CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Prior to the 1960s, agriculture served as the backbone of the Nigerian economy, but the government did not take seriously how important it was to the country's economy. Nigerian agriculture was still able to expand at an ideal rate even with very little assistance from the government, providing enough food for a growing population, raw materials for a productive industrial sector, increasing government revenue and foreign exchange for the government, as well as job opportunities for a growing labour force. Government support for agricultural growth was minimal and focused on export goods including cocoa, groundnuts, cotton, cashew nuts, rubber, and produce from the palm tree like palm kernel.

The Nigerian agriculture began to show signs of issues during the first ten years after its independence (1960–1969). The insufficient food supply, rising food costs, and decreased foreign exchange gains from agricultural exports were all obvious indicators of these things. Despite the warning signs, little worry was expressed since it was believed that the issues were only transient side effects of the chain of crises that led to the civil war (1967 - 1970).

Despite the commercial discovery of oil and its subsequent boom since the early 1970s, the agricultural sector in Nigeria was still a significant part of the economy at that time and has continued to be the major driver of the country's economy ever since. In spite of the government's carelessness during the oil boom of the 1970s, the agricultural sector is still the largest source of employment in the nation, employing 60% of the jobless workforce, fostering economic growth, and combating extreme poverty. (Onyebuchi 2017) suggested that due to its numerous contributions to the expansion of the domestic economy, agriculture is a growth-led element that has a multiplier impact on socio-economic and industrial development of any economy. Similar to how it did in the previous decades, (Onyebuchi 2017) claimed that agriculture is the most crucial sector of Nigeria’s economy because it offers a number of advantages that can help the country’s economy expand and develop. Over 65% of the nation labour force is employed in this industry, which contributes between 30% and 42% of the country’s total real gross domestic product (RGDP).

Later in the second decade of Nigeria’s independence (1970 - 1979), the nation’s agricultural sector suffered a swift downturn. Not only did the food prices rise, supply-demand gaps widened, and food import cost increased but there was also sharp drops in government revenue agriculture, the labour force needed for agriculture, and foreign currency earnings from agricultural exports. The effects of the civil war, severe food shortages in some areas of the nation, government fiscal and monetary policies, and most importantly, an “oil boom” which caused serious economic distortions like food insecurity, inadequate supplies of raw materials to industries, balance of payment deficit, high inflation rates, and unemployment, and increased the rate of labour displacement from other countries, all contributed to making the situation worse.

However, governments started investing infrastructures in all part of the country to address the crisis by creating an environment that is favourable for new investments, create employment opportunities to workforce, generates revenue from the government, and encourages exports. The most benefited areas are the urban cities which cause the service sector to grow more significantly and thereby making urban centres more attractive. The most benefited areas are the urban cities which cause the service sector to grow more significantly and thereby making urban centres more attractive. The development in turn, caused the industrious youths who comprised the active workforce of the nation to migrate from their known agricultural activities in the rural areas for the urban centres with aim to participate in the economic boom of the cities. This act in turn led to urban sprawl like congestions, high unemployment, pollution, food shortage, inflation, as well as increased criminal activities in the society. Ibeaja, Amadi, and Dim(2022) argued that despite the emanation of oil in commercial quantities and its boom in the 1970s led to a significant shift in the Nigerian economy like rise in total GDP, foreign export revenues, infrastructural development, and a reduction in agricultural output level and its augmentation to the extension of the domestic economy. Although, the sector was not totally displaced but has recorded low output due to its negligence by the government as oil sector became main foreign exchange earner of the economy. The sector was not totally displaced but has recorded low output due to its negligence by the government as oil sector became main foreign exchange earner of the economy. The consequences of the low productivity of the sector seemed to have caused economic distortions which are characterized by food insecurity, inadequate supply of raw material to industries, high unemployment and inflation, low income improvement to rural farmers, excessive borrowing, exchange rate depreciation and import dependence. 

In an effort to tackle these serious economic problems, the government enunciated some agricultural policies, programmes and projects so as to strengthen and reform the agricultural sector in Nigeria. Some of the agricultural reforms established before the Structural Adjustment Programme (SAP) which was introduced in 1986 include the enunciation of the Commodity Market, National Accelerated Food Production Programme (NAFPP), Agricultural Development Projects (ADPs), Operation Feed the Nation (OFN), River Basin and Rural Development Authorities (RBRDA). Others include the Green Revolution Programme (GRP), Directorate of Food, Roads and Rural Infrastructures (DFRRI), Land Use Decree, National FADAMA phases I to III, National Agricultural Land and Development Authority (NALDA), National Poverty Eradication Programme (NAPEP), National Fertilizer Company of Nigeria (NAFCON), among others. While one of the policies adopted after SAP is President Yar’ Adua 7-point Agenda. Other policies adopted to encourage agricultural output in Nigeria were in terms of credit schemes, which include the Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB), currently referred to as Agricultural Bank of Nigeria (ABN), Rural Banking Scheme, Agricultural Credit Guarantee Scheme Fund (ACGSF), Agricultural Credit Support Scheme (ACSS), established in 1977, etc.

 However, all the credit schemes as mentioned were enunciated by the government in order to encourage agricultural credit agencies disburse more agricultural funds to farmers with the main purpose to ensure food security in the economy. To obtain this aim, the Central Bank of Nigeria (CBN) laid down advantageous rates for agricultural activities with the farmers enjoying the lower interest rates. Moreover, in year 2004, former President Olusegun Obasanjo in his regime with other leaders of African countries established New Partnership for Africa’s Development (NEPAD), which the paramount objective was to alleviate extreme poverty and starvation in Africa. And also, the National Economic Empowerment and Development Strategy (NEEDS) was launched to induce private sector participation in the development of the economy. The program was based and focused on four main areas; strengthening public expenditure management, promoting the macroeconomic environment, pursuing structural reforms and implementing institutional and governance reforms. But NEEDS could not make significant change on the agricultural sector and it only functioned for just one year.

The average total yearly expenditure on the sector has been rising over time as a result of these agriculture sector reform efforts. Average yearly spending on the agriculture sector increased from N0.02 billion in the 1981–1986 period to N0.2 billion in the 1987–1992 period to N1.84 billion in the 1993–1998 period (CBN, 2019). Average yearly spending on agriculture climbed dramatically between 1999 and 2006, reaching N16.97 billion, and then increased again between 2007 and 2008, reaching N37.13 billion, before falling to N36.19 billion between 2011 and 2021. (CBN, 2021). Despite the significant sums of money invested in the industry, it was noted that Nigerian agriculture looks to still be in a poor and undeveloped state.

According to CBN figures, the agricultural sector's percentage of GDP increased from 17.8% in 1985 to 23% in 1988, decreased to 21.1% in 1989, increased marginally to 21.3% in 1990, and then dramatically to 20% in 1992. In 1994, it reached 25%, and by the end of 1999, it had climbed to 27%. Sadly, between 2010 till now, the agriculture sector's average contribution to GDP has been 21.09%. (CBN, 2022).

1.2 Statement of Problem

Agriculture continues to be the backbone of Nigeria's economy, despite the petroleum industry's dominant position as the country's principal source of foreign money. In addition to making up the greatest portion of the GDP, agriculture and allied industries are also the largest employer of labour, the major earner of non-oil exports, and a significant driver of wealth creation and poverty reduction. The rate of development in agricultural output has inerted over time and has not kept up with the demands of a fast expanding population, leading to a steady rise in import costs for food and industrial raw materials. So the federal government started and carried out a number of agricultural policies and initiatives, some of which are no longer in effect or have been abandoned, while others have been reformed and are still in force. Farm Settlement Scheme, National Accelerated Food Production (NAFPP), Agricultural Development Projects (ADPs), River Basin Development Authorities (RBDAs), National Seed Service (NSS), National Center For Agricultural Mechanization (NCAM), Agricultural And Rural Management Training Institute (ARMTI), and Agricultural Credit Guarantee Scheme Fund are a few of these (ACGSF). Operation Feed the Nation (OFN), the Green Revolution Program, the Directorate of Foods, Roads, and Rural Infrastructure (DFFRI), the Nigerian Agricultural Insurance Company (NAIC), the National Agricultural Land Development Authority (NALDA), Specialized Universities for Agriculture, Root and Branch, and the agricultural bank were among the others.

Moreover, in order to promote private sector involvement in the growth of the economy, the Federal Government created the National Economic Empowerment and Development Strategy (NEEDS) initiative in 2004. By incorporating civil society and development partners in a participatory approach, it also hoped to encourage growth and the eradication of poverty. NEEDS were focused on influencing improvements in the production, processing, and distribution of agricultural commodities in the agricultural sector. Because that NEEDS only lasted one year, it was unable to significantly alter or have an influence on the agriculture industry.

Notwithstanding all of the said reform plans and programmes, the performance of the sector has not improved from before independence. This is due to a number of factors, including a lack of participation from all parties or stakeholders, vague agricultural reform strategy, inconsistencies between regional and national policies on the development of agriculture, and insufficient programme monitoring and evaluation. Thus, it is impossible to highlight enough how these issues contribute to the agricultural reform policy's lack of efficacy. If not addressed, it has the potential to deteriorate Nigeria's agriculture sector performance.

1.3 Research Questions

The major objective of this study is to examine the impact of agricultural sector reforms on agricultural sector performance in Nigeria. For this purpose, this study is set to provide answers to the following research questions. 

(i)     Has government agricultural finance policies contribute to agricultural sector performance in Nigeria?

(ii)    Has government Agricultural Credit Guarantee Scheme Fund contribute to agricultural sector performance in Nigeria?

1.4 Objectives of the Study

The aims of this study are divided into two categories: Broad and Specific 

^·          The study's Broad objective is to examine the economic impact of agriculture reform policy on agricultural sector performance in Nigeria.

^·          The study's specific goals are:

(i)     To examine whether government agricultural finance policies contributed to the agricultural sector performance in Nigeria.

(ii)   To evaluate the impact of Agricultural Credit Guarantee Scheme Fund on agricultural sector performance in Nigeria.

1.5 Statement of Hypotheses

1.  H₀: there exist no significant effects of agriculture reform policies on Nigeria’s agricultural sector performance.

2.  H₀: Agricultural Credit Guarantee Scheme Fund has no significant impact on agricultural sector performance in Nigeria.

1.6 Significance of the Study

This research would help to advance the boundaries of knowledge in the management of agricultural reform policies in Nigeria’s agricultural sector. The study will be extremely useful in determining the government's success in boosting the Nigerian agricultural sector.

The research, on the other hand, will assist in identifying the causes or barriers that prevent the successful execution of government agricultural reform policies and programmes and will provide helpful recommendations to ensure the accomplishment of the goals of such strategies and programmes. This is crucial because the government must implement an efficient agricultural reform strategy in order to revive the agricultural sector and guarantee that it meets its goals and purpose for attaining national development.

1.7 Scope of the Study

The examination of the effects of agricultural reform policy on the agricultural sector performance in Nigerian economy is the main scope of this study. In-depth coverage of Nigerian government policies and programmes on agriculture is provided in this report.

This study's time frame, will span a 40-year period from 1981 to 2021. This is because we want to look at the Green Revolution policy, which was put into place in April 1980, during the administration of Shehu Shagari, with the main objective of guaranteeing food self-sufficiency and integrating new technology into Nigeria's agricultural sector.

1.8 Organization of Research

This Chapter one is the introduction. The remainder of the study is divided into four sections. Chapter two contains a review of the literature like conceptual review, theoretical review, theoretical framework and empirical review. Chapter three consists of research methodology, sources of data, model specification and method of data analysis. Chapter four focuses on analysis, results and interpretation while the chapter five include the summary, conclusion and recommendation for future study.

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