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46 Journal of Economics, Finance and Administrative ScienceDecember 2010Table 4Results of the long-run Restricted ModelVariable Coefficient Standard Error t- statistics ProbabilityTVLGUAD 0.63078 0.19521 3.23217 0.0034**TVLACMB 0.61847 0.20872 3.44814 0.0052**ECM2 (-1) -0.53171 0.17857 -2.97449 0.0438C -0.11690 0.06517 -1.76676 0.0886Source: Extracted from computer print-out of resultsNote: **= significant at 1%R 2 = 0.5648 R -2 =0.5446 DW= 1.771F-Stat= 8.009 Schwartz Criterion= -0.0087disequilibrium and it was significant at 5%. Thisresult confirmed significant relationship betweenthe output of the agricultural sector as proxied by theagricultural GDP, and total volume and value of loansguaranteed the agricultural sector. However, theeffects of these two independent variables on agriculturalGDP manifested a year after. This is understandablebecause agriculture has a gestationperiod. The equation for the restricted or under-parameterizedmodel is then specified as follows:DLOG (GDP) = -0.11069 + 0.63078 DLOG (TVLGUAD) + 0.61844D LOG(TVLACMB) -0.53171 ECM2(-1) (7)From the econometric results, it was shown that theoutput of agriculture proxied by agricultural GDP isinfluenced to varying degrees by a number of factors.In the restricted model, the total number and volume ofloans guaranteed to the agricultural sector were foundto be the only significant factors determining GDP.LESSONS LEARNED FROM THE NIGERIANCREDIT GUARANTEE SCHEMEA number of lessons could be learned from the NigerianACGSF by other countries intending to institute similarprograms. They are as follows:1) The CBN and the FGN are the sponsors of theScheme. While the CBN has been paying upits agreed contributions to the Fund, the FGNhas persistently been lagging behind in payingup. Given that the FGN is the originator of thepolicy, it has not matched its action with itsstated intention. This may give wrong signals tothe states and local governments as well othercorporate organizations that are now beinginvited to contribute to the Fund under the TrustFund Model. This could be responsible forthe slightly slow response to the invitation toparticipate in the Trust Fund.2) The Nigerian economy has experienced inflationover the years. This has continuously beeneroding the value of the Naira and hence the valueof the Fund. This is what necessitated theupward review of the authorized and paid upcapital as well as the ceilings for the loans thatcould be guaranteed for cooperatives/corporateorganizations and individual large-scale farmerstwice. The ceiling for small-scale farmers’ loan,which is not collateralized, was however onlyincreased once.3) There is a problem of backlog of unsettledclaims, some of which span over twenty years.This is highly undesirable because it may erodethe confidence of banks in the Scheme. This isprobably responsible for the poor growth in thenumber of banks participating in the aforementionedprogram.J. econ. finance adm. sci., 15(29), 2010
Vol. 15, Nº 29Mafimisebi, Oguntade & Mafimisebi: Re-Engineering Agriculture for Enhanced Performance 474) The design of the TFM makes it a social responsibilitycontribution of corporate organizationsand hence not mandatory. At the same time, theTFM is not designed as a statutory responsibilityfor the state and local governments. As a result,the parties being targeted by the Trust Fundhave not felt obligated to contribute to it. Sincethe TFM commenced as a framework for fundintermediation for agricultural purpose in 2001,only about 15 stakeholders, comprising 10 StateGovernments (out of 36), 3 multinational corporationsand 2 NGOs, have adopted the modelas of the end of December 2005, with a totaldeposit of N 1.6 billion. None of the 778 localgovernments have contributed to the Fund.5) A major strong point of the Scheme is the easyaccess farmers enjoy. This was facilitated by theuse of NACB offices, which exist in every stateand local governments’ capital cities across thenation. They became the points for obtainingand submitting application forms6) The overhead of the Scheme has been keptrelatively low over the years. This was madepossible by the use of existing structures of theCBN, commercial banks and the NACB to runthe Scheme rather than creating a new structurefor it.CONCLUSION ANDRECOMMENDATIONSThe co-integration results have clearly shown that thereis a long-run relationship between agricultural GDPand the number and volume of loans guaranteed by theACGSF. This implies that the Scheme has contributedto the development of the agricultural sector and hasmet some of the objectives for setting it up. For countrieswishing to set up similar scheme, the followingrecommendations should be considered:1. Whenever possible, existing structures should beused to run the credit guarantee scheme ratherthan setting up a new structure for it. This willhelp to limit the scheme’s overhead and directthe available fund to the beneficiaries.2. All tiers of government should be made partnersin contributing to the fund through the enablingact to be passed by parliament right from theonset. This is because it may be difficult to amendthe bill later and the other tiers of governmentmay be unwilling to voluntarily contribute, asseen in the case of Nigeria.3. In any economy in which inflation is a persistentproblem, there is a need to review the authorizedcapital of the fund and the ceilings for the loansto be guaranteed for beneficiaries upwards atperiodic intervals. This is to ensure that the fund’scapital base is adequate and the loans guaranteedunder the scheme are enough for investmentpurposes.4. Operators of the scheme should ensure thatverification and settlement of claims are treatedpromptly. This will enhance the confidence inthe program by the participating banks. In turn,this confidence is very critical especially if theeconomy of a country is experiencing inflation.5. Efforts must be made to ensure that the programis brought as near as possible to the farmers. Theclients will have access to it and reduce the costof transactions to them. This could be achievedat minimal costs if existing programs and/orinstitutions with wide network across the countrycould be identified and used for reaching out tothe farmers.6. There is a need to build into the scheme a mechanismthat will enhance voluntary repayment ofguaranteed loans by beneficiaries. In fact, smallscalefarmers are not expected to provide collateralswhile the individual large-scale farmersand cooperative/corporate organizations do nothave to provide collaterals covering one hundredpercent of the loans approved for them.J. econ. finance adm. sci., 15(29), 2010
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