ABSTRACT
The impact of the Central Bank of Nigeria (CBN) cooperative lending on the performance of agribusiness sector in Nigeria was investigated in this study, and was conducted between 1981-2020. The statistical tools used for the study were descriptive statistics, unit root test, Augmented-Dickey Fuller method, Johansen co-integration Vector Error Correction model, and Parson Correlation coefficient. The data were collected from CBN statistical bulletin and examined with descriptive statistics, unit root test was used to ascertain the stationarity of the time series data while Augmented-Dickey Fuller was used to validate the presence of constant means, Vector Error Correction model, Johansen co-integration were used to test for first and second degree co-integration. The result of the study indicated that, CBN Cooperative lending(CCL) has not benefited crop agribusiness enterprise in the short-run with a negative coefficient of (-0.033) significant at 10% of overall production.(-0.100) in the long-run for livestock agribusiness statistically significant at 10% while it positively impacted fisheries agribusiness in the long-run at a coefficient of (0.037), CCL had a positive coefficient of (2.573) on agribusiness sector in the long run and was statistically significant at 1% and (-0.03) in the short-run. However, inflation (INF) was statistically significant at 10% in the short-run with a positive coefficient of (0.073) and at a 10% negative coefficient of (-8.310) in the long-run thereby putting further strain on Nigeria agribusiness sector. Therefore, the federal government of Nigeria through the CCL should pay special attention to the livestock and the fisheries agribusiness enterprises by designing programs that will be all encompassing, unique and encouraging based on their peculiarities to provide sufficient funding. Single-digit interest and inflation rates should be the target of the CBN through her fiscal and monetary policies, the CBN must ensure that single-digit inflation and interest rates be maintained to boost the long-term performance of the agribusiness sector.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of contents vi
List of Tables ix
List of Figures xi
Abstract xii
CHAPTER 1: INTRODUCTION 1
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Research Questions 4
1.4 Objectives of the Study 5
1.5 Research Hypotheses 5
1.6 Justification of the Study
6
1.7 Scope of the Study 7
CHAPTER 2: REVIEW OF RELATED LITERATURE 8
2.1 Conceptual Review 8
2.1.1 Credit 8
2.1.2 Nigeria
Cooperative Credit Market 9
2.1.3 Access to Financial Services by Agribusiness Enterprises 11
2.1.4 Overview
of Nigeria's Agribusiness Finance Policies 13
2.1.5 Agricultural Finance Policy Schemes 13
2.1.6 Agribusiness Finance
Policies Programmes 15
2.1.7 Institutions for Agricultural
Finance Policies 19
2.1.8 Nigerian Agricultural Cooperative and Rural
Development
Bank (NACRDB 22
2.1.9 Agricultural
Credit Support Scheme (ACSS) 23
2.1.10 Rural Finance Institution Building Programme
(RUFIN) 24
2.1.11 Credit guarantee
programs in Nigerian Countries 25
2.1.12 Obstacles to agricultural finance policies 29
2.1.13 The Agribusiness
Sector and Nigeria's Development (2007), 31
2.1.14 The Plan to Guarantee
Agricultural Credit 34
2.1.15 The ACGSF'S structure, organization, and purpose 39
2.2 Theoretical Review 40
2.2.1 Demand and supply of
finance theory 40
2.2.2 Financial growth theory 41
2.2.3 Pecking order theory 42
2.2.4 Contract theory 44
2.2.5 Financial rationing and
constraint theory 45
2.3 An Empirical Review 45
2.4 Analytical review 48
2.4.1 Unit root test 48
2.4.2 Time series' stationary
properties 50
2.4.3 Testing for serial
correlation (autocorrelation) 52
CHAPTER 3: METHODOLOGY 53
3.1 Study Area 53
3.2 Sources of Data 54
3.3 Method of Data Analysis 54
3.4 Model Specification 55
3.4.1 Unit root test:
augmented Dickey-Fuller (ADF) test (for the
stationary test) 55
CHAPTER 4: RESULTS AND
DISCUSSION 59
4.1 Descriptive Statistics
of the Variables Included in the Model 59
4.1.1 Unit root tests for the
variables included in the model 61
4.2 Examine the Relationship between credits granted by CBN
through cooperative societies and the performance
of crop agribusiness enterprises in Nigeria 61
4.3 The Relationship
between Credits granted by CBN through cooperative societies to livestock agribusiness enterprise in
Nigeria 68
4.3.1 The relationship between
credit granted by CBN through cooperative
societies to
fisheries Agribusiness enterprise in Nigeria 74
4.4 Examination of
cooperative lending granted by CBN to Agribusiness
sector in Nigeria 81
4.5 Examination of the
nature of the Relationship between
Cooperative lending and Agricultural protection in
Nigeria between 1981-2022 87
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS 88
5.1 Summary 88
5.2 Conclusion 90
5.3 Recommendation
91
REFERENCES 93
LIST OF TABLES
Table 4.1: Descriptive statistics of the variables included in the model
59
Table 4.2 Unit root tests for the variables included in the model 61
Table 4.3 Lag
order selection criterion for examine the relationship between credit granted by CBN through cooperative societies and the performance of crop agribusiness
enterprises in Nigeria 62
Table 4.4 VEC
residual serial correlation lm tests for the relationship between cooperative credit and crop agribusiness
enterprises in Nigeria 63
Table 4.5 Unrestricted
co-integration rank test (trace) for the relationship credit granted by CBN through cooperative societies and the performance of crop agribusiness enterprises
in Nigeria . 64
Table 4.6 Vector
error correction estimates showing long-run and short-run relationship between cooperative credit and
crop agribusiness enterprises in Nigeria 67
Table 4.7 Lag
order selection criterion for the relationship between credits granted by CBN through cooperative societies to livestock agribusiness enterprise in Nigeria 69
Table 4.8 Vec
residual serial correlation lm tests for the relationship between credit granted by CBN through cooperative societies to livestock agribusiness enterprises in
Nigeria 70
Table 4.9 Unrestricted
co-integration rank test (trace) the relationship between credit granted by CBN through cooperative societies to livestock agribusiness enterprises in
Nigeria 70
Table 4.10 Vector
error correction estimates showing long-run
and short-run relationship between cooperative credit and livestock agribusiness enterprises in Nigeria 72
Table 4.11 lag
order selection criterion for the relationship between credit granted by CBN through cooperative societies to fisheries agribusiness enterprise in Nigeria 75
Table 4.12 Vec
residual serial correlation lm tests for the relationship between cooperative credit and fishery agribusiness enterprises in Nigeria 76
Table 4.13 Unrestricted
co-integration rank test (trace) for the relationship between credit granted by CBN through cooperative societies to fisheries agribusiness enterprise in
Nigeria 77
Table 4.14 Vector
error correction estimates showing long-run and short-run relationship between cooperative credit and fishery agribusiness enterprises in Nigeria 79
Table 4.15 Lag
order selection criterion for the cooperative lending granted by CBN to agribusiness sector of Nigeria 81
Table 4.16 VEC residual serial correlation lm tests
for the impact of cooperative
credit on agribusiness enterprises in Nigeria 83
Table 4.17 Unrestricted
co-integration rank test (trace) for cooperative lending granted by CBN to agribusiness sector of
Nigeria 83
Table 4.18 Vector
error correction estimates showing long-run and short run impact of cooperative credit on agribusiness
enterprises in Nigeria 85
Table 4.19 The nature of relationship existing between cooperative credit and agribusiness production 87
LIST OF GRAPHS
Fig 4.1 Inverse roots
of AR characteristics polynomial for the relationship between
credits granted by CBN through cooperative societies and the performance of crop
agribusiness enterprise in Nigeria 63
Fig 4.2 Inverse roots
of AR characteristics polynomial for relationship between
credits granted by CBN through cooperative societies to
livestock agribusiness enterprise in Nigeria 69
Fig 4.3 Inverse roots of AR characteristics polynomial
for the relationship between credits granted by CBN
through cooperative societies to fisheries agribusiness enterprise
in Nigeria 76
Fig 4.4 Inverse roots
of AR characteristics polynomial for cooperative lending granted
by CBN agribusiness sector in Nigeria 82
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
According to Ashish
(2015), agribusiness is a crucial component of human resource development and
an essential component of any nation's economic growth. Economic development,
food security/food self-sufficiency, trade, nutrition, climate change, natural
resource allocation, protecting plant and animal biodiversity, and
environmental priorities are all driven by this sector on the global stage
(FAO, 2013). As one of Nigeria's main economic drivers, the sector has been a
major focus of government economic policies (Akpan et al., 2012). According to
FAO (2014), agribusiness contributes about 24% of the Nigerian economy in a
variety of ways, including providing food for a growing population, sufficient
raw materials (labor and input), a significant source of employment, earning
foreign exchange, and providing a market for the products of the industrial
sector. By enhancing the technical capabilities of other support agribusiness
organizations, the World Bank, the United Nations Food and Agriculture
Organization, and others contribute by providing on-farm and off-farm financial
and input support. Eze et al.,
(2010).
In 1977, the
National Administration of Nigeria, through the Central Bank of Nigeria (CBN)
laid out the Agricultural Credit Guarantee Scheme Fund (ACGSF) to further
develop admittance to cultivate credit, in acknowledgment of the significant
job agribusiness plays in the economy, and the view that credit is a
significant apparatus for raising salaries of farmers and rural individuals,
particularly by assembling assets to additional useful purposes (Atieno, 2001).
By 2005, the credits ensured remained at over N10billion, relating to around
443, 660 loans. Loan completely repaid totaled N6billion in value and 310, 653,
in number, by that very year addressing 60.08% and 70.02% respectively of the
worth and number ensured. The statistics cut across all significant crop and livestock
animals endeavors, including long growth tree crops (ACGSF Yearly Report,
2001).
The central Bank of
Nigeria (CBN), in accordance with its formative capabilities as enshrined in
Segment 31 of the CBN Act 2007, laid out the Anchor Borrowers’ Program (ABP) to
make financial linkages between smallholder ranchers (SHFs) and trustworthy
organizations (secures) engaged with the creation and handling of key
agricultural commodities. The core of the Program is to give loans (in kind and
cash) to smallholder farmers to boost agricultural production, job creation,
and reduce food import bill towards protection of foreign reserve. The Nigerian
Agricultural Cooperative and Rural Bank (NACRDB) 2002 to date, previously known
as Nigerian Rural and Agreeable Bank NACB was mutually settled by the Federal
Government of Nigeria (FGN) and the central Bank of Nigeria (at a proportion of
3:2) to apportion credit to cooperatives, agribusiness, and individual little
holder farmer at a subsidized interest rate. Share capital completely bought in
by the Federal Ministry of Finance Consolidated (60%) and the central Bank of
Nigeria (40%). The Bank’s broad mandate envelops investment funds assembly and
the ideal conveyance of reasonable credit to meet the subsidizing necessities
of the overflowing Nigeria populace in the agrarian and non-agrarian (NACRDB,
2009) sectors of the national economy. According to Ujah and Okoro (2009), a
summary of the performance of the NACRDB's loans from July 2002 to December
2006 revealed that it approved loans totaling N34.65 billion, distributed loans
totaling N21.40 billion, and repaid loans totaling only N8.68 billion, or
58.56%. A more in-depth analysis of the loan disbursements revealed that micro,
macro, and on lending were N10.60 billion, N6.71 billion, and N4.1 billion,
respectively (Agbo, 2010).
According to the
International Cooperative Alliance (ICA, 2010), a cooperative is "an
autonomous association of persons united voluntarily to meet their common
economic, social, and cultural needs and aspirations through a jointly owned
and democratically regulated enterprise." Definitions of cooperative
societies frequently include the characteristics of the seven principles of
ICA. They are: Open and voluntary membership, democratic control by members,
economic participation by members, autonomy and participation by members,
education, member cooperation, and concern for the community. Ujiagu and
Uchenna, (2015) "Cooperatives play a critical role in society because they
result in better living conditions for their members, particularly the
low-income earning cadres of the population, the poor in rural areas, and the
poor in urban areas."
1.2
STATEMENT OF THE PROBLEM
Productivity in the agribusiness sector has
also decreased, from 28% in 1985 to 27% in 2000, then 0.37% in 2009, and 0.20%
at the end of 2019 (CBN, 2019). This awful situation can be attributed to
Nigeria's high level of corruption and persistent mismanagement of funds.
Particularly, this development was influenced by widespread and exaggerated
shifts in the political and leadership systems.
Due to poor
management and borrowers' reluctance to repay loans, Nigeria's cooperative
credit schemes have been threatened by the high default rate. On the other
hand, Olagunju and Adeyemo (2007), argued that one factor that has hindered the
expansion of Nigeria's agribusiness sector is default on loan repayment.
Agribusiness in
Nigeria is gradually losing ground in terms of contributing to GDP and meeting
its food needs, despite recent successes from CBN cooperative lending (UN,
2015). Despite these recent successes, Nigeria is a net food importer
(Ihegboro, 2014).
According to Okorie
(2004), there is a lack of financial resources for purchasing profitable
inputs. Inadequate management practices, loan misappropriation, and a refusal
to repay loans are the primary causes of credit defaults, which have been a
persistent issue in the majority of credit schemes coordinated or funded by the
Nigerian government. However, numerous studies have pointed to the importance
of credit in the socio-economic transformation process (Nnadozie and Uzoigwe,
2002; Sunday and Idu, 2016).
The inadequacy of
productive tools like cooperative credit is made worse by insufficient
agricultural extension services, insufficient physical infrastructure,
insufficient connectivity, ineffective transportation networks, and inadequate
marketing canters. On the other hand, they help to increase food security,
decrease poverty in rural areas, and enhance rural infrastructure by providing
services that are beneficial to rural farmers and encouraging them to
collectively decide how resources are distributed and managed (FMARD, 2013).
Afolabi's (2002)
analysis of loan repayment among small-scale farmers in Oyo State, Nigeria,
found that 66.99% of the sampled farmers used their farm loans for things like
hiring labor, buying tools, fertilizers, seeds, and other farm inputs, and that
31.07% of the loan was misused.
For the majority of
agribusiness operations in Nigeria, there is a significant gap between owned
capital and required capital due to rising borrowing costs (Iroh, 2012).
According to Tefera (2004), one of the primary obstacles to the expansion of
the agribusiness industry is a lack of access to capital as a result of high
interest rates.
1.3 RESEARCH QUESTIONS
i.
Do CBN
Cooperative lending have a relationship with agribusiness sector?
ii.
To what
extent does CBN cooperative lending have a significant relationship on crop
agribusiness enterprise in Nigeria?
iii.
To what
extent does CBN cooperative lending have a significant relationship with
livestock agribusiness enterprise in Nigeria?
iv.
How far
does CBN cooperative lending have a significant relationship with fisheries
enterprise in Nigeria?
v.
To what
extent does CBN cooperative lending have a significant impact on agribusiness
production in Nigeria?
1.4 OBJECTIVES OF THE STUDY
The general objective of this study was to examine the
impact of the Central Bank of Nigeria Cooperative Lending on the Performance of
the Agribusiness Sector of Nigeria (1981 -2020). The specific objectives
therefore include to:
i)
examine
cooperative credit granted to agribusiness sector in Nigeria;
ii)
estimate
the relationship between credit granted by CBN through cooperative societies
and the performance of crop agribusiness enterprises in Nigeria;
iii)
examine
the relationship between credit granted by CBN through cooperative societies to
livestock agribusiness enterprise in Nigeria,
iv)
determine
the relationship between credit granted by CBN through cooperative societies to
fisheries agribusiness enterprise in Nigeria,
v)
analyze
the nature of relationship between cooperative credit and agribusiness
production in Nigeria between 1981-2020.
1.5 RESEARCH
HYPOTHESES
As a
result of the research questions and objectives raised above, the hypotheses
for this study are:
Ho1: Cooperative credit, Government agricultural
budget, inflation, and interest rate do not have a significant impact on crop
agribusiness enterprises in Nigeria.
Ho2: Cooperative credit, Government agricultural
budget, inflation, and interest rate do not significantly impact livestock
agribusiness enterprises in Nigeria.
Ho3: Cooperative credit, Government agricultural
budget, inflation, and interest rate do not significantly impact fishery
agribusiness enterprises in Nigeria.
Ho4: Cooperative credit, Government agricultural
budget, inflation, and interest rate do not significantly impact agribusiness
output in Nigeria.
1.6 JUSTIFICATION OF THE STUDY
The issue with operators repaying loans necessitates this
study. The borrower may be discouraged from using a loan amount equal to one
eighth of the business requirement because it may be insufficient to act.
Similarly, if a borrower takes out a loan with a value that is significantly
higher than what they require, the extra money will be used for activities that
were not planned and were not productive. Consequently, the borrower may not be
able to repay the loan when the due date arrives. It is argued that the farmer
will earn more money and be able to spend more on business inputs if the loan
amount is higher (Onyebinama, 2007). The impact of CBN cooperative credit on
Nigerian agribusiness enterprises must be investigated in order to develop and
implement economic and financial policies aimed at increasing agribusiness
productivity. Policymakers in Nigeria will be motivated to focus on the
specific effects of cooperative financing on various aspects of agribusiness
development as a result of this study. Agribusinesses that produce crops, fish,
and livestock will be able to use the financing options provided by this study
to boost output. It brought to light the funding issues confronting Nigeria's
agribusiness sector. Additionally, it will assist the government in
recognizing, supporting, and facilitating the creation of appropriate interest
rates in commercial and agricultural banks. Again, this study contributed to
the identification of the negative effects of interest rates on farmer access
to agricultural credit and the formulation of appropriate recommendations.
Additionally, this research contributed to the development of a long-term
strategy for achieving and maintaining a reasonable interest rate that will
make it easier for Nigerian farmers to obtain credit.
This study showed how CBN cooperative credit affected
Nigerian agribusinesses, which will help the government and financial
institutions design programs that make it easier for farmers to access credit.
The findings of this study will also serve as a guide for other researchers who
wish to conduct related or additional research.
1.7 SCOPE OF THE STUDY
The purpose of this study was to examine how cooperative
lending by the Central Bank of Nigeria impacted the performance of Nigeria's agribusiness
sector from 1981- 2020. This study's scope included: examined cooperative
credit given to Nigeria's agribusiness sector; estimated the connection between
the performance of Nigerian crop agribusiness enterprises and the credit
granted by the CBN through cooperative societies; examined the connection
between the credit granted to Nigerian livestock agribusiness enterprises by
the CBN through cooperative societies; determined the connection between the
CBN's credit granted to Nigerian fisheries and agribusiness enterprises through
cooperative societies and analyzed how cooperative credit and agribusiness
production in Nigeria correlated from 1981-2020.
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment