This study examined the Effect of Agro-allied Funding and Agricultural Productivity in Nigeria. Three research hypothesis were formulated to guide and direct the study which are: (1)There is a significant relationship between Agro Funding and Agricultural productivity in Nigeria.(2)There is no long run relationship between agro allied funding and agricultural productivity in Nigeria.(3)There is no significant relationship between agricultural credit guarantee scheme fund and agricultural productivity in Nigeria. Data for the study was collected from the Central Bank of Nigeria Statistical bulletin. In a bid to answer the research questions, the study employed the ordinary least squares technique. The study found that commercial banks’ credit and government expenditure on the agricultural sector had a positive and insignificant effect on Agricultural Productivity in Nigeria. However, the study found a positive and significant relationship between agricultural credit guarantee scheme fund and agricultural output. The study recommended that agricultural credit guarantee scheme fund should be properly funded by the Government in order to induce Agricultural Productivity.
1.1 Background of the study
Agricultural productivity is a measure of the amount of agricultural output produced for a given amount of inputs, such as an index of multiple outputs divided by an index of multiple inputs (e.g. the value of all farm outputs divided by the value of all farm inputs). Also Agro allied funding can also be known as agricultural financing. According to Ugwuanyi (1999), Agricultural financing is the sourcing of fund and making it available for agricultural production and uses. Agricultural financing Simply means the acquisition and utilization of funds for agricultural purposes.
The role of agriculture in any economy is indeed significant and requires no debate. It is the most dominant sector and indeed a major source of livelihood for its citizens (Ijaiya & Abdulaheem, 2000). This is because apart from providing food for the teeming population of the economy, it is also a source of raw material that other sectors look out for before their production could take place. Also, the rearing of animals provides agro-allied products for industrial growth and development, provision of employment opportunities, especially to the rural population; provision of market for the industrial sector; and provision of the needed linkage between the traditional sector and the modern sector; ensuring food security and thus serving as a catalyst for the growth of the entire economy . In line with these, Abayomi stated that the increasing production in agriculture is regarded as the most vital attendant for achieving industrialization.
Agriculture accounts for about 70 percent of the sectors that generate employment for the working population (Abubi, 2000) In Nigeria, the mainstay of the economy before the 1970s was the agricultural sector. During this period, the structure of the Nigerian economy was largely agrarian in nature with agriculture, solid minerals and other metals forming the bedrock of the economy. Agricultural commodities were also the major export earner for the country. Nigeria was a key exporter of rubber, cotton, groundnut, palm oil, cocoa and palm kernel amounting into three per cent and four per cent in the 50s and 60s respectively of the annual rates of output growth for food and agricultural crops (Osuntogun, 1997). Agriculture also was the largest economic activity, contributing 50.2 per cent of the GDP in 1960. The dominance of the crude oil as major export revenue causes the agricultural sector to be neglected and its contributions to the GDP dropped drastically. Several factors apart from the emergence of oil have been identified as causal in the decline factors.
Finance was identified as a major factor hindering agriculture production. For this reason various Programmes, polices as well as institutions have been established with the aim of providing easy finance to the sector. Commercial Banks were at the forefront for this purpose. One of the major inputs identified over the years in the development of the Nigerian agricultural sector has been the agricultural credit (CBN, 2005). The sources for funding the agricultural sector have been micro and macro sources of finance. The micro source relates the use of the commercial bank financing as capital for agricultural activities while agricultural funding through capital mobilization and allocation by government through such agencies as rural banking development Programmes, Nigerian Agricultural Cooperative and Rural development Bank (NACRDB) and the Central Bank of Nigeria (CBN) .
Statistics according to Chris O. Udoka has shown that the Nigerian agricultural sector received increased credit form the commercial banks up to about N7 million in 1970 representing 1.99 per cent of the N37.4 million credits in 1975 representing 2.6 per cent of the total credit by the commercial banks. In 1980, the amount of credit offered by the commercial banks to the agricultural sector rose to N462.2 million, representing 7.28 per cent of the entire credit and in 1985, and total commercial banks credit to agriculture rose further to N1310.2 million and constituted 10.77 per cent of the overall credit by the commercial banks. By 1990, total credit to agriculture rose to N4221.4 million and represented 16.24 per cent of the overall credit in the economy and rose further to N25, 278.7 million in 1995, which also accounted for about 17.49 per cent of the entire credit budgeted to the economy.
However, CBN(2000) has shown that, the share of credit to agriculture through increasing in absolute terms, has started to decline relatively. By 2000, total credit to agriculture was N41028.9 million in 2005, constituting 2.46 per cent of the total credit and in 2010, total commercial banks credit to agriculture had risen to N128, 406.0 million thereby accounting for only 1.67 per cent of the total commercial banks credit to the economy (CBN, 2011). By 2012, total credit to agricultural sector has risen to N316,364 million, representing 3.9 per cent of commercial bank total credit. Agricultural credit rose again from N343 696.80 million in 2013 to N478,911.78 million in 2014, representing 3.7 per cent of commercial banks total credit. The preceding analysis, it can be observed that though total credit to agriculture has been increasing in absolute terms but when measured in term of percentage share in total credit to the economy, it is found that the credit to agriculture constitutes an insignificant proportion of the total credit.
Thus, adequate credit availability is critical to the enhancement of production in the agricultural sector in the economy and this has been a top priority for the Federal Government of Nigeria, thus, commercial banks have been directed to devout a major part of their funding to finance this sector. Despite this huge investment in the agricultural sector by the government in the form of provision of the needed finance for farmers the dwindling fortune of the sector seems to persists, prompting the question as to the role of the financial system in providing credit to agricultural sector in Nigeria. Other numerous problems hindering agricultural financing in Nigeria include: diversion of loans meant for agricultural projects into frivolous activities which may not engender growth. High interest rate charged on loans acquired by farmers, inability of farmers to provide collateral securities for loans; political interference on loan procurement by political big whips and in fact lack of “strong political will” by the government of the day to solve protracted agricultural problem facing modern farming in Nigeria. There are various problems militating against agricultural production in Nigeria, which this study intends to seek adequate solution to:
1.2 Statement of Problem:
Agro allied funding have been a major problem not facilitating against agricultural productivity in Nigeria, this is caused by the inability of farmers to obtain credit facilities from financial institutions due to several factors such as; In ability of providing collateral to obtain such credit facilities, infidelity and lack of trust among others. In spite of these endowments, the sector has continued to record a declining productivity. The capacity of the sector to fulfil its tradition roles in Nigerian economy has been constrained by various social-economic and structural problem such as;
Unavailability of credits to local farmers
The civil war of the late 1960S
The severe drought of the early 1970s and 1980s
The discovery of oil (the oil boom of the 1970 created relative disincentives for agriculture in relation to other sectors of the economy).
High interest rates on loans to farmers
Rural- urban migration
Ineffective institutions charged with policy implementations.
Thus, it is in light of the foregoing that this study seeks to evaluate the effect of agro-allied funding on economic growth in Nigeria.
According to the (UN, 1999), the population of Africa and West Asia is projected to grow rapidly over the course of the next 30 years, with highest rates of growth occurring in sub-Sahara Africa(SSA). Therefore, meeting the food and livelihood requirements of this growing population presents a significant challenge to all countries. It is therefore pertinent, considering the high population rate of Nigerian populace (estimated to be over 150 million people) to pave way to the advent of agro-processing industry like wet corn milling that will increase the economic empowerment of the increasing population as well as raise the standard of living of the populace.
Poverty in African is still a largely rural phenomenon. Rural economic development is thus critical to poverty alleviation in Africa (Ann, 2005). According to FAO (2000), it concluded that looking forward to 2030, even with the good progress in food production in the coming years; the region could still have 15 percent of its population under-nourished in which Nigeria is not an exception. It is therefore of the opinion that that world’s food problem can only be solved by first providing a varied menu containing all necessary elements instead of concentrating exclusively on the protein content of the food. Events have rightly shown that the trend in milling industry has not been given wider attention in Nigeria with emphasis on the economic analysis. Maize is widely used directly for human consumption as well as for human feed. It is used mainly as the main sources of calories in animal feed and feed formulation. Thus, the importance of food processing and the production of convenience foods is accompanied by a growing dominance of supermarket.
Despite the entire emerging enabling environment in attempting to get agricultural production back to its rightful place. It is still a mirage that the extent of deregulation and policy programmes outcome has not elevated the desired response. There is urgent need to sustain agricultural growth beyond the current rates if the challenges confronting us as regards food insecurity and un-employment are to be overcome. The pertinent question to ask is therefore is, why the measures have adopted over the years not achieved sustainable growth of the sector and in which direction policy should be focused to hasten the realization of the objectives for Nigerian agro-allied industries.
1.3 Research Questions
The study will examine the following questions:
- To what extent has agro allied funding contributed to agricultural productivity in Nigeria?
- Is there any long-run relationship between agro allied funding and agricultural productivity in Nigeria?
- Does agricultural credit guarantee scheme fund have any effect on agricultural productivity in Nigeria
1.4 Research Objectives
The major objective of this study is to investigate the impact of agro allied funding on the agricultural sector in Nigeria. Specifically, this study seeks to:
- To determine the effect of agro allied funding on agricultural productivity in Nigeria
- To determine if there is any long run relationship between agro allied funding and agricultural productivity.
- To determine if agricultural credit guarantee scheme fund influences agricultural productivity in Nigeria
For the objectives of this study to be achieved, we divided this study into five sections. The first section deals with the introduction, the second dwells on literature review while research methodology was captured in the third section. Data analysis and discussion of findings was captured in section four and finally, section five draws managerial implication.
1.5 Research Hypothesis
The research hypotheses were formulated after the order of the research objectives to include:
- H0: There is no significant relationship between agro funding and agricultural productivity in Nigeria
- H0: There is no long run relationship between agro allied funding and agricultural productivity in Nigeria
- H0: There is no significant relationship between agricultural credit guarantee scheme fund and agricultural productivity in Nigeria
1.6 Significance Of The Study:
The study is significant in the following ways
- It will influence various economic units in both public and private sectors of Nigerian economy.
- The research report will be a veritable source of information to various categories of students as well as researchers wishing to model
- It will be relevant to policy makers especially when making policy decisions on choice of policy that will encourage agricultural productivity in Nigeria.