Agricultural Finance and Productivity in the ECOWAS


Akpan H. Ekpo and Douglason G. Omotor

West African Institute for Financial and Economic Management (WAIFEM)

Lagos, Nigeria.

Abstract

In recent times, two global economic and political challenges which have had mix impact on the domestic economies of the ECOWAS member countries are the volatility of international commodity prices and global financial meltdown which began in July, 2007 orchestrated by loss of confidence in securitized mortgages in the United States. The toll of the meltdown which culminated into economic recession in major industrialized countries and its consequential challenges resulted in world economic output growth plummeting to 3.9 per cent in 2008, from 5.2 per cent in 2007. Global inflation rates surged owing to global trade decline as rising food and fuel prices aggravated. In Africa, inflation in the sub-Saharan countries rose from 7.1 per cent to 11.9 per cent owing to the region's strong dependence on imported food and fuel. These indicators in the past five years do not seem to have improved in the ECOWAS region as inflation rates for instance, have been uneven recording great disparities at the regional, national and even, subnational levels.

 In 2008, inflation rate in the ECOWAS region stood at 13 percent and dropped sharply to 7.39 per cent in 2014 and rose again to 8.02 per cent in 2015. During the same period at the sub-regional level, WAEMU recorded inflation rates were 8.5 per cent, 3.9 per cent and -0.13 per cent in 2008, 2010 and 2014 respectively. For the WAMZ group, member countries inflation averaged 15.3 per cent, 11.7 per cent and 8.63 per cent respectively in 2008, 2010 and 2014. Ironically, real growth rates at the regional, sub-regional and national levels portray a different story during the same periods as the group with worse inflation episodes recorded higher economic growth rates. Precisely, real growth on the average has been slower in the WAEMU than the WAMZ. WAEMU member countries averagely recorded real growth rates of 3.9 per cent, 0.83 per cent and 6.99 per cent in 2008, 2011 and 2012; while Ghana’s real growth rates during same periods were 8.4 per cent, 14.4 per cent and 7.12 per cent.

Nigeria’s (the largest economy in the region and almost same in the African continent) real economic growth rates were 6.0 per cent, 7.4 per cent and 6.16 per cent for 2008, 2011 and 2012 respectively. The surge in inflation rates in most of the ECOWAS member countries have been related to decline in trade and productivity, dependence on imported food and fuel as earlier noted. Theoretically, high food prices should stimulate a supply-side response as market signals would be transmitted to farmers. However, as noted by the CBN (2008) only those that have the capacity to increase production and have supportive credit, transport, market and processing infrastructure would be able to respond to the market signals. As has been identified in the empirical literature, access to credit facilities is one direct solution to increasing investment in agricultural productivity in the region; while at the same time, accomplishing the Sustainable Development Goal 2 (SDG2) of getting to Zero Hunger without leaving no one behind by 2030.

To this effect, ECOWAS governments at various times have formulated and implemented individual and collective agricultural finance policies with little success. It is in the light of this that the study will examine and analyze institutional factors which would have hindered access to agricultural credit and low level of agricultural productivity in the region. Panel data estimating techniques comprising pooled OLS, fixed and random effects estimators shall be employed in the analysis; while, an appropriate specification statistic shall be invoked in the choice of the best estimator among highlighted three estimators. It is expected that findings from this study shall guide in policy choices aimed at addressing the challenges of low agricultural productivity in the region.



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