AN ECONOMETRY ANALYSIS OF COMMERCIAL BANK’S CREDIT ON THE NIGERIA AGRICULTURAL SECTOR (1970-2012)
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
Background of the Study
Statement of Problem
Hypothesis of the Study
Objective of the Study
Significance of the Study
Scope and Limitation of the Study
CHAPTER TWO: REVIEW OF LITERATURE
2.1    Definition of Concept
2.1.1    Agriculture
2.1.2    Commercial Bank
2.1.3    Credit
2.1.4    Agricultural Credit
2.3    Sources of Agricultural Financing
CHAPTER THREE: THEORETICAL FRAMEWORK, MODEL SPECIFICATION, AND METHODOLOGY
3.1    Theoretical Framework
3.2    Model Specification
3.3    Data Sources
3.4    Method of Data Analysis
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF REGRESSION RESULT
4.1    Presentation of Results
4.2    Discussion of Results
4.3    Policy Implications
CHAPTER FIVE
5.1    Summary
5.2    Recommendation
5.3    Conclusion
    Reference
    Appendix
 CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
    The role of agriculture in transforming both the social and economic framework of an economy cannot be over emphasized. The agricultural sector has been an engine of economic growth. Since, the development of this sector, it has accounted for over 60% of its Gross Domestic Product (GDP) to the Nigeria economy. Agricultural produce has been a source of earning foreign exchange in Nigeria right from when we gain independent in 1960; it has also created employment opportunity especially, for those in the rural area in Nigeria. It provided food for the population and raw materials for our industries in Nigeria.
    The agricultural sector has played a key role in virtually all social and economic activities of the country. This sector is crucial for a nation who wants to experience rapid growth and development in is economy. It follows that in developing countries such as Nigeria, spending on agriculture is one of the most important government instruments for alleviating poverty in the rural areas and promoting economic growth and development.
    In recognition of this, the government has embarked on various policies and programmes aimed at strengthening the sector in order to continue performing its roles, as well as measures for combating poverty. Some of the policies and programs embarked by the federal government of Nigeria (FGN) to restore the agricultural sector in recent times include; farm settlement scheme, National Accelerated food  production (NAFP), agricultural development projects (ADPs) River Basin Development Authorities (RBDAs), National Seed Service (NSS), National Centre for Agricultural Mechanization (NCAM), Agricultural and Rural Management Training Institute (ARMTI) and Agricultural Credit Guarantee Scheme Fund (ACGSF). Others includes, Operation Feed the Nation (OFN), Green Revolution Programme, Directorate of Foods, Roads and Rural Infrastructure (DFFRI), Nigerian Agricultural Insurance Company (NAIC) National Agricultural Land Development Authority, (NALDA), specialized Universities for Agriculture, Root and Tuler Expansion Programme (RTEP) and Rural Banking Scheme etc.
    Despite all the aforementioned policies and programmes, it is unfortunate that the performance of the Agricultural Sector in Nigeria is horrible in terms of product contribution, factor contribution, Market contribution and foreign exchange contribution. In agriculture, fund is needed to enable the farmer purchase more land, buy his inputs at the appropriate time and to pay for hired labour or farm machinery. Unfortunately, credits are not easily available for most of the farmers because of collateral and other things that are usually required by the commercial banks and other credit institutions. This makes it possible for most of the farmers in Nigeria to lack the required capital for investment in large scale agriculture, hence the reason for the recent low agricultural productivity. We hope that the present Transformation Agenda of President Goodluck Jonathan administration initiated to succeed the seven point Agenda will help to elevate the agricultural sector as we enter into the 21th century.
1.2    STATEMENT OF THE PROBLEM
    In spite of Nigeria’s rich agricultural resources endowment, there has been a gradual decline in agricultural contributions to the nation’s economy (Manyong  et al., 2005). In the 1960s, agriculture accounted for 65-70% of total exports, if fell to about 40% in the 1970s, and crashed to less than 2% in the late 1990s. The decline in the agricultural sector was largely due to rise in crude oil revenue in the early 1970s. Less than 50% of the Nigeria’s cultivable agricultural land is under cultivation. Even then, smallholder and traditional farmers who use rudimentary production techniques, with resultant low yields, cultivate most of this land. The smallholder farmers are constrained by many problems, which include poor access to modern inputs and credit, poor infrastructure, inadequate access to market, land and environmental degradation, majority of the farmers are illiterate and they still use traditional method of farming and inadequate research and extension services.
    Not until recently have government seriously thought and attempted to mobilize potential savings for the rural farmers. Commercial banks themselves have given little attention to the approval of loans to farmers for fears of defaults. Where credits are received from other sources apart from government and commercial lending, the interest rates have been too high. These reported high interest rates are stark realities to the peasant farmers. However, Ogunfowora et al (1972:35) attributed most of the short comings on institutional credits in Nigerian to factors such as, ineffective supervision or monitoring insufficient, funds, political interference, cumbersome and time consuming loan processing, large loan defaults and absence of financial projections. the question deducible from the above are;
Is the high interest rate on loans given to farmer really preventing them from borrowing from credit institutions? or are the commercial bank afraid of fraud, the risk of not paying them back the loans?
Is market failure the problem of low productivity in Nigeria Agricultural sector?
Do farmers really use the money for agriculture or do they (farmer) use it for their personal needs; i.e getting married, and houses etc?
How have the credit institutions, especially commercial banks, been able to impact positively on the level of agricultural productivity in Nigeria amidst aforementioned problem?
1.3    OBJECTIVE OF THE STUDY
    The board objectives of the study are to investigate the extent to which commercial bank credit had supported agricultural output in Nigeria.
    However, the specific objectives of the study are as follows:
To determine the impact of commercial banks credit on agricultural output in Nigeria
To determine the impact of agricultural output on economic growth in Nigeria.  
1.4    HYPOTHESIS OF THE STUDY
    Following from the above stated objectives, the following hypothesis are tested in this study;
Commercial banks credits has no significant impact on agricultural output
Agricultural output has no significant impact on economic growth.
1.5    SIGNIFICANCE OF THE STUDY
    This research is expected to open our understanding of the important role of commercial bank credit and agricultural output in Nigeria, the study will uncover why it is necessary for the Nigeria governments to increase is public expenditure in the agricultural sector. The study will explain some measure on what can be done by the government and the private sectors to expand the agricultural sector in Nigeria. In other, for the standard of living of the people especially, does in the rural area to raise and also making sure that the entire national economy benefit from the agricultural sector by suggest ways of combating the perceived problems of the peasants scales farmers, such as loan procurement from commercial bank, and effective credit lending to the benefit of the local farmers. Also, it sets out to help proffer solutions to the problems being faced by the sectors.
    This study will serve as a good background for those intending to carry out further research work on related topics.
1.6    SCOPE AND LIMITATIONS OF THE STUDY
    The scope of this study will focus on the impact of commercial bank credit on the agricultural output in Nigeria for the period of 1970-2012. The choice of this study period is based on the availability of data and the important  of this period in the agricultural sector in the economy of Nigeria. This study period will be used to assess the impact of commercial bank credit on the agricultural output in Nigeria and as well on how, this sector has impacted on the standard of living of the people.
    The major problem encountered when researching is inconsistency of data. The data as reported by CBN is not consistent with that of federal office of statistics.

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