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1.1       Background Study

The role of agricultural credit as a factor of production to facilitate economic growth and development as well as the need to appropriately channel credit to rural areas for economic development of the poor rural farmers cannot be over emphasized. Agriculture contributes immensely to the Nigerian economy in many ways, namely; in the provision of food for the increasing population; supply of adequate raw materials to a growing industrial sector; a major source of employment generation, foreign exchange earnings; and, provision of a market for the products of the industrial sector (Okumadawa, 1997; World Bank, 1998; Food Agricultural Organization, 2006). The agrarian sector has a strong rural base; hence, generating concern for agriculture and rural development. Support for agriculture is widely driven by both Government and the public sector, which has established institutional support in form of agricultural research, extension, commodity marketing, input supply, and land use legislation, to fast-track development of agriculture and rural economic empowerment (CBN, 2007).

Over the years, the inability of this sector to expand and as well contribute meaningfully to the growth of Nigerian economy was due to inadequate financing to improve on the situation that is, facilitating agricultural credit. Also, the problem of rapid agricultural development in Nigeria indicates that efforts directed at achieving expanded economic base of the rural farmers were frustrated by the scarcity of and restrictive access to loanable fund. One of the reasons for the decline in the contribution of agriculture to the economy is lack of formal National credit policy and paucity of credit institutions which can assist farmers (CBN,2010).

The role of financial capital as a factor of production to facilitate economic growth and development as well as the need to appropriately channel credit to rural areas for economic development of the poor rural farmers cannot be over emphasized. Credit (capital) is viewed as more than just another resource such as labour, land, equipment and raw materials (Raji,2008). Shepherd (2002) opined that credit determines access to all of the resources on which farmers depend. Consequently, provision of appropriate macroeconomic policies and enabling institutional finance for agricultural development is capable of facilitating agricultural development with a view to enhancing the contribution of the sector in the generation of employment, income and foreign exchange (Olomola, 1997).

The low volume of business in the rural areas where poverty is most prevalent cannot guarantee sustainable business activities to encourage the establishment of commercial banks to provide the needed finance for agricultural production. Moreover, the cost implication of processing agricultural loans in the rural economy makes it unattractive for conventional banks to channel their resources to farming. Although, the commercial banks finance agricultural activities but their credits are urban based and so small that their impact cannot be felt in the rural areas where farming actually takes place. Lack of priority attention to rural population in credit delivery by commercial and other banks in the economy contributed to the depressed economic conditions in the rural economy, and this situation also affects the overall economic growth and development of the nation (Bamsisele, 2006) The Federal Government of Nigeria established many institutions, programmes and schemes aimed at providing the financial needs of the rural farmers. The major institutions established to provide credit facilities for agricultural growth and development in Nigeria were the defunct Nigerian Agricultural and Co-operative Bank (NACB), 1973, River Basin Development Authority (RBDA), 1977, Directorate of Food and Rural Infrastructure (DFRRI), 1986 and Nigerian Agricultural Insurance Corporation (NAIC), 1987. The above institutions were complemented by the following programmes; Agricultural Development Programme (ADP), 1975, Operation Feed the Nation (OFN) 1976, Rural Banking Programme (1977), Green Revolution, 1980, defunct Family Economic Advancement Programme (FEAP), 1997 and the National Poverty Eradication programme (NAPEP), 1999.

The major agricultural financing schemes were the Agricultural Credit guarantee scheme fund (ACGSF), 1978 and the Agricultural Credit Support Scheme (ACSS), 2006 (World Bank, 2009).

At the advent of democracy in 1999, Obasanjo’s first full national budget in 2000 was under N600bn naira but now we have as much as 800% increase over this, yet we can only see little development but surplus of preaching’s and governance by billboards while vision 20-2020 is in a state of rest like Newton’s first law of thermodynamics. We say unequivocally that resource looting and wastage is much concentrated at the state levels, because most of our Governors are not just most wanting but problematic and the very impediment to development.

In a world where globalization and economic integration is fast eroding distance and barriers, a country cannot afford to be in an autarky position (a state of self-sufficiency) if indeed it must achieve the status of a developed nation. Exports help in increasing the level of aggregate economic activities through its multipliers effects on the level of national income (Usman & Salami, 2008). Exports have also been described as the bedrock of any economic development (bright C opera, 2010). Furthermore, a well-developed export sector will provide employment opportunity for the people with the attendant reduction in social costs of unemployment. Earnings from export will reduce the strains on the balance of payment position and even improve it. A rewarding export drivecan turn a hitherto underdeveloped economy into a prosperous economy. Therefore, the role of export in economic performance of developing countries like Nigeria can never be over emphasized.

1.2       Statement of the Problem

Agricultural funding schemes have with no doubt contributed immensely to the growth and development of our economy. It can be done through the following means: provision of loans, grants, subsidies, and leasing out of some farming equipment by the government or any corporative body. This funding have increased the productivity level of the country thereby creating rooms for employment opportunities and increase in the country’s GDP. Despite the increase in the country’s GDP and employment creation generated through agricultural funding; export level of agricultural outputs had however decline over a period of time. This quagmire can emanates as a result of many factors surrounded by individual farmers and the government as well; amongst them are lack of adequate funding to the farmers, lack of government incentives, poor managerial skills by the individual farmers, and foreign policy manipulations amongst nations, government quota amongst others. This study will therefore focus mainly on the various ways which the country’s export level will increase profoundly to a length which can be more than or commensurate to its relative funding.



1.3       Research Questions

The research questions are hinged in the following questions:

  1. What is the impact of agricultural funding in the economic growth of the nation?
  2. What is the impact of funds committed to exportable agricultural products on economic growth?

1.4       Objectives of the study         

The broad objective of the study is to analyze the agricultural funding and net export nexus in Nigeria, while the specific objectives of the study are stated as follows:

  1. to analyze the impact of agricultural funding on the economic growth of the nation.
  2. to access the impact of funds committed to exportable agricultural products on economic growth.

1.5       Research Hypothesis

H01:     There is no significance difference between agricultural funding and economic growth.

H02:     There is no significant difference between agricultural exports and the economic growth of the country.

1.6       Significance of the Study

This study which focuses on agricultural funding and net export nexus in Nigeria will critically widen the knowledge of the government in policy construction in other to take agricultural sector as an important and vital sector which has a profound growth in its GDP and export level. This study will also influence most financial institutions in restructuring the procedures of which loans, grants and subsidies by the government could be given out to the various potential farmers in other to meet up with the expected export level.

1.7       Scope of the Study

This study will cover the effect of agricultural funding on the economic growth and export nexus in Nigeria over a time frame of ten (34) years; that is 1981-201


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