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Impact of Agricultural Credit Guarantee Scheme Fund on Agricultural Production in Nigeria, 1978-2011

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Impact of Agricultural Credit Guarantee Scheme Fund on Agricultural Production in Nigeria, 1978-2011.

ABSTRACT

Supporting smallholder farmers to play a greater role in food production and natural resource stewardship has been identified as one of the quickest ways to lift Nigerians out of poverty.

Funding has been seen as a major problem militating against achieving this goal. It is argued that adequate credit facility could play an important role  in  enhancing  agricultural  productivity through the acquisition of latest technology, employment of skill manpower, promotion of agricultural research and commercial farming.

In an attempt to mitigate the funding problem of the agricultural sector, the Federal Government of Nigeria has instituted several agricultural financing schemes.

One of such schemes is the Agricultural Credit Guarantee Scheme Fund (ACGSF) which was established by the federal government in 1977 with the aim of enhancing commercial banks’ loans to the agricultural sector in Nigeria with focus on agro-allied and agricultural production in order to mitigate the risk associated with lending to the sector.

The scheme is expected to stimulate agricultural production for both domestic consumption and export purposes but not much has been researched in this regard.

This study strives to fill this important knowledge gap by examining the  impact  of Agricultural Credit Guarantee Scheme Fund (ACGSF) on total agricultural productivity in Nigeria, as well as on the four major subsectors (crop, livestock, forestry and fishery) of the agricultural sector in Nigeria.

The ex-post facto research design was adopted for the study and annualized data for a 34-year period, 1978-2011, were obtained from the Central Bank of Nigeria Statistical Bulletin. The multiple regression technique was used to estimate the five hypotheses formulated for  the study.

Aggregate agricultural production, crop, livestock, forestry and  fishery  productions were adopted as the dependent variables, while the independent variable was  Agricultural Credit Guarantee Scheme Fund including some other relevant variables.

The study also controlled for government expenditure in agriculture, foreign exchange rate and inflation rate. Results indicate that the Agricultural Credit Guarantee Scheme Fund (ACGSF) has a non- significant positive effect on aggregate agricultural output but significant positive impact on both crop and fishery subsector outputs.

Nevertheless, the effects of the scheme on livestock output was non-significant and negative, while that of the forestry output was non-significant and positive. Thus, it is evident that the ACGSF plays a fundamental role in stimulating agricultural production in Nigeria.

As a strategy to realize the optimal potential of farmers in enhancing agricultural performance, it is recommended that the  Nigerian  government continues the use of the credit finance from the ACGSF as an inducement  to  encourage farmers to put in their best efforts in agricultural production.

The study has contributed to knowledge by using modified versions of earlier works to produce relevant results.

TABLE OF CONTENTS

Title Page i
Approval Page ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
List of Tables vii

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Objectives of the Study 5
1.4 Research Questions 5
1.5 Research Hypotheses 6
1.6 Scope of the Study 7
1.7 Significance of the Study 7
1.8 List of Acronyms 9
References 12

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Theoretical Review 15
2.1.1 Prelude 15
2.1.2 Types of Schemes 16
2.1.3 Types of Credit Guarantee Schemes 18
2.1.4 Features of Credit Guarantee Schemes 22
2.1.5 Merits of Credit Guarantee Schemes 24
2.1.6 Demerits of Credit Guarantee Schemes 25
2.2 Empirical Review 26
2.2.1 Outline of Agriculture in Nigeria 26
2.2.2 Performance of Nigeria’s Agricultural Sector 30
2.2.2.1Development in Agricultural Production 33
2.2.2.2 Development in Gross Domestic Product (GDP) growth of the agricultural sector 33
2.2.2.3 Development of Gross Domestic Product (GDP) of Agricultural Sector Relative to that of other Sectors 37
2.2.2.4 Development in Agricultural Import and Export Trade 40
2.2.3 Constraints to Nigeria’s Agricultural Performance 41
2.2.4 Agricultural Credit Guarantee Scheme Fund in Nigeria 42
2.2.5 Scope of the ACGSF 43
2.2.6 The Role of the ACGSF in Financing Agricultural Production in Nigeria 45
2.2.7 Loan Limits under the Scheme 46
2.2.8 Types of Security Accepted for Loan 47
2.2.9 Problems of ACGSF 47
2.2.10 Performance of ACGSF 49
2.3 Review Summary 50
References 62

CHAPTER THREE: RESEARCH METHODOLOGY 72

3.1 Research Design 72
3.2 Nature and Sources of Data 72
3.3 Model Specification 72
3.3.1 Modification of some Models 72
3.3.2 Model Assumption 78
3.4 Explanation of Variables 79
3.4.1 Dependent Variable 79
3.4.2 Independent Variables 79
3.4.3 Techniques of Analysis 80
References 81

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS 69

4.1 Presentation and Interpretation of Data 83
4.1.1 Test of Hypothesis 84
4.1.1.1 Test of Hypothesis One 84
4.1.1.2 Test of Hypothesis Two 86
4.1.1.3 Test of Hypothesis Three 87
4.1.1.4 Test of Hypothesis Four 89
4.1.1.5 Test of Hypothesis Five 91
4.2 Implications of Results 93
4.2.1 Implications of Results of the Variable of Interest 93
4.2.2 Implications of Results of Control Variables on Agricultural Production Outputs 94
4.3 Findings and Relevant Works 95
References 97

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings 100
5.2 Conclusion 100
5.3 Recommendations 101
5.4 Contribution to Knowledge 101
Bibliography 103
Appendices

BIBLIOGRAPHY

Adegeye, A. J. and J. S. Dittoh (1985), Essentials of Agricultural Economics, Ibadan: Centre  for Agricultural and Rural Development Publication.
Adeyemi, S. L. and A. L. Badmus (2001), “An Empirical Study of Small Scale Financing in Nigeria”, Journal of Unilorin Business School, 1(1), 62-87.
Adofu, I., M. Abula and S. I. Audu (2010), “An Assessment of the Effects of Interest Rate Deregulation in Enhancing Agricultural Productivity in Nigeria,” Current Research Journal of Economic Theory 2(2), 82–86.
Adubi, A. A. and F. Okunmadewa (1999), “Price, Exchange Rate Volatility and Nigeria’s Agricultural Trade Flows: A Dynamic Analysis”, AERC Research Paper 87, African Economic Research Consortium, Nairobi.
Advani, A. (1997) “Industrial Clusters: A Support System for Small and Medium- Sized Enterprises”, Private Sector Development, World Bank Occasional Paper No. 32, Washington, DC.

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