term loans, towards production and
livestock insurance which covers the entire agricultural chain. Agriculture which can be defined as the activity of man for the production of
food, clothing and the
optimum use of terrestrial resource.
Agriculture
been
stated as the back bone of Nigerian economy and the most important human
economic activity. However, agriculture is
originated from a Latin word 'Ager' means "field”, soil and 'Cultura'
means "cultivation" which deals with the science, art or practising the
cultivation of the soil, production of crops and raising live stocks and management of its
products.
The importance of agriculture in
increasing the food supply for Nigeria’s teeming populations, providing
adequate raw materials for agro–based industries, employment, capital and
foreign exchange for economic development calls for banks and public sector’s
partnership in agricultural financing for increased output.
Nigeria’s quest for food security and
self sufficiency will remain unrealisable
if the country’s agriculture continues to rely on peasant farmers for
agricultural financing. This is why successive Governments and banks in Nigeria
have adopted various policies, programmes and actions to increase the flow of
financial resources to the agricultural sector, in order to increase that
sector’s output for self sufficiency. Self sufficiency in food production has
engaged the attention of successive governments in Nigeria since the
independence in 1960. This is because no country can claim to be either
economically or politically sovereign if it cannot feed its people. However, judging by the growth rate of the
agricultural products, the sector cannot be said to have performed optimally.
To achieve the objective of this research, the
appropriate agricultural finance policy and strategy must be adopted by the
country and measures to intensify the role of financial institutions in
accelerating the development of Nigeria’s agricultural needs to be given urgent
attention especially in this era of global food crisis. Towards this end, the
paper in section two discusses the literature review. Section three and four
contain the methodology, results and discussion of findings while Section five
is the conclusion and recommendations.
In order for Nigeria to successfully diversity
its economy and avoid the consequence of depending just on petrol, new innovation should be introduced to
boost the agricultural sector as following steps;
Agricultural output in Nigeria can be influenced
amongst other factors by Government policy framework in such areas as Central Bank of Nigeria, Bank Credits Guild Lines and Budgets Allocations; and it’s financing remains the mainstay of the economy since
it is largest sector in term of its share in employment.
As the watchdog of the economy; Nigeria is
placing much emphasis on financing other sectors most especially agricultural
sector since agriculture has the potentials to stimulate economic growth
through provision of raw material, food, jobs and increased financial stability
(Obansa and Maduekwe 2012).
It follows that financing agriculture is one of the most important instrument of
economic policy for Nigerian, In her efforts to stimulate development in all directions, finance is
required by agricultural sector to purchase land, construct building, acquire
machinery and equipment, hire labor, irrigation etc. In certain cases, such
loans are needed to purchase new appropriator technologies. Adegeye and Dittohs (1985) gets it insights as the economic study of
acquisition and use of capital in agriculture to help in its output in Nigeria.
In recent
years, Nigeria has been a land with agriculture, yet the sector still accounts
for a significant proportion of her gross domestic products. Agriculture is the
leading sector in accounting
about
63 and 54 percent to GDP especially in the 50s and 60s respectively (Aigbokhah,
2001). The sectors share in gross domestic product
though fell in the post oil boom period, maintained yet persistent increase.
For instance, between 1970 and 1980 the share of agriculture in real gross
domestic product (RGDP)in Nigeria arranged 29.2%, it was 33.3% between 2001 and
2009;
World (2007) opines that in Nigeria Agriculture is estimated to be largest
contributor to non-oil foreign exchange earnings. This means that it holds the
abundant potential enhancing and sustaining the country's foreign exchange.
(Food and Agricultural Organization (2006) observed that agriculture
contributes immensely to the Nigeria economy in various ways: provision of food
for the increasing population, supply of adequate raw material sector, a major
source of employment, generation of foreign exchange earnings and provision of
a market for the productivity supports. The possible way forward among others,
include the provision of finance. Farmers need access to cheap finance and not
to be forced to borrow at sky-high interest rate from local money lenders: it
can achieve by salting up moral bank - Specializing in the provision of finance
to small farmers. Various measures have been adopted in insurance of these
objectives in recent years. These include conveyance of credit to agricultural
sectors at its interest rate, establishment of agricultural financial institutions and introducing
finding schemes.
Also in
the recent time in country, following the Central Bank of Nigeria C.B.N (2010)
animal growth rate of agriculture dropped from 55.2% in 2002 to 7.4% in 2006,
which however, this research will focus on using variable like commercial bank
loan to agriculture and loan guarantee to agricultural finance have impacted of
agricultural output in Nigeria and its
welfare.
1.2 Statement of the Problems
It is
obvious that no aspect of the economy will do well without proper financial
intermediation from the financial system of the agricultural output. However, the problems that give rise to this
study are lack of loan to agricultural sector by commercial bank in Nigeria
etc. There is high interest rate on agricultural Loan in Nigeria and the
problem of low performance of the agricultural credit guarantee scheme fund
which has lefty aims especially the need to make agricultural sector lucrative
but it has not lift up his bidding, this calls to empirical assessment with a
view to understanding the resultant effects from the huge investment from the
government into this sectors. The vast employment opportunity and the quest
towards diversification of the revenue sources by the federal government and
development agencies have shifted attention towards the informal and
agricultural sectors. For instance, example to sustain this agricultural
production in Nigeria, the World Bank developed a project allied agricultural
development project (ADPS) which was designed to enhance the production of
agricultural productivity in
Nigeria.
1.3 Research Questions
1. What is
the impact of agricultural credit guarantee scheme funds on agricultural output
in Nigeria?
2. What is
the impact of government expenditure on agricultural output in Nigeria?
3. What is
impact of commercial bank credit to agricultural output in Nigeria?
1.4 Research Objectives
The major
objectives of this work are to determine the impact of agricultural financing
on agricultural output in
Nigeria.
1. To
evaluate the impact of agricultural credit guarantee scheme funds on
agricultural output in Nigeria
2. To
ascertain the impact of government expenditure on agricultural output in
Nigeria.
3. To
determine the impact of commercial bank credit to agricultural output in Nigeria.
1.5 Research Hypothesis
The
following hypotheses were formulated after the order of the research objectives
to include:
H0. Agricultural credit guarantee scheme funds have no significant effect
Agricultural output in Nigeria.
1. Government expenditures
have no significant effect on agricultural output Nigeria.
2. Commercial
bank credit has no significant
effect on the agricultural output in Nigeria.
1.6 Significant of the Study
This study
is significant in the sense that it will reveal how agricultural financing can contribute to the
growth of agricultural products. if proper attention is given to agricultural output through the financing system it will guide
policy makers such as government and private sectors in making polices that
will help the agricultural
endeavors. This study will be useful to the student of economics, banking and
Farmer etc. As it will aid in them for research.
1.7 Scopes
of the study
This study is aimed at accessing the impact of
agricultural financing to agricultural output in Nigeria, ranking
from 1980 to 2015, which captures the
extent to which agricultural have improved on agricultural output; through stimulating economic growth. Through our findings it stated that
agricultural output will always fluctuate and is not constant, which will
always increase at a certain year and also decrease at a certain year.
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