Agricultural Financing, Food Production and Poverty Level in Nigeria

HAMMED, Yinka Sabuur

Department of Economics, OAU, Ile-Ife & Centre for Econometrics and Applied Research, CEAR, Ibadan

Introduction
Attempts to ensure sufficient food production for the entire world
population is increasingly receiving critical attention (see Tochukwu et
al, 2022).
While the United Nations focus on reducing hunger through adequate
food production, it is equally making effort to eradicate poverty across
the entire nations.

The increasing effort to reduce poverty at global level is thus gaining

momentum.
 Introduction (cont’d)
Additionally, the multidimensional survey in 2022 suggests that 63% of Nigerian representing 133 million
people are multidimensionally poor.

This statistic is deeply suggesting that many of this population are grossly deprived of adequate food
production, quick attention for health facility, sanitation practice and adequate housing facility (NBS, 2022).

Evidence from international Food Policy Research Institute (IFPRI) also suggests that global hunger index
for the country is very high (see figure 1).

While the cost of purchasing a healthy diet keep rising in Nigeria, the number of people and the percentage
of population being unable to afford the cost has also been on a far increase (see figure 2).

The issue of concern is however to investigate the role of finance in ensuring food production and by
extension reduce poverty level in Nigeria.
 Introduction (cont’d)
250
Nigeria Global Hunger Index 200
191.5 197.6
45.0 179.7 185.6
40.0 150
40.4
35.0
100
30.0 32.1 94.1 94.8 95.3 95.9
25.0 28.4 27.3 50
20.0
15.0 0
3.565 2017 3.724 2018 3.87 2019 4.093 2020
10.0
5.0 Cost of a healthy diet (PPP dollar per person per day)
0.0 Percentage of the population unable to afford a healthy diet (percent)
2000 2007 2014 2022 Number of people unable to afford a healthy diet (million)

Figure 2: Connectedness between cost of healthy diet and

Figure 1: Global hunger index for Nigerian between 200 and 2022
(Data source: International Food Policy Research Institute, IFPRI) number of population unable to afford it (Data source: FAO
Statistics)

However, literature equally suggested that food production is more congruent to adequate financial flows to the concerned sector
(Osabohien et al, 2020; Ebere et al, 2021).

The implication from the foregoing is that having sufficient food security as way to eradicate poverty, presupposes adequate
financing to the agricultural sector (see Omodero, 2021) 
 TREND ANALYSIS
300 3500 1,600.00 160

3000 1,400.00 140

250

Production Indices for Rice and Food

Production Index Food and Rice

1,200.00 120
2500
200
1,000.00 100

GDP per capita

2000

Agric Credit
150 800.00 80
1500
600.00 60
100
1000
400.00 40
50 500 200.00 20

0 0 0.00 0
61 65 69 73 77 81 85 89 93 97 01 05 09 13 17 21 81 84 87 90 93 96 99 02 05 08 11 14 17 20
19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 19 19 19 19 19 19 19 20 20 20 20 20 20 20

PI (Food) PI (Rice) GDPPC $ Fin PIF pir

Figure 3: Co-movement among food production index, Rice production index and Figure 4: Co-movement Agric credit, food production index and rice
GDP Per Capita for Nigeria (Data source: FAO Statistics) production index 1981 and 20121 (Data source: FAO Statistics)
 Results
Table 1 MODEL I: Finance and Food Production

Variable Short Run Long Run

coefficient p-value Coefficient p-value

LPIF (-1) -0.2935 0.0013

LFIN (-1) 0.0462 0.0058 LFIN 0.1573 0.0000

LARL 0.2743 0.0007 LARL 0.9346 0.0000

Coint-Eq (-1) * -0.2934 0.0000

ALTERNATIVE PROXY USING PIR

Variable Short Run Long Run

coefficient p-value Coefficient p-value

LPIR (-1) -0.4935 0.0036

LFIN (-1) 0.0792 0.0195 LFIN 0.1606 0.0000

LARL 0.4021 0.0019 LARL 0.8148 0.0000

Coint-Eq (-1) * -0.4935 0.0002

F-Bound Test F-stat

Required 3.8800 Actual 5.3000

Break-Point 2014 decision level @ 1%

 Results
Table 2 MODEL II: Food Production and Poverty Level

Variable Short Run Long Run  

Coefficient p-value coefficient p-value  

LGDPPC (-1) -0.1035 -0.0052  

LPIF 0.1466 0.0356 LPIF 1.4159 0.0000  

LFIN 0.0382 0.0496 LFIN 0.3694 0.1681  

CointEq(-1)* -0.1035 0.0000  

ALTERNATIVE PROXY USING GNIPC  

Variable Short Run Long Run  

Coefficient p-value coefficient p-value  

LGNIPC (-1) -0.0659 0.0144  

LPIF 0.1041 0.0349 LPIF 1.5802 0.0000  

LFIN 0.0067 0.5602 LFIN 0.1009 0.5974  

Coint-Eq (-1) * -0.0658 0.0033  

F-Bound Test F-stat  

Required 3.88 Actual 5.30  

Break-Point 2015 decision level @ 1%  

 Policy Implication
The policy arising from our analysis is found in the necessity of
agricultural finance for the farming activities of food crops.

With adequate credit accessibility by the farmers, the production of food

crops will be assured and its extended impact will become pronounced in
poverty reduction.

However, as suggested by our findings, the finance impact of credit

facility is not often instantaneous, hence the need to make agricultural
fund before time in anticipation for future benefit through food surplus.