Fuel Subsidy Removal and Agricultural Financing: Assessing the Impact of Elevated Operational Costs on the Creditworthiness of Nigerian Agribusiness Cooperatives and their Reliance on Information Financial Network (International Journal of Innovative Science and Research Technology (IJISRT))

Summary

• The study collects 334 completed survey instruments out of a target population of 360 Nigerian agribusiness cooperatives (a 92.8% response rate) following the May 2023 fuel-subsidy removal.p.1
• The reported target frame encompasses 1,250 registered agricultural aggregation and marketing cooperatives across Nigeria's six geopolitical zones.p.5
• Descriptive statistics show that the average net profit margin of sampled cooperatives declined from 0.185 in the pre-subsidy period to 0.042 in the post-subsidy period.p.1
• The debt-service coverage ratio mean dropped from 1.640 to 0.780, with the proportion of cooperatives holding a debt-service coverage ratio below 1.0 rising from 4.2% to 62.3%.p.1
• The average current ratio decreased from 2.120 to 1.140, pointing to working capital pressures.p.1
• Informal capital networks reported an average effective annualized financing cost of 31.0%, compared to 16.5% for formal financial channels, resulting in a 14.5 percentage point difference.p.8

Key insights

1. Smallholder farmers account for over 80% of total agricultural output in Nigeria's fragmented market.p.3
2. The complete deregulation of premium motor spirit in May 2023 triggered an over 200% surge in pump prices within months.p.3
3. An OLS panel regression on operational expenditures yields an R-squared of 0.742 and an adjusted R-squared of 0.738.p.7
4. Formal financial institutions report settlement times ranging from 45–90 days, compared to 1–2 days for informal capital networks.p.8