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The Effect Of Monetary Policy On Agricultural Output In Nigeria
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1.2 Statement Of The Problem
Before the rapid rise in oil
export revenue, Nigeria was a major exporter of agricultural produce,
especially cocoa, groundnuts, cotton, palm oil, palm kernel, and rubber.
Since then however both the volume and the range of agricultural
exports has declined sharply and agricultural imports have increased
dramatically.
In addition, Nigeria no longer produces sufficient
food for the country's large and rapidly growing population. The average
annual rate of real output growth for food crops fell to about 2
percent a year during the 1970s. Between 1970 and 1975, however, the
output of export crops dropped 17percent, the food import bill rose more
than 10-fold in 1970-1980.
Low agricultural output has a negative
effect on the economy as a whole, there is a low production of goods for
food and raw materials for industries. A major challenge facing Nigeria
is the inability to capture the financial services requirements of
farmers and agribusiness owners who constitute about 70 percent of the
population. Farmers need access to capital to purchase land and
equipment and to invest in the development of new products, services,
production technologies and marketing strategies. Yet banks are often
reluctant to lend money to farmers for agricultural enterprises due to
the lack of creditability and collateral.
Therefore there is need for
a research in order to effect necessary changes because activities of
the monetary authorities through monetary policy affect the financial
institutions and credit availability to the agricultural sector in no
small measure this will further affect agricultural output positively.
1.3 Scope of Study
This
research seeks to study agricultural output and the how monetary policy
affects it. The study shall be made using secondary time series data,
for a span of 26 years that is from 1980 to 2006 which is sufficient and
suitable for conducting a research, making new findings and relevant
recommendations.
1.4 Objectives of Study
The main objectives of this research are as follows:
1) To identify the monetary policy instruments used to support the agricultural sector.
2)
To examine the impact of prime lending rate, cash reserve ratio,
agricultural credit guarantee scheme fund and money supply on
agricultural output.
3) To find out if there is a long-run
relationship between certain monetary channels and variables such as
real exchange rates, monetary policy rate, private investments in
agriculture, agricultural credit guarantee scheme fund, and agricultural
output.
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