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This research work tries to investigate the role of microfinance
bank on agricultural development in Nigeria using Nigeria as a case study.
Using ordinary least square method, data collected were secondary data
and the durbin-watson t-statistics were used in the regression analysis. The
study shows that Microfinance bank loans have a positive impact on
agricultural development in Nigeria. Based on these findings some
recommendations were made, interest rate should be reduce to encourage
farmers in borrowing and The federal government should give a directive
through microfinance bank that will encourage the farmers by giving them
incentives. This will automatically increase the efficiency of farmers and
thereby attract more youths to the agricultural sector.
Title page———————————————————————————–i
Approval page——————————————————————————–ii
Acknowledgement ———————————————————————–iv
Table of content————————————————————————–vi

1.1 background of the study———————————————————-1-2
1.2 statement of the problem———————————————————2-3
1.3 Research Questions—————————————————————-3-4
1.4 objective of the study————————————————————–4
1.5 hypothesis of the study————————————————————4
1.6 significance of the study———————————————————–4-5
1.7 scope of the study——————————————————————-6
2.1 theoretical literatures—————————————————————-7-21
2.2 Empirical literature——————————————————————–25
2.3 Limitation of the literature review—————————————————25
3.1 model specification———————————————————————26
3.2 Estimation procedure——————————————————————-27
3.2.1 statistical test (second-order-test)————————————————–27
3.2.2 econometric test (second-order-test)———————————————–28
3.2.3 autocorrelation test——————————————————————-29
3.2.4 heteroscedasticity test—————————————————————-29
3.3 data and their features——————————————————————30
4.0 result presentation and analysis——————————————————30
4.1 presentations of regression results—————————————————31
4.2 evaluation of result———————————————————————34
4.3 statistical test (1st order test) ———————————————————38
4.4 Econometric test (2nd order test) —————————————————-38
5.1 summary, conclusion and policy recommendation ——————————39
5.1 summary ——————————————————————————-39
5.2 conclusions —————————————————————————–40
5.3 policy recommendations————————————————————–41
5.4 Bibliography—————————————————————————–41
5.5 Appendix —————————————————————————-42-45
Nigeria is endowed with natural resources, large fertile farmland, wide range
crops, and river amongst others. Despite its abundant natural resources it is faced
with poor food situation. The poor food situation is traceable to the decline in the
agricultural sector. The problem of feeding and provision of natural resources is
increasing by the day. However several efforts are being made to improved the
Prior to the discovery of petroleum in Nigeria agriculture used to be the highest
foreign exchange resources earner and contribution to gross domestic product GDP
has been estimated to about 62.63% in 1960, 48.08% in 1970s, and 20.63% in
1980. Recently due to the growing awareness of the role of agriculture, the various
governments have intensified efforts aimed at transforming from its present
subsistence level to a market oriented production. One of those efforts was the ban
made on importation of agricultural products like palm oil, maize and rice. This
was done to encourage improvements on our production standard.
Due to the fall in the level of production from decade to decade, the country could
no longer feed the large population, provide raw material for domestic-industries,
engage in export of agricultural produce and employ the labor force of the country
despite the abundance of human and material resources.
In spite of growing urbanization, Nigeria is known to be predominantly rural in
natural and majority of population is dependent directly or indirectly on agriculture
for their live hood. Credit delivery is perhaps one of the most important roles of
microfinance banks, as the loans extended are used to expand existing businesses
and in some cases to start new ones. According to CBN (2008) microfinance loans
granted to clients is increasing from 2007 to date and most of it goes to financing
micro-enterprises in rural areas.
Ketu (2008) observed that Microfinance banks have disbursed more than eight
hundred million micro-credits to over 13,000 farmers across the country to
empower their productive capacities. As such it is expected that agricultural output
will increase with the increase in finding. The entrepreneurial capacity of the
farmers we thus improve.
According to Anyanwu etal (1997:14) “the agricultural sector has been recognized
for a long time as an important sector to Nigeria economy and development is one
of the crucial requirements for the overall economic growth.
He noted further that the declined in agricultural activities might appear natural in
any development process, it is obvious that in Nigeria agricultural activities would
remain the most important single sector for some time to come. He emphasized
that in the past, development planners have introduce programs such as national
accelerated food production project (NATPP), green revolution programs (GRP),
In search for all appropriate technique in order to increase farm output and
productivity and such program have at one time been implemented.
Based on these, a number of problems one facing the agricultural sector and they
are as following. Inadequate finance or credit facilities, inadequate farms input,
lack of storage facilities, lack of basic amenities, Lack of technical know-how, lack
of research and illiteracy of the farmers.
The questions to which this research will provide answers to one, is the credit
advanced to farmers through microfinance adequate to have a significant impact on
agriculture? All these problems can be solved or rather reduce when there is
adequate financing.
This study revolved around the answering of the following research question.
What extent does microfinance loans influences the agricultural output in
Nigeria economy?
What policy actions can be implemented to boost the agricultural productivity
in Nigeria through microfinance?
In this study therefore, the researcher hope to accomplish the following objectives:
To determine how microfinance loans/credit granted to the farmers can
influences the agricultural output in Nigeria economy.
To determine policy actions in which agricultural output can be improved
through microfinance bank credit.
Microfinance banks loans have no significant impact on agricultural
development in Nigeria.
Microfinance services, particularly those sponsored by the government have
adopted a traditional supply led subsidized credit approach mainly directed to the
agricultural sector and other non-farming activities, but the effect has short lived.
The Nigerian economy stands to derive lot of benefits if concrete steps are taken to
salvage the agricultural sector opinions are divided as the actual benefit of
microfinance policy, regulatory and supervisory framework and how it can develop
economy, most especially the agricultural sector because it has grasps of the
challenges facing agriculture.
To the researcher, this work will serve as an avenue to broaden my knowledge, as
it places a challenge that will expand my intellectual horizon by and applying
various economic tools analysis draw conclusion for future analysis. It is also
expected to serve as an impetus for further researchers in this area of study. It
should not be considered as an end to research and policy making but as a guide
taking into consideration of its limitation.
To the government and its agencies, it looks at earlier policies designed and why
they failed. Therefore it is hoped that it will provide a useful guide to policy
makers in agriculture for steady and consistent policies and programmes in terms
of funding.
To the society, this researcher’s work will create awareness of the microfinance
services that enables them engage in economic activities to be self-reliant, increase
employment opportunities, wealth creation, growth and development. Finally, the
salient findings of the study will also make the farmers to be more oriented in
The scope of this research covers the period from 1980 to 2013. The period is
significant because a lot of measures were adopted following the advert of crude
oil and its collapse. That is pre-sap and implementation and role in financing the
agricultural sector


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