36 Journal of Economics, Finance and Administrative ScienceDecember 2010ResumenEl insuficiente crédito institucional es el mayor contribuyente al constante bajo <strong>re</strong>ndimiento del sector agrícola en Nigeria.Para alentar a las instituciones financieras a que aumenten el préstamo en el sector, se ha instituido un esquema de garantíade crédito parcial. Este esquema inició sus operaciones en 1978 con un capital autorizado de N100.00 millones, suscritos en60 % y 40 % por el Gobierno Federal de Nigeria y el Banco Central de Nigeria <strong>re</strong>spectivamente. Este estudio p<strong>re</strong>senta unaap<strong>re</strong>ciación de ese esquema. Los <strong>re</strong>sultados <strong>re</strong>velan que se ha dado un c<strong>re</strong>cimiento sostenido en el capital compartido pagado,total de <strong>re</strong>cursos del fondo, el monto máximo de préstamo obtenible por los agriculto<strong>re</strong>s, número y valor de los préstamosgarantizados, volumen y valor de los préstamos totalmente pagados y el volumen y valor de los <strong>re</strong>clamos por mora <strong>re</strong>sueltos.Se observó una gran cor<strong>re</strong>lación ent<strong>re</strong> el número y el volumen de préstamos garantizados y el PBI agrícola. Este <strong>re</strong>sultadoindica la necesidad de aumentar la cuantía de los fondos disponibles que garanticen los préstamos agrícolas para aumentar el<strong>re</strong>ndimiento del sector agricultura en el largo plazo. Este paso está justificado por el papel estratégico de la agricultura en laeconomía nigeriana en términos de producción de comida y fibra, c<strong>re</strong>ación de trabajo, generación de ing<strong>re</strong>sos, <strong>re</strong>ducción dela pob<strong>re</strong>za y la estabilidad económica.Palabras claves: Finanza agrícola, crédito garantizado, pequeños agriculto<strong>re</strong>sJ. econ. finance adm. sci., 15(29), 2010
Vol. 15, Nº 29Mafimisebi, Oguntade & Mafimisebi: Re-Engineering Agricultu<strong>re</strong> for Enhanced <strong>Performance</strong> 37INTRODUCTIONAgricultu<strong>re</strong> is still a dominant sector of the Nigerianeconomy. From the early 1950s to the early 1970s,the sector was a source of employment to about 80%of the labour force (World Bank, 1993; Upton, 1997).Agricultu<strong>re</strong> generated fo<strong>re</strong>ign exchange earnings usedin financing development projects in other sectors.Abundant and affordable food emanated from agricultu<strong>re</strong>for both domestic consumption and export duringthis period. This ensu<strong>re</strong>d a highly stable economy witha low rate of inflation (Nigerian Institute of Social &Economic Research (NISER), 2003).However, starting from the early 1970s when Nigeriabegan to export crude oil, the importance of agricultu<strong>re</strong>began to wane. Attention virtually shifted to theoil sector, which prog<strong>re</strong>ssively accounted for the bulkof fo<strong>re</strong>ign exchange earnings. As a <strong>re</strong>sult of inflow of«petrol dollars», Nigeria inc<strong>re</strong>asingly <strong>re</strong>lied on importationof food and agricultural raw materials instead ofinvesting in and st<strong>re</strong>ngthening the agricultural sector.This marks the decline of this sector as an engine ofeconomic growth. The <strong>re</strong>ason given was that <strong>re</strong>turnsfrom agricultu<strong>re</strong> we<strong>re</strong> far lower compa<strong>re</strong>d to other sectors(NISER, 2003). In spite of the underfunding, whichmakes Nigerian agricultu<strong>re</strong> largely traditional, subsistentand very low in the use of productivity-boostingtechnologies, it <strong>re</strong>mains an important economic drivercontributing about 42% to the nation’s GDP (Njoku,2010). About 70.3% of the rural and 34.8% of theurban poor a<strong>re</strong> engaged in di<strong>re</strong>ct, on-farm agriculturalproduction (NBS, 2006). The overriding importance ofagricultu<strong>re</strong> to the Nigerian economy is <strong>re</strong>vealed by thefact that despite oil and gas accounting for over 80%of the nation’s <strong>re</strong>venue, the contribution of this sectorto the GDP is only 23% (Njoku, 2010). Agriculturalloans we<strong>re</strong> <strong>re</strong>garded as low-yielding, high-risk loanswith towering administrative costs and consequentlyunattractive to grant (Coster, 1998). The problem ofunder-funding of the agricultural sector continued toaggravate to the extent that by the late 1970s, Nigeriahad become a net importer of many of the major fooditems it was exporting befo<strong>re</strong>. Thus, the oil boom of thelate 1970s brought in its wake the agricultural doom,which Nigeria has been battling to <strong>re</strong>verse in the lastth<strong>re</strong>e decades (Mafimisebi et al., 2008). The unbridledimportation of goods, especially food commodities andits attendant demand on the country’s fo<strong>re</strong>ign account,also placed the balance of payment in a p<strong>re</strong>cariousposition (NISER, 2003).The poor performance of the agricultural sector,which was first noticed about th<strong>re</strong>e decades ago,worsened through inadequate capital investment thatculminated in the vicious circle of low farm size, lowuptake of productivity-boosting technologies, lowoutput, low income and low farm size (Mafimisebi,et al., 2006, 2008). This magnified the p<strong>re</strong>valence ofsmall-scale farmers, <strong>re</strong>garded as highly unorganizedand poor in <strong>re</strong>source endowment and managerialskills (Akinwunmi, 1999). To <strong>re</strong>medy the problem ofpersistent low performance of the agricultural sector,the need for capital injection into agricultu<strong>re</strong> becameobvious (Olayemi, 1999; Udoh et al., 2002; Mafimisebiet al., 2006, 2008).In <strong>re</strong>cognition of the indispensable role of c<strong>re</strong>dit inengendering the development of Nigerian agricultu<strong>re</strong>,the government established the Nigerian AgriculturalCo-operative Bank (NACB) in 1973, which in 2003became the Nigerian Agricultural C<strong>re</strong>dit and RuralDevelopment Bank (NACRDB). Within a couple ofyears, the institution was burdened with very poor loan<strong>re</strong>covery rate (Kabir, 1985; Balogun & Otu, 1991; Dittoh,1992; Coster, 1998; George, 2002). Further effortstargeted at providing institutional c<strong>re</strong>dit for agriculturalpurposes and bridging the c<strong>re</strong>dit gap included mandatingcommercial banks to open branches in rural a<strong>re</strong>asfor easy and <strong>enhanced</strong> access to c<strong>re</strong>dit by farmers. Inaddition to this, commercial and merchant banks we<strong>re</strong>also mandated by the Central Bank of Nigeria (CBN) tocommit 15% and 8% <strong>re</strong>spectively of their loan portfoliosto agricultu<strong>re</strong>. Despite these laudable and potentiallyworkable policies, availability of institutional c<strong>re</strong>dit tofarmers <strong>re</strong>mained a mirage. The major <strong>re</strong>ason for thiscircumstance was the high default rate of agriculturalloans occasioned by low <strong>re</strong>turns compa<strong>re</strong>d with othersectors. The problem g<strong>re</strong>w to such an alarming dimensionthat many commercial banks deliberately <strong>re</strong>fused toJ. econ. finance adm. sci., 15(29), 2010
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