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GOVERNMENT
POLICIES ON NON-OIL EXPORT (AGRICULTURE) ON THE ECONOMIC GROWTH OF NIGERIA
Background
of the study
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).
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