ABSTRACT

Despite various efforts in Nigeria towards delivering microcredit to farmers to achieve the twin objectives of poverty alleviation and enhanced agricultural productivity over the years, the track record of performance has been unencouraging. Agricultural productivity is still reportedly low while incidence of poverty is on the increase. Assessment studies on microcredit have focused mainly on the informal and public sector initiatives with little attention on the private sector, institutional microcredit providers. Therefore. this study analyzed institutional microcredit supply and its effects on the productivity, technical efficiency and poverty levels of arable crop farmers in Nigeria. Primary data used in the study were obtained from the farmers directly, while the secondary data were obtained from publications of the Central Bank of Nigeria, National Bureau of Statistics, the World Bank and CIA World Fact Book. Tools used in analyzing the data were trend equations, multiple regression analyses and the FGT poverty measurement indices. The trend analysis covered a fifty-year period from 1961 to 2010 and was broken into sub-periods (pie-deregulation. regulation and financial sector reform) to capture some major policy milestones in Nigeria. The results of data analyses showed that there was a positive trend relationship between time and institutional microcredit supply to farmers all through the fifty-year period. The compound growth rate of institutional microcredit to farmers was however found to be higher in the pie-deregulation era than in the deregulation and financial sector reform periods. This was corroborated by the result of the quadratic time term (t2) which showed acceleration of credit supply in the pie- deregulation period as compared to deceleration in the deregulation and stagnation in the post financial sector reform periods. The major determinants of credit supply to the agricultural sector were lending interest rate. deposit base of the lending institutions and liquidity. While the deposit base of the institutional microcredit providers (IMPs) stimulated lending, rising interest rate and liquidity ratios were major constraints to agricultural sector credit supply. There were also significant positive relationships between interest rate, treasury bills rates, and minimum rediscount rate (MRR). Credit supply. gross domestic product (GDP), government expenditure and financial investment were also found to have significant positive relationship with the deposit base of the IMPs while, MRR moved in the opposite direction contrary to a priori expectation. The results of the productivity analyses showed that institutional microcredit beneficiaries had higher productivity and technical efficiency indices than the non beneficiaries. The study also showed that non beneficiaries of institutional microcredit were poorer than their credit using counterparts and that the level of poverty among the farmers generally was higher than the national average. Finally, the results showed no significant differences in the productivity and poverty indices across the geopolitical zones. Based on these results. it was recommended that government should combine deregulation with a more direct policy measure that stipulates minimum credit boundaries for the IMPs to targeted priority sectors like agriculture. This would improve farmers' productivity and technical efficiency levels and in turn, reduce poverty among them.