ABSTRACT
This
research work is an empirical effort attempted to re-evaluate the impact of
monetary policy on agricultural output with annual secondary data from 1980 to
2015 sourced from Central Bank of Nigeria Statistical Bulletin. The ordinary
least square techniques was employed for its estimation. The result shows that
the independent variables interest rate, cash reserve ratio and deposit money
bank credit to agriculture have
significant impact on the Agricultural sector in Nigeria which means
that monetary policy instruments is relevant to agricultural. From the study
the government is advised to seek a proper role for monetary policy in
promoting strong and sustainable growth in a stable macroeconomic environment
in Nigeria through monetary authority also the government should advocate for a
moderate interest rate which is needed for a sustainable economic growth and
development.
CHAPTER ONE
INTRODUCTION
1.1
Background of the Study
Monetary policy includes
a number of policies by which a country controls its money stock so as to
achieve macroeconomic goals. Monetary policy refers to the combination of
measures designed to regulate the value, supply and cost of money in an
economy. It can be described as the art of controlling the direction and
movement of credit facilities in pursuance of stable price and economy growth
in an economy (CBN, 1992). Monetary policy in the Nigerian context refers to
the actions of the Central Bank of Nigeria to regulate the money supply which
could be through discretional monetary policy instruments such as the open
market operation (OMO), discount rate, reserve requirement, moral suasion,
direct control of banking system credit, and direct regulation of interest rate
(Iyoha, 2002). Agricultural financing also plays a fundamental role in
determining access to the needed inputs that facilitates farming and other
extensive agricultural practices which ultimately transforms into increased
output while increased agricultural output establishes a forward linkage in
terms of development to other sectors as well as higher income and better
quality of life for the rural poor, (Hazell, 2005).
There exist relationship between monetary policy and
other macro-economic variable, the objectives of monetary policy include price
stability, full employment and economic growth, targets of monetary policy
refer to the variables such as supply of money or bank credit, interest rates
which are sought to be changed through the monetary policy instruments such as
open market operation and selective credit control etc, so as to attain the
laid out objectives (Ahuja, 2013).
Monetary policy thus becomes an indispensable and
inevitable variable in any economy that it cuts across every sector, agricultural
sector inclusive. The agricultural sector is seen as one of the major sectors
in the economy and a key determinant of long run economic development in
Nigeria with the sector contributing to development of an economy through production of goods, foreign
exchange and exports. Prior to oil discovery in Nigeria, agriculture was the
mainstay of the nation. However, with oil discovery and the oil boom of the
1970s, the sector suffered neglect with the sector’s contribution to GDP
declining to 35% in 2014 from 65.7% in 1957 leading to food insecurity and
increased level of poverty in the country with the poverty level standing at
33.1% in 2013 (NBS, 2014).
Due to the failing agricultural
sector, the Nigerian government became directly involved in boosting the
agricultural sector, with several large scale agricultural projects and
programmes launched and established while concessionary interest rate structure
was employed with direct cheap credit to agricultural sector. Despite these
efforts of government in boosting the performance of the sector, the sector is
still not witnessing significant development.
Monetary policy facilitates the establishment
of agricultural businesses through availability of credit and finance for
start-up, investments, and expansion. The CBN controls the availability of
credit through monetary policy instruments. These instruments affect
agricultural output through agricultural banks and other financial
institutions. Therefore, it is imperative in this study to re-evaluate the
concept of monetary policy and agricultural output.
1.2
Statement Of The Problem
The fundamental problem of any
government is it economic or otherwise its implementation. A number of
government monetary policy instruments have been designed and applied in
Nigeria in the hope of achieving the desired result of stable price level, low
level of unemployment, efficient banking system etc.
The agricultural sector in Nigeria
today has been characterized by low productivity. Recognizing this, the
Nigerian government introduced series of macroeconomic programmes and policies
(both monetary and fiscal policy) aimed at improving the sector performance.
However, the share of agriculture contribution to GDP declined from 42.20% in
2007 to 40% in 2010 and to a more worsening rate of 35% in 2013 (CBN 2013).
Low agricultural output has a
negative effect on the economy as a whole; there is a low production of goods
for food and raw materials for industries. A major challenge facing Nigeria is
the inability to capture the financial services requirements of farmers and
agribusiness owners who constitute about 70 percent of the population. Farmers
need access to capital to purchase land and equipment and to invest in the
development of new products, services, production technologies and marketing
strategies. Yet banks are often reluctant to lend money to farmers for
agricultural enterprises due to the lack of creditability and collateral.
Therefore there is need for a
research in order to effect necessary changes because activities of the
monetary authorities through monetary policy affect the financial institutions
and credit availability to the agricultural sector in no small measure this
will further affect agricultural output positively.
1.3
Research question
1. To what extent has monetary policy
impacted on agricultural output in Nigeria?
2. What is the nature of the
relationship between monetary policy and the agricultural output in Nigeria?
1.4
Objectives of Study
The general objective is to empirical re-evaluate
the impact of monetary policy on agricultural output in Nigeria for the period
of 1980-2015. . Under this general objective, the specific objectives this study
covers are;
1.
To find out if there is a long-run relationship between monetary policy
and agricultural output.
2.To determine the
impact of monetary policy on agricultural output.
1.5 The statement of hypothesis
HAo: monetary policy has no significant
impact on agricultural output.
HA1: monetary policy has significant
impact on agricultural output.
HBo: there is no long-run relationship
between monetary policy and agricultural output.
HB1: there is a long-run relationship
between monetary policy and agricultural output.
1.6 Significance
of Study
This research work is being carried out to empirical
re-evaluate the overall impact of monetary policy on agricultural output. The
findings of this work will be of immense use and benefit to government
Ministries like Ministry of agriculture and Monetary Authorities (Central Bank
of Nigeria), Department and Agencies at federal level in solving some
macro-economic problems, state and local, policy makers and intellectual
researchers who may be willing to improve the work subsequently. Lastly, it
will educate the public on various government policies as related to monetary
and agricultural issues.
1.7 Scope
of Study
This research seeks to re-evaluate
the impact of monetary policy on agricultural output in Nigeria. The study
shall be carried out using secondary time series data, for a span of 36 years
that is from 1980 to 2015 which is sufficient and suitable for conducting a
research, making new findings and relevant recommendations.
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Item Type: Project Material | Attribute: 54 pages | Chapters: 1-5
Format: MS Word | Price: N3,000 | Delivery: Within 30Mins.
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