THE IMPACT OF AGRICULTURAL CREDIT ON AGRICULTURAL PRODUCTIVITY IN NIGERIA

ABSTRACT

In most agrarian economies like the type that exists in Nigeria, agricultural production provides the needed fulcrum upon which a sustainable development would blossom. Being the main source of food for most of the population, till date, agricultural production remains the mainstay of the Nigerian economy. It provides the means of livelihood for most of the population, a major source of raw materials for the agro-allied industries and a potent source of the much needed foreign exchange.  However, inadequate credit (among other factors) to the agricultural sector led to the downward trend observed in agricultural productivity in Nigeria. To avert such trend, the Federal Government of Nigeria established the Agricultural Credit Guarantee Scheme Fund (ACGSF) in 1977 to assist farmers have access to credit as to improve agricultural productivity. The setting up of the ACGSF was predicated on the unwillingness of commercial banks to give loans to smallholder farmers for reasons of high default rate on loan repayment and, therefore high risk, of repayment. In the course of the fund’s operations, a number of problems have been identified as militating against its smooth performance; some of which affected the amount of credit granted to the various agricultural subsectors. Therefore, this study sought to examine (i) the impact of Agricultural Credit Guarantee Scheme Fund on crop output in Nigeria; (ii) the impact of Agricultural Credit Guarantee Scheme Fund on livestock output in Nigeria; (iii) the impact of Agricultural Credit Guarantee Scheme Fund on fisheries output in Nigeria; and (iv) the impact of Agricultural Credit Guarantee Scheme Fund total fund granted on Agricultural output and productivity in Nigeria. The ex-post facto research design was adopted to enable the researcher make use of secondary data and determine cause-effect relationship during the period, 1978-2008. The Ordinary Least Square (OLS) estimation technique was adopted, using SPSS statistical software to test the hypotheses, where Total Agricultural Credit Guarantee Scheme Fund (TACGSF), Agricultural Credit Guarantee Scheme Fund to crop production (ACGSFCP), Agricultural Credit Guarantee Scheme Fund to livestock (ACGSFLSP) and Agricultural Credit Guarantee Scheme Fund to fisheries (ACGSFP) were used as the independent variables while Agricultural Production (AP), Gross Domestic Product Agricultural Crop Production (GDPACP), Gross Domestic Product Agricultural Livestock Production (GDPALS) and Gross Domestic Product Agricultural Fisheries Production (GDPAFP) were used as the dependent variable. The study found that Agricultural Credit guarantee scheme fund for crop production, livestock production and fisheries had significant positive impact on crop, livestock and fisheries productivity in Nigeria for the period of the study and also, the total agricultural credit guarantee scheme fund had significant positive impact on agricultural output in Nigeria. The study therefore recommends that stakeholders in the scheme viz: the farmers, lending institutions and government must show greater commitment and dedication for the scheme to achieve its laudable objectives.

TABLE OF CONTENTS
Title Page – – – – – – – i
Approval Page – – – – – – – ii
Certification Page – – – – – – – iii
Dedication – – – – – – – iv
Acknowledgements – – – – – – – v
Abstract – – – – – – – vii
Table of Contents – – – – – – – x
List of Figures – – – – – – – xi
List of Appendices – – – – – – – xii

CHAPTER ONE INTRODUCTION
1.1 Background of the Study – – – – – – 1
1.2 Statement of the Problem – – – – – – 5
1.3 Objectives of the Study – – – – – – 6
1.4 Research Questions – – – – – – 7
1.5 Research Hypotheses – – – – – – 7
1.6 Scope of the Study – – – – – – 8
1.7 Significance of the Study – – – – – – 8
1.8 Definition of Terms – – – – – – 8
References – – – – – – 10

CHAPTER TWO REVIEW OF RELATED LITERATURE
2.1 Agricultural Financing Policies in Nigeria – – – – 13
2.2 Challenges of agricultural financial policies – – – – 15
2.3 Agricultural Production in Nigeria – – – – 17
2.4 The Agricultural Sector and Nigeria’s Development – – – – 19
2.5 The Agricultural Credit Guarantee Scheme: Roles, Problems and Prospects – 21
2.6 Structure, Organization and Mandate of the ACGSF – – – – 24
2.7 Overview of the agricultural finance policies in Nigeria- – – – 25
2.7.1 Agricultural Finance Policies Schemes – – – – – 25
2.7.2 Agricultural Finance Policies Programmes – – – – – 27
2.7.3 Agricultural Finance Policies Institutions – – – – – 30
2.8.1 Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) – 31
2.8.2 Agricultural Credit Support Scheme (ACSS) – – – – 33
2.8.3 Micro Credit Fund (MCF) – – – 33
2.8.4 Rural Finance Institution Building Programme (RUFIN) – – – 34
2.8.5 Nigerian Agricultural Insurance Scheme (NAIS) – – – 35
2.9 Credit Guarantee Schemes in Developing Countries – – – 35
2.10 Agricultural Budget in Nigeria – – – 38
2.11 Agricultural Finance through Bank Lending – – – 44
2.12 Agricultural Credit Guarantee Scheme Fund on Cash Crops – – – 45
2.13 Agricultural Credit Rationing by Commercial Banks in Nigeria – – 47
2.14 Issues on Banking Lending for Agricultural produce – – – 51
2.15 Lending risks and agricultural loans – – – 53
2.16 Credit Risk Management in Bank Lending to Agriculture – – – 54
2.17 Potentials for diversifying Nigeria’s non-oil exports to non-traditional markets – 55
2.18 Causes of Credit Risks in Agricultural Financing – – – – 57
2.19 Sources of Risks of Agricultural Firms – – – – 58
References – – – – 59
CHAPTER THREE RESEARCH METHODOLOGY
3.1 Research Design – – – – – 67
3.2 Nature and Sources of Data – – – – – 67
3.3 Model Specification – – – – – 67
3.4 Model Justification – – – – – 67
3.5 Techniques of Analysis 69
References 71

CHAPTER FOUR PRESENTATION AND ANALYSIS OF DATA
4.1 Presentation of Data – – – – – 72
4.2 Test of Hypotheses – – – – – 75
4.2.1 Test of Hypothesis One – – – – – 75
4.2.2 Test of Hypothesis Two – – – – – 76
4.2.3 Test of Hypothesis Three – – – – – 77
4.2.4 Test of Hypothesis Four – – – – – 78
4.3 Comparison of the Findings with the Objectives of the Study – – – 79
References – – – – – 81

CHAPTER FIVE SUMMARY OF FINDINGS, CONCUSION AND RECOMMENDATIONS
5.0 Introduction – – – – – 82
5.1 Summary of Findings – – – – – 82
5.2 Conclusion – – – – – 82
5.3 Recommendations – – – – – 84
References – – – – – 86
Bibliography – – – – – 8 Appendices – –