IMPACT OF GOVERNMENT POLICIES ON NON-OIL EXPORT (AGRICULTURE) ON THE ECONOMIC GROWTH OF NIGERIA

The article on this topic (government policies on non-oil export on the economic growth of Nigeria) is an extract from literature review of the project material. The complete project work would be made available when you subscribe for the full material.

CHAPTER TWO

LITERATURE REVIEW

CONCEPTUAL FRAMEWORK

2.2 PROMOTION OF THE EXPORT INNIGERIA: EMPIRICAL ASSESSMENT OF AGRICULTURAL CREDITS GUARANTEE SCHEME FUNDS.

 The agricultural Credit Guarantee Scheme fund (ACGSF) was formed under the military government in 1977 with an initial capital of ₦100 million distributed between the federal governments (60%eqity). The ACGSF is exclusively managed by a board set up under the supervision of the CBN (management agent). The fund is set up with the sole purpose of providing guarantee in respect of loans granted by any bank for agricultural purposes (CBN, 1990).  Nwosu et at. (2010) noted that the ACGSF was formed solely with the objective of encouraging financial institution to lend funds to those engaged in agricultural production as well as agro-processing activities with the aim of enhancing export capacity of the nation as well as for local consumption.

 Most often, financial institutions require huge collateral from customers before loans are granted to them. This is detrimental to enhance their production. The ACGSF is aimed at reducing this dearth by guaranteeing these farmers or other individuals involved in agricultural production when seeking for loans from the bank. In case of a beach in contract, the fund bears the liability of 75% of the amount in default, net of any amount realized by the banks in the sale of the security pledged by the customer: this has made most financial institutions interested and secured in granting loans to agricultural renters. An analysis of the direction of commercial bank loans to the agricultural sector of the economy has some interesting observation as reflected in table 1.

 The question that comes to mind is whether the declining shame of agricultural loan from commercial bank can be traceable to the challenges that encumbered ACGSF. For example, Nwosu et at. (2010) identified three major problems associated with the ACGSF scheme which includes increasing incidence of loan defaulters, bank related problems and the inclusion of the term “personal guarantee”. Nwosu et at illustrates that the term is subjected to illustration or rather interpretation especially as the decree forming ACGSF was not able to explain this. Therefore bank utilize personal judgment and circumstantial frame work to interpret this. This will hinder the achievement of the objective of the scheme.

 The ACGSF is aimed at guaranteeing agricultural outfit that specializes in the following:

 1. Agricultural outfit engaged in the establishment and management of plantation for cash crop produce like rubber production, oil palm extracting, cocoa plantation etc.

 2. Agricultural outfit engaged in the cultivation and production of crops like fruit of all lands, tubers of yam, cereals and other food crops.

 3. Agricultural activities involved in the large sealed production of animal husbandries.

NON-OIL EXPORT AND ACGSF: One of the sole objectives for the establishment of the ACGSF is to enhance the export capacity to agricultural produce (Somayina, 1981). The need to understand the trend of event for export since the inception of ACGSF becomes pertinent: and hence, fig. 1 brings out the trend. The figure is a descriptive comparism of the fund allocated to ACGSF and the value of the non-oil export. Nigeria has overtime had majority of its non-oil exports dominated by agricultural produce, most especially cocoa and rubber (Sasore, 2005).

 The value of non-oil export follows a similar trend with the value of ACGSF. From the figure, the value of non-oil export in the period 1978 and 1980 experienced an upward trend which was similar to ACGSF. The value of non-oil export increased up until the period 1984-1986, which experience a downward trend and at the same period, the ACGSF kept rising. The period 1994 and 1986, witnessed turbulence in the Nigerian political system, especially with the coup that took place in the period. Also, this may be explained by the initial downward shock experienced by ACGSF in the latter and early period of 1984. This may indicate the fact that non-oil export experiences a lag, before reacting to change in ACGSF. The value of non-oil export experienced a sharp decline in the period 1996 -1998, after a long downward slope of ACGSF between the period of 1990 and late 1994. (Bernard, A .Band J. Wagner 2001).

 The period 1990-1995 was particularly a tensed period especially with the several riots and change of government that took place during the period, which resulted into immense political crisis. This probably would have led to the decline in the ACGSF scheme and the shock experienced in the value of non-oil export in the year 1996 .Hence there is a need to examine the trend relationship between political constraint and non-oil export as well as ACGSF.

 It is important to conceptualize political constraint in the light of the focus of this study. Political constraint is the effective veto points with political interaction to derive the extent to which any one political actor or the replacement for anyone actor e.g. the executive or a chamber of the legislature is constrained in his or her choice of future policies (Heinz and Zelner, 2007).During this period of military government, the level of political constraint is zero because of the absolute rate power the military government has in influencing policy as when needed. From the figure two significant trends of the value of non-oil export and ACGSF can be categorized: during the later years of military regime-1992-1999(political constraint was very minimal) and the early years of democratic regime -1998-2008.Political constraint was fairer than the former. The trend of non-oil export had a lower trend movement during the periods of military regime, while the period of democratic government experienced a higher trend of non-oil export. Non-oil export experienced a sharp decline during the military government era (Late 1995-1996), which is the period after the national crisis that led to a coup as well as massacre of many political figures.

 Interestingly, the figure also exhibits the fact that the ACGSF value was on a higher trend in the democratic government era than in the military government era .This probably will be to the fact that the democratic era was more concerned in development than in power cannibalism’ .Hence, the government is focused on increasing the capital base of the scheme so as to meet the needs of the recipient. Although this is not a claim of the debate for preference Nigerian democratic government to military government, but it is an argument to support the trend ACGSF exhibited over time .The decline in the ACGSF during 2005-2006 can be traced to the bank recapitalization exercise which was mandated in 2004 but was effective in December 2005.Most banks during this period were most importantly concerned about meeting up with the ₦25 billion minimum capital base (Aktar, I. and L. Ozturk, 2009).

2.3 NIGERIA FIRMS’ NON-OIL EXPORT INVOLVEMENT AN ECONOMIC TRANSFORMATION PARADIGM

 To engage in foreign trade bring about earning foreign exchange, increase in sales ,increase in profit ,lower production cost, employment creation ,earning international recognition, enhancing reputation ,improving living standard of both the exporting and importing firms/nations. Panagariya (1995), in a study of china’s exporting strategy remarked that export is a key to high GDP growth rates. The critical economic difficulty faced by Nigeria as a result of oil glut in the world market stimulated several search for alternative to oil as a sustainer of economic development in 1980s, hence the need for export marketing as a viable alternative to oil (crude petroleum).

 This study therefore, examined and documents the derivable benefits and factors impacting on export marketing involvement of Nigeria manufacturing firms. It also highlighted the country’s market opportunities in foreign market involvement. (Ayanwale, A. B 2007).

EXPORT AND ECONOMIC DEVELOPMENT

 The vital role of optimizing economic growth process can therefore be credited to export marketing and or marketing. This is because marketing was instrumental in laying the ground work necessary for rapid development of most developed nations. Drucker (1998) asserts that marketing is the process through which the economy is integrated into society to serve human needs. In the same manner effective marketing was described as not only improving the life-style and well-being of people in a specific economy, but also up-grades world markets In other words, marketing raises the living standard of not only of its domestic economy, but also of others through export marketing. (Ng F, Yeats A .2002).

 Export marketing can be described as a nation’s economic facilitator, as it facilitates transactions between a country’s productive sector and its international consumer need /demand. It is the critical link in effectively utilizing the production resources of one country to the economic well-being and growth of both the importing and exporting countries. It has also been argued that export marketing and extension marketing, might by itself go far toward changing the entire economic tone of the existing system, without any change in methods of production, distribution of population or of income .What is needed in most developing countries’ (like Nigeria) is growth to make economic development realistic and meaningful to engage in effective marketing and export marketing.

 It is the belief of most people that Man can improve his economic lot through systematic, purposeful and directed marketing effort, individual as well as for the entire society .This is because Man has so been equipped and blessed with necessary tools of divine aptitude, learning, developed technology among others.

ISSUES IN DEVELOPING COUNTRIES EXPORT MARKETING

 It has been observed that marketing profits are usually low in developing countries like Nigeria, because people who are involved in marketing activities do so to barely eke out a subsistence living. This can be attributed to the fact that there are inefficiencies in the areas of product, price, promotions and place. In other words, low marketing in under developed countries, results to producers being in-capable of producing marketable products. Marketing has to improve in developed countries, so as to free itself from limiting / static system into creative and generative organic growth.

 In an economy that is developing and striving to break the age old bondage of Man to misery, wants and distribution like that of Nigeria ; marketing is the catalyst for the transmutation of latent resources into actual resources of desires into accomplishments and the development of responsible economic leaders and informed economic citizens. The less developed countries low marketing system also bring about agricultural over- population in which the great bulk of the people have to laboriously find a living on the land ,which cannot even produce enough food to feed the people, let alone produce surplus for export. There is no doubt that the contributing factors to the problem of marketing includes: lack of mechanized equipment for serious agricultural production, availability of capital for meaningful investment in this sector, lack of socio-economic infrastructure and of course political instability. (Dolan C, Humphrey J. 2000)

 The less developed countries marketing system has been said to be responsible for the stunted economic growth because economic development hinges on marketing, which is described as important multiplier’ for development .This vital role of marketing is the necessary foundation for any meaningful export marketing, which also enhances the economic development of nations.

 It has also been argued that most of the benefits derived from exporting, may not be realized if the firms in developing countries do not first meet the home need of its products or services. Iyanda (1982) noted that it will be a misplaced priority to plan to export when domestic demand has not been satisfied. However, the fact still remains that for firms to grow at home, they definitely need to sell their products / services abroad. The conception that a country should only export when it has surplus over domestic demand, undermines the policy of export oriented development, which Nigerian government tend to be pursuing. (MARI .A .2008)