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PROJECT TOPIC  : MONETARY POLICY AND AGRICULTURAL DEVELOPMENT IN NIGERIA (1970 - 2010)

PROJECT PROPOSAL/CHAPTER ONE

1.1 BACKGROUND OF THE STUDY
If left unchecked to allocate themselves freely in an economy, money and credit flows, volume, cost and direction are very unlikely to achieve some specific macro-economic policy objectives, which can change from time to time, depending on the economic fortunes of a particular country. To achieve balanced and steady economic growth and development, and to instil some sanity into a country’s financial system, the need for monetary policy becomes inevitable.

Monetary policy then can be viewed as measures designed to regulate and control the volume, cost and direction of money and credit in an economy. Monetary policy influence the volume and direction of purchasing power in an economy and is an instrument of market intervention to achieve rationality stipulated objectives which otherwise be impossible of attainment at least in terms of volume, speed and direction (Anyanwu, 1996).

Monetary policy in the economy is made up of six components or different policies dealing with the volume of or quantity of, money i.e. the supply of money and credit, its price, the rate of interest and its allocation (Afolabi, 1991). It also includes policies on balance of payments on the exchange rates and on external reserve management. In other words, monetary policy that limits itself merely to establishing and controlling the quantity of money or its price or indeed omits or excludes any of the six components is not complete and cannot be effective.

Money or credit is an indispensable and inevitable variable in any economy that it cuts across every sector - agricultural, industrial, commerce and so on. It is money or credit that forms the basis of monetary policy; therefore monetary policy can be defined as a tool of effective changes in the cost of, volume of, and direction of flow of credit in an economy. Put in another way, monetary policy is any conscious action undertaken by the monetary authorities to change the quantity, availability or cost of money. This implies that monetary policy is a policy employed by the Central Bank to control money supply as an instrument for achieving certain objectives of economic policy which often encompasses price stability through improved agricultural production.

Monetary policy has been used in diversified ways to aid the development of the agricultural sector in Nigeria. To start with, interest rate structure has been employed principally to direct ‘cheap’ credit to specific sectors such as agricultural sector. This was done by consistently stipulating relatively lower interest rates for loans and advances of the sector. It should be noted however, that the shares of agriculture in the total loans and advances of commercial and merchant banks are still relatively small.

Furthermore, as parts of the efforts of the monetary authorities to alleviate the burden of loan repayment of agricultural loans by farmers, the grace periods for the repayment was evolved in 1984. The grace period for loans granted to small-scale peasant farmers and producers of seasonal cash crops; like groundnuts was fixed at one year, four years for loans to livestock farmers and those engaged in the production of crops with relatively long gestation periods for example rubber, palm trees and cocoa. For medium and large scale mechanized farming, the grace period was five (5) years.

Despite the efforts of government in boosting agricultural production, the sector seems not to be witnessing significant development. To be able arrive at a logical conclusion; this study shall examine the effectiveness of CBN’s monetary policy by examining empirically investigating its impact on agricultural development in the country.

1.2 STATEMENT OF THE PROBLEM
Of recent, the agricultural sector in Nigeria has not been able to fulfill its traditional role of feeding the population, meeting the raw materials needs of industries, as well as providing substantial export earnings for the economy. Indeed, the contribution of the sector to gross domestic product (GDP) has been falling, not necessarily because a strong industrial sector is displacing agriculture but as a result of low productivity. The largely subsistence agricultural sector has failed to keep up with rapid population growth.

Nigeria is Africa’s most populous country and the country, once a large net exporter of food, now imports food. Emerging problems which constrained the full realization of the potentials in the agricultural sector include: inadequacies in the supply and delivery of farm inputs, shortage of working capital, low level of technology, diseases and pest infestation, poor post-harvest processing and shortage, technology, environment hazards, labour and land use constraints. Most of these problems could be solve with the appropriate monetary policy.

The need to correct the existing structural distortions in Nigerian agricultural sector and put the economy on the path of sustainable growth is therefore compelling. This raises the question of what monetary policy to adopt to develop the agricultural sector in order to realize the potentials of the sector. This is the main thrust of this study.

1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to assess the effectiveness of the monetary policies in terms of its promotion of agricultural development in Nigeria. However, the following specific objectives would also be achieved.
(i) To examine the trend and structure of monetary policy in Nigeria;
(ii) To evaluate the performance of the agricultural sector in Nigeria over the years.
(iii) To empirically investigate the impact of the monetary policy on agricultural development in Nigeria;
(iv) To make recommendations on how to boost the performance of the agricultural sector through appropriate monetary policies.

1.4 RESEARCH QUESTIONS
This research shall be guided by the following research questions:
(i) What has been the trend and structure of monetary policy in Nigeria over the years?
(ii) What has been the performance of Nigerian agricultural sector over the years?
(iii) How do the monetary policy instruments affect agricultural sector in Nigeria?

1.5 RESEARCH HYPOTHESES
The hypotheses to be tested in the course of this research work are stated below:
HYPOTHESIS I
H0 - That monetary policy instruments do not affect agricultural output in Nigeria.
H1 - That monetary policy instruments affect agricultural output in Nigeria.

HYPOTHESIS II
H0 - That monetary policy instruments do not affect index of agricultural production in Nigeria.
H1 - That monetary policy instruments affect index of agricultural production in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY
This study is significance in the following ways:
1. It would provide an objective view of the effectiveness of Nigerian monetary policy in terms of its promotion of agricultural development;
2. The study would also provide an econometric basis upon which to examine the effect of monetary policy on agricultural development in Nigeria;
3. Lastly, it would provide policy recommendations to policy-makers on ways to make the Nigerian agricultural sector vibrant through the monetary policy.

1.7 SCOPE AND DELIMITATION OF THE STUDY
The economy is a large component with lot of diverse and sometimes complex parts. However, this study will only focus on some macroeconomic variables such as the monetary policy and agricultural productivity. This study will cover all the facets that make up the monetary policy, but shall empirically investigate the effect of the major ones. The empirical investigation of the impact of the monetary policy on the agricultural development in Nigeria shall be restricted to the period between 1970 and 2010.

This study shall contain five chapters. The first chapter shall contain the background of the study, the statement of the research problem, the objectives of the study, the research questions etc that would guide the study. Chapter two summarises the opinions of different authors on the subject matter. Chapter three states the methodology adopted in the study. Chapter four focuses on the presentation and interpretation of the regression results. The last chapter, which is chapter five, presents the summary of the findings, conclusion and appropriate recommendations.

1.8 DEFINITION OF TERMS
(i) Open Market Operation (OMO):
This is the buying and selling of government securities by a central bank, such as the Central Bank of Nigeria, in order to control the money supply.
(ii) Expansionary Monetary policy:
Expansionary monetary policy is when the Central bank is using its tools to stimulate the economy. This usually means lowering the cash ratio to increase the money supply. The opposite is contractionary monetary policy
(iii) Moral Suasion:
This is an application of pressure, but not force, by an authority (such as the Central Bank) to get financial institutions to adhere to a policy.


REFERENCES
Afolabi, L (1991), Monetary Economics: Heinemann Educational Books (Nigeria) PLC.

Anyanwu J. C. (1996), Monetary Economics: Theory, Policy and Institutions. Hybrid publishers limited.

Folawewo, A. O. and Osinubi, T. S. (2006). “Monetary Policy and Macroeconomic Instability in Nigeria: A Rational Expectation Approach”. Journal of Social Science, vol.12(2): pp.93-100.

PROJECT PROPERTIES
Project Status
Available
Number of Chapters
5
Number of Pages
97
Number of Words
16,165
Number of References
31
Project Level
B.Sc.
Price
N10,000 - Ten Thousand Naira (Non-Negotiable)
Abstract, Regression Data and Results are included
How to Pay for this Project . . . .CLICK HERE

Keywords: monetary policy, monetary policy instruments, agricultural development

 

 

 

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