Impact of Agriculture on Bank Credits in Nigeria: An Econometric Analysis

Abstract

In most developing countries, agriculture is both the main sector that provides employment to large segments of the population and the key to sustained economic growth of the countries like Nigeria. This study presents an empirical analysis of the  Impact of Agriculture on Bank Credit in Nigeria.. Also, highlighted are the problems of agricultural production in Nigeria and the strategies for agricultural transformation of the economy. Our findings revealed that agricultural variables have impact on food industries in Nigeria. Consequently, the macro-econometric model in this study contributes to the development of policy and programming by shedding light on the choice to be made and indicating the magnitude and direction of responses that can be expected from changes in key agricultural policy. It is a known fact that the efficiency of credit facility positively contributes to production base of a sector, especially the Nigerian agricultural sector which is recognised as the heartbeat of the economy by employing over 70% of the country’s labour force; this forms the motivation for this study. This study also deals with the potentials of agricultural output in terms of commercial bank loan to agriculture and agricultural credit scheme as well as their corresponding interest rates to farmers towards increasing agricultural production as the pathway to food industries in Nigeria. The study employed the Autoregressive Distribution Lag (ARDL) econometric approach on the time series data sourced from the Central Bank of Nigeria (CBN) statistical bulletin, Food and Agriculture Organisation (FAO) and the World Development Indicators (WDI) for the period 1998-2018. The result from ARDL showed that commercial banks loan and Agricultural Credit Scheme increased food industries and agricultural output by 8.12% and 0.002% respectively, while population reduces Agricultural Output by 0.001%.

Keywords: Agriculture, Bank Credits, Nigeria

DOI: 10.7176/JESD/12-12-13

Publication date:June 30^th 2021