CHAPTER TWO
LITERATURE REVIEW
In this chapter, relevant literatures were reviewed under the following sub-heading: Meaning and Concept of Deregulation; Deregulation in Nigeria Economy; Deregulation and Extension Service; Meaning and Concept of Fund; Funding Extension Service in Nigeria; and Ebonyi State Agricultural Development Programme (EBADEP).
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2.1 Meaning and Concept of Deregulation
Deregulation is the process in which a trade, a business activity, etce are made to be free from rules and controls. In other words, it is the process of making a trade, a business activities etc free from rules and controls. Deregulation si also the process in which government makes a trade, a business activity free by removing rules and controls o them in order to encourage efficient operation of the market system. Aurelia (1999) defined deregulation as the process by which government remove selected regulations on business in order to encourage the theoretical efficient operation of markets.
Deregulation means abolishing state controls on the freedom of health competition in a trade and/or business. This implies that regulatory policy on any sector of the economy is deregulated to pave way for competition, and for effective and efficient operation of the system. Deregulation (less regulation) leads to a raised level of competitiveness which brings higher efficiency in productivity. Therefore, deregulation is an economic policy introduced in a nation’s economy to better the lots of her citizenry.
Deregulation is synonymous with privatization; hence it is an aspect of privatization. The word deregulation is often misconstrued as liberalization. Some people see it as privatization. Privatization is the selling of part or all government’s owned enterprises to the private sector. Oyedokun (2001), state that privatization means selling part or all the State-Owned Enterprises (SOE) to private sector, and added that it is a complex operation often requiring more than just selling companies. Odili (2001), observed that privatization typically involves the transfer of ownership and control of public enterprises to the private sector. Liberalization is the reduction or removal of restriction on the operation of business, and elimination of all tariffs and quotas, as well as internal taxes in indigenous products. Nigeria’s liberalization policy is intended to overcome the problems posed by sliding rates of industrial growth, sluggishness in private investment and the demonstrated limitations of domestic demand.
Orlugbagbe (2003), emphasized that the deregulation policy of Nigeria in almost all the sectors of the economy would tend to aggravate the economic hardship in the country in short-run effect, but in the long-run effect, would tremendously alleviate the suffering of the masses permanently. The deregulation of Nigeria economic sector is primarily designed to increase the competition within the sub-sectors. It can lead to free market forces and health competition. The process may initially bring hardship to the people, but later would bring joy to the masses.
Madu (2003), asserted that the people of Africa are already questioning the relevance of States that justify their existence only by deregulation of everything but the process of political succession. He further added that most countries of the world, especially the developing nations, like Nigeria cannot do without deregulation, but the only exception is the process of political succession.
Deregulation is inclined to capitalism, and when the word is mentioned, the capitalists are full of excitement. It is very much associated with increase in prices. Deregulation and price increase have been used interchangeably in most cases. Some critics of deregulation may argue that they mean one and the same thing. For instance, the deregulation of the downstream sector of oil industry in Nigeria has lead to the astronomic increase in the pump price of petroleum products.
2.2 Deregulation in Nigeria Economy
Ikhide (1990) revealed that deregulation policy was first made on finance sector in Nigeria in 1987 by the then Federal Military Government of Nigeria following the introduction of Structural Adjustment Programme (SAP). He further stated that as part of the SAP, the Federal Military Government of Nigeria recently announced the deregulation in interest rate in the banking sector. The policy later spread to other sub-sectors of the economy. In the year 2003, the Federal Government of Nigeria introduced an economic reform measure known as National Economic Empowerment and Development Strategies (NEEDS) through deregulation process. In 2004, deregulation was made on the oil (petroleum) sub-section of Nigeria Economy
Deregulation policy is not unique to Nigeria as a nation. It cuts across the globe, both the developed and developing nations are involved in the process. Herbert (1999), affirmed that indeed, the wind of privatization (deregulation) has been blowing across the world, so much so that even the countries not predisposed to deregulation are beginning to consider it. He further stated that in the United State of America, deregulation began in the 1970s, and it ha affected airlines, energy and financial services, telecommunication and other several sectors. In Britain, since the 1980s, privatization and deregulation have been key elements in the policy towards utility industries, transport and financial services.
In Nigeria, the deregulation policy should be conducted in transparent, accountable and comprehensive manner. This is because it will help in the distribution of social amenities, and engender foreign investors’ confidence in a direction Nigeria wants to move her economy. The business and international community seems to be making deregulation the basis for Nigeria’s seriousness at taking bold policy reform measures.
The Federal Government of Nigeria has taken various economic reform measures for the betterment of all Nigerian. One of such measures is National Economic Empowerment and Development Strategy (NEEDS). NAO (2003), stated that although National Economic Empowerment and Development Strategy (NEEDS) is essentially a Federal Government Programme, it is fully owned by Nigerians, and a medium term strategy (2003-2007) with the objectives of poverty reduction, wealth creation, employment generation and value re-orientation. The key elements of this strategy include renewed privatization, liberalization and deregulation, and explicit sectorial strategies for agriculture.
NEEDS seeks to promote the emergence of medium and large commercial farms and plantations, and increase in the level of agricultural production through private sector participation NOA (2003), further pointed out that the priority ot agriculture is an essential aspect of the poverty reduction strategy, since it is believed that over 50% of the poor in Nigeria are engaged in agriculture. Therefore, NEEDS is the means through which the deregulation process can be vigorously pursued in Nigeria.
As part of Nigeria’s agricultural reforms and deregulation process, recently, there was a ban on the importation of some agricultural products such a rich, dressed chicken/turkey, wheat, flour etc. There was also the utilization of market mechanism through deregulation in the production and marketing of food and fibre.
Deregulation policy on the downstream sectors of Nigeria economy such as agricultural extension, oil industry, banking, communication etc, can create positive impact on the entire populace. Agboti (2004), opined that the deregulation of downstream sector of our economy will impact positively on people of this country. He added that things have to get worse before they get better, and most Nigerians did not understand the benefit accruable from the policy of deregulation. Hence, there would not have been any opposition to the idea of deregulation if people were conversant w ith its long term advantages.
Afolabi (2003). Observed that Nigeria has achieved a lot through the deregulation process. He added that deregulation of Nigeria economy serve as an incentive to the potential investors. However, even with this achievement, there is still a great discontent among industrial experts about the manner through which deregulation process is carried out. Ikhide (1990) asserted that the protagonists of deregulation see the policy as antidote to low level of production; whereas others see it as an era of economic disaster. He further opined that the anti-deregulation group may agree initially that the effect of deregulation will bring hardship to the citizenry, but later deregulation process will help a lot. Every Nigerian who understands, the importance of deregulation should continue to reiterate the call for deregulation, but just how far deregulation will proceed in the years ahead remains to be seen.
It is also important that special attention needs to be paid in certain sectors of the economy as far as deregulation is concerned. The level of advancement is equally necessary. What is probable is that deregulation may advance more rapidly in some sub-sectors than in others. It is most likely to proceed at a faster pace in those areas where there are clear political gains to make economic advantages, and most importantly in agricultural sub-sector which is quite indispensable for any nation, providing food and fibre, raw, materials for industries and employment.
2.3 Deregulation and Extension Service
In developing countries like Nigeria, which publicly funded extension is often more important, there has been considerable questioning of the structure and form of extension delivery. As a result of financial constraints many countries have examined alternative structural arrangements, including the feasibility of public sector extension expenditure dedication, charges for government extension services, commercialization and privatization (deregulation). Governments at Federal and State levels have found that they are less able to continue providing all the services previously provided. Some functions of the government have been curtailed, others have been privatized. As a result of Nigeria’s political ideologies and free market economy, and global development, there is need for increased competition in agricultural extension services.
Madukwe, M.C. and Eric, A.R. (1999), stated that there has been call for private sector involvement in the provision of extension service as a result of governments dwindling development budgets, and extremely poor progress in raising economic and social well-being of the populace through public extension service. They added that privatization (deregulation) which was introduced as an integral part of Structural Adjustment Programme (SAP) is aimed at achieving economic efficiency. This is believed to be the panacea to the problems of corruption, red-tapsim, ineffective allocation of resources, inefficiency, inappropriate and inadequate technological development which bugged the public extension system
In Nigeria, the State/Federal Ministries o Agriculture have continued to provide important extension services to farmers, but in some countries, commercial agencies are responsible for the provision of the services. La-Anyame (1988) observed that agricultural extension has taken the form-of primarily providing important services to the farmers by the State Ministry or Department of Agriculture and in some countries by commercial agencies which have proved more successful than the former. He also revealed that extension by industrial and commercial firms in support of trade or processing agricultural products is more effective than demonstration and instruction by the State Departments. He further emphasized that firms have given more incentives
to their workers, and have proved to be more effective and efficient in extension delivery.
2.4 Meaning and Concept of Fund
Fund refers to money committed to a project or business enterprise to enable it operate. It is needed to enable the purchase of fixed assets and to provide working capital. Fund also refers to a sum of money held for a specified purpose. It is normally held in the form of cash or highly marketable securities. The Health System Fund (HSF) is an example of fund provided by the World Bank for the development of health sector facilities in developing countries such as Nigeria.
Philip and Carl (1984) showed that in accounting and financial uage, the term fund means segregation of cash for a special purpose as in “change fund” and “petty fund” and can also be used to designate the amount of cash and marketable investment segregated in a “sinking fund” for the purpose of liquidating bonds or other long-term obligations at maturity. He further added that when used in plural form “funds” is often synonymous for cash and that funds can be interpreted broadly to mean “working capital” or more narrowly to mean “cash” and marketable securities.
Chukwu (2003), affirmed that the general public use the word “funds” to mean cash but business people apply a broader meaning and use the word as a synonym for working capital. He maintained that, that portion of the current asset not immediately needed to pay current debt is referred to as liquid resources or available fund. In financial management, the conversion of short-term debt into long-term debt is called funding.
2.5 Funding Extension Services in Nigeria
In a developing country like Nigeria, the bulk of fiscal requirement for agricultural research and extension is said to be provided by government. Extension activities and innovations may not work out efficiently and effectively if financial resources (fund) required to follow up the activities are not available in the required amount and at proper time too. Under-funding of extension has been observed as one of the main factors causing the dwinding status with imminent chain reaction such as stagnation in agricultural development. This can manifest in low productivity output levels which translates to food and raw materials scarcity, with possible closure of industries that are dependent on agricultural raw materials, and retrenchment of workers leading to high level of unemployment and socio-political unrest. Therefore, making fund available and on time to the needy agency(s) can make crucial difference in their capacity to start and sustain extension activities for transfer of innovation to the farmers.
Nigeria receives considerable external support for agricultural development from European Community (EC), the International Fund for Agricultural Development (IFAD), the United Nation Development Programme (UNDP), the African Development. Bank (ADB) and World Bank. The World Bank is the principal external donor of loans and credit to Nigeria's agricultural sector. The Bank's lending to the sector exceeds US $2,1 billion, with some US $400-500 million of the project funding in the pipeline prior to the suspension of lending operation in 1995 (IFAD, 1999).
Gbenga (1998), observed that until recently, the main thrust of support for extension service organizations has been through World Bank - funded Agricultural Development Programme (ADP) which is the major source of extension delivery to farmers. He added that World Bank leadership role and expertise in the development process have encouraged other bilateral and multilateral agencies as well as private banks to participate in funding agricultural development in Nigeria.
The suspension of lending operation to Agricultural Development Programmes in 1995 by World Bank has a negative impact on extension delivery throughout Nigeria. However, the World Bank has resumed talks with the Federal Government of Nigeria after years of putting its
lending on hold due to what the bank perceives as lack of transparency in the management of public expenditure.
Umeh (2003) pointed out that, funds for each Agricultural Development Programme (ADP), which is the main source of extension delivery in Nigeria, are derived from three main sources - direct grants by the Federal Government, grants by the government of the benefiting state, and loan funds from the World Bank.
2.6 Ebonyi State Agricultural Development Programme (EBADEP)
The Ebonyi State Agricultural Development Programme (EBADEP) is the major extension service agency in the state. The programme was established in the year, 1996, following the creation of Ebonyi State out of Enugu and Abia States. The Extension Service of the programme has been fully organized in a core sub-programme in line with other five sub-programmes namely: technical services; rural institutions development; planning, monitoring and evaluations; engineering services; and administration and finance services. At the headquarter level, the extension service sub-programme that is headed by Director of Extension is made up of two components - extension service and mass media support components. The funding of EBADEP revolves around International .Agricultural and Development Organizations, Federal and State Governments. The programme's projects are currently funded by the following donor agencies:
i. FAO (Food for Agricultural Organization) - funds Special Programme for Food Security (SPFS).
ii. FGN (Federal Government of Nigeria) - responsible for the payment of counter part fund to all the current ADP projects,
iii. IBRD (International Bank for Reconstruction and Development)-takes care of multi-state ADP (MSADP), National Agricultural Technical Support Project (NATSP), and National FADAMA Development Programme 11 (NFPII).
iv. IFAD (International Fund for Agricultural Development)-mainly funds IFAD cassava multiplication programme (IFAD.CMP) and Root and Tuber Expansion Programme (RTEP).
v. SG (State Government) - pays counter-part fund to all the projects embarked upon by ADP
2.6.1 EBADEP Specific Projects Currently Funded by Donor Agencies, Federal and State Governments
There are several past and on-going projects in EBADEP but the specific projects currently funded by donor agencies, federal and state government are as follows;
i) National Special Programme for Food Security (NSPFS): This is a Poverty reduction agricultural programme of the Federal Government if Nigeria. The programme is solely funded by the Federal Government but managed by Food and Agricultural Organization (FAO) of the United Nation. The programme focuses on capacity building of resource poor farmers, provision of farm inputs and intensive/extensive extension service to ensure high agricultural productivity and food security in Nigeria.
ii) Root and Tuber Expansion Project (RTEP): This is an international fund for Agricultural Development (IFAD) assisted project which is meant to consolidate the gains made under 1FAD Cassava Multiplication project. The project is tripartitely funded by IFAD, Federal 3vernment and State Government. RTEP aims at expanding production root crops such as yam, cassava, cocoyam, sweet potato, irish potato, d, their processing and marketing to ensure self-sufficiency in tuber) crop production and export.
iii) Rural Transformation Programme (RTP): This is a Federal Government of Nigeria solely funded programme which attempts to holistically transform the quality of lives in the rural areas. RTP aims cutting in place rural infrastructures, provision of modern inputs and dissemination of modem fanning practices to farmers in order to increase agricultural productivity. dissemination of modem fanning practices to farmers in order to increase agricultural productivity.
iv) Cassava Enterprise Development Project (CEDP): This is a collaborative project between Ebonyi State Agricultural Development Programme (EBADEP) and International Institute for Tropical Agriculture (IITA). CEDP started in Ebonyi state in the year 2003 with the main objective of improving production, processing and marketing of cassava products through setting up of cassava resource and technology transfer centres in the state. Under this project, series of training are being organized by a unit known as Women in Agriculture (WTA) under Extension Sub-programme of EBADEP for men and women groups in the state on processing and utilization of cassava tubers.
v) Farm Management Advisory Service (FAMAS) Projects: FAMAS is an appendage project to National Special Programme for Food Security (NSPFS), and sponsored by Food and Agricultural Organization. It is aimed at strengthening farm management survey and data analysis in support of agricultural policy formulation and delivery services. However, it is still a pilot project in six (6) states of Nigeria, and Ebonyi State inclusive.
vi) National FADAMA Development Project: FADAMA is an Hausa word for describing flood plains, lowlands, swampy areas or shallow aquifers found along Nigeria's major river systems that have potentials for dry season or irrigated agriculture. However, the word FADAMA is no longer restricted to the Hausa usage alone. It is now internationally adopted for use in describing projects used by the International Development Association to reduce poverty among farmers and other users of Fadama resources. National FADAMA Development Project (NFDP) is a World Bank assisted poverty reduction project. The NFDP is being embraced in Ebonyi State ADP with some pilot sites mapped out for the state. Also Fadama Users Groups (FUG) have been selected for the NFDP implementation in the state. The objectives of the projects are to sustainably increase the income of Fadama users, reduce national resources based conflicts among farmers and also to develop the downstream sector of Nigeria agriculture
vii) On Farm Structure-Millennium Development Goal Project: This project is an initiative of the Strategic Grain Reserve,- a department of Federal Ministry of Agriculture and Rural Development. It is a strategy whereby state ADPs are encouraged to develop and establish strategically on-farm structure like metal bins, fish smoking cabinets and brick bins. This is aimed at reducing post harvest losses inherent in our agricultural systems
viii) Opportunity Industrialization Centre International (OIC1)
Farm Service Project: This is a capacity building and job creation programme, financed by United State Agency for International Development (USAID) with OICT as implementation agency. The project involves sponsoring of United State of America Volunteer consultants in special areas of agriculture to help in capacity building of Ebonyi State ADP staff, Local Government Council agricultural staff and farmers' groups/co-operative societies in specialized areas. Under the arrangement, OICI pays the volunteer their ESTACODE and air tickets while state government provides accommodation, local transport and logistics for the volunteers work activities.