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.
