The effect of inflation and interest rate on agricultural productivity in nigeria from 2000-2015

Thesis Overview

<p> </p><p><b>INTRODUCTION</b></p><p><b>1.1 &nbsp; &nbsp; <br></b><b>Background<br>of the study</b></p><p>Inflation has been apparent in Nigeria from the outset<br>of her national life as it was propelled in the 1960s through the “cheap money<br>policy” adopted by the government to stimulate development after independence<br>(Bayo, 2005). Nigeria has experienced all manners of inflationary episodes,<br>from creeping to moderate and from high to galloping (Olubusoye and Oyaromade,<br>2008). Inflationary pressure in Nigeria was largely contained in 2010 and 2011,<br>though the rate remained above the national and the West African Monetary Zone<br>(WAMZ) single-digit inflation rate target (CBN, 2011). However, the 12-month<br>moving average headline inflation rate was 10.8 percent in 2011, compared with<br>13.7 percent at end-December 2010. The agricultural sector is strategic to national<br>economic development and contributes 42.1% of the current GDP (Eleri et al.,<br>2012). It remains a major source of food and raw material for agro-industrial<br>processing and has strong links to employment, national income, market<br>opportunities for industrial production and strong potentials for poverty<br>reduction and health improvement. However, Nigerian agriculture faces<br>tremendous challenges which include the rising food prices amongst others. Food<br>price inflation has risen in recent years because of many factors, on and off<br>farms throughout the world (Oppedahl, 2009). The future direction of world food<br>prices will depend on whether research and development increases agricultural<br>productivity faster than the growth in world food demand. Key sources and features<br>of recent increases of food prices in developing countries have been identified<br>as being the underinvestment in agricultural innovation and rural<br>infrastructure, shift of land and crops towards biofuel feedstocks, natural<br>disasters, high global energy prices, unequal distribution of resources,<br>mismanagement of natural resources, population growth and competition for land<br>and water (Alam and Shahiduzzaman, 2008) Global food prices registered a new<br>high in February 2011, rising by more than 30 percent year-on-year, underpinned<br>by large increases in the prices of cereals, edible oils, and meat (ADB, 2011).<br>While the recent price increases were triggered largely by production<br>shortfalls due to bad weather, structural and cyclical factors that were at<br>play during the 2007–2008, food crisis continue to be relevant, especially in<br>the light of the strong recovery of many emerging economies from the global<br>economic crisis. Inflation is undeniably one of the most leading and dynamic<br>macroeconomic issues confronting most economies of the world and has become a<br>leading topic of discussion in Nigerian families and press as its effects<br>penetrate more deeply into nation’s life due to prevailing increase in prices<br>(Olatunji et al., 2010). The consumer price index for food over the years in<br>Nigeria constituted a larger proportion of the composite consumer price index<br>and as noted by Oppedahl (2009), households in developing countries spend more<br>on food relative to overall spending and therefore, food price inflation had played<br>a bigger role in overall inflation. Despite the critical position of inflation<br>in the macroeconomic environment of Nigeria, research efforts have not hitherto<br>addressed the links between the direction of inflation, agricultural<br>productivity and economic growth over the years in Nigeria and therefore, this<br>study was carried out to the effect of inflation and interest rate on<br>Agricultural productivity in Nigeria from 2000-2015.</p><p><b>1.2<br>STATEMENT OF THE PROBLEM</b></p><p>Inflation is undeniably one of the most leading and<br>dynamic macroeconomic issues confronting economy of Nigeria and has become a<br>leading topic of discussion in Nigerian families and press as its effects<br>penetrate more deeply into nation’s life due to prevailing increase in prices<br>(Olatunji et al., 2010). The consumer price index for food over the years in<br>Nigeria constituted a larger proportion of the composite consumer price index<br>and as noted by Oppedahl (2009), households in developing countries spend more<br>on food relative to overall spending and therefore, food price inflation had<br>played a bigger role in overall inflation. That is why the researcher wants to<br>investigate the effect of inflation and interest rate on Agricultural<br>productivity in Nigeria from 2000-2015</p><p><b>1.3<br>OBJECTIVE OF THE STUDY</b></p><p>The objectives of the study are;</p><p>1. &nbsp; To ascertain<br>the factors that affect agricultural productivity</p><p>2. &nbsp; To<br>ascertain the effect of inflation on Nigeria’s economy</p><p>3. &nbsp; To<br>ascertain the relationship between effect of inflation and agricultural<br>productivity</p><p>4. &nbsp; To<br>ascertain the effect of inflation and interest rate on agricultural<br>productivity in Nigeria from 200-2015</p><p><b>1.4<br>RESEARCH HYPOTHESES</b></p><p>For the successful completion of the study, the<br>following research hypotheses were formulated by the researcher; </p><p><b>H0:<br></b>there<br>are no factors that affect agricultural productivity</p><p><b>H1:<br></b>there<br>are factors that affect agricultural productivity</p><p><b>H02:</b>there<br>is no relationship between effect of inflation and agricultural productivity</p><p><b>H2:</b>there<br>is relationship between effect of inflation and agricultural productivity</p><p><b>1.5 SIGNIFICANCE OF THE<br>STUDY</b></p><p>This<br>study will be of significance to students of different higher of learning as it<br>would enlighten them and the entire nation. Finally, this study will also help<br>to serve as literature (reference source) to the public, individuals and<br>corporate bodies into what to carry out on further research on the effect of<br>inflation and interest rate on agricultural productivity in Nigeria.</p><p><b>1.6 SCOPE AND LIMTATION OF<br>THE STUDY</b></p><p>The<br>scope of the study covers the effect of inflation and interest rate on<br>agricultural productivity in Nigeria from 200-2015. The researcher encounters<br>some constrain which limited the scope of the study;</p><p><b>a)<br>AVAILABILITY OF RESEARCH MATERIAL:</b><br>The research material available to the researcher is insufficient, thereby<br>limiting the study &nbsp; &nbsp; &nbsp; </p><p><b>b) TIME:</b><br>The time frame allocated to the study does not enhance wider coverage as the<br>researcher has to combine other academic activities and examinations with the<br>study.</p><p><b>c)<br>Organizational privacy</b>: Limited Access to the selected<br>auditing firm makes it difficult to get all the necessary and required<br>information concerning the activities. </p><p><b>1.7<br>DEFINITION OF THE TERM</b></p><p><b>INFLATION:<br></b><em>Inflation</em>&nbsp;is defined as a sustained increase in the general level<br>of prices for goods and services in a county, and is measured as an annual<br>percentage change. Under conditions of <em>inflation</em>, the prices<br>of things rise over time. When <em>inflation</em>&nbsp;goes<br>up, there is a decline in the purchasing power of money.</p><p><b>INTEREST RATE: </b><em>Interest rate</em>&nbsp;is<br>the amount charged, expressed as a percentage of principal, by a lender to a<br>borrower for the use of assets. <em>Interest rates</em>&nbsp;are<br>typically noted on an annual basis, known as the annual percentage <em>rate</em>&nbsp;(APR). <em>Interest</em>&nbsp;is<br>essentially a rental, or leasing charge to the borrower, for the asset’s use.</p><p><b>AGRICULTURAL PRODUCTIVITY: </b>Agricultural productivity is measured as the ratio ofagricultural outputs to agricultural inputs. While individual products are usually<br>measured by weight, their varying densities make measuring overall agriculturaloutput difficult.</p><p><b>1.8 ORGANIZATION OF THE STUDY</b></p><p>This<br>research work is organized in five chapters, for easy understanding, as follows</p><p>Chapter one is concern with the introduction, which<br>consist of the (overview, of the study), historical background, statement of<br>problem, objectives of the study, research hypotheses, significance of the<br>study, scope and limitation of the study, definition of terms and historical<br>background of the study. Chapter two highlights the theoretical framework on<br>which the study is based, thus the review of related literature. Chapter three<br>deals on the research design and methodology adopted in the study. Chapter four<br>concentrate on the data collection and analysis and presentation of<br>finding. Chapter five gives summary,<br>conclusion, and recommendations made of the study</p> <br><p></p>