The Impact of Banks’ Credit on Agricultural Productivity in Nigeria: An Empirical Analysis

Abstract

This study examines the impact of banks’ credit on agricultural production in Nigeria by means of autoregressive distributed lag (ARDL) model using a time series data from 1981– 2016 to measure the short and the long run relationship between agricultural production, banks’ credit, government expenditure on agriculture and interest rate charged on agricultural lending. The study reveals that in the short run, except for interest rate, that posted a conditional negative impact on agricultural sector performance, banks’ credit and government expenditure impacted positively on agricultural sector. These statistical signs were maintained also in the long run. In the same vein, the application of the Error Correction Model (ECM) reflects that increased commercial banks’ lending to agriculture will lead to increase productivity. This development thus justifies the need for increased federal government participation in facilitating funding and related activities. Basically, thesecoordinated efforts should be CBN driven via optimizing the benefits offered by Enhanced Agricultural Credit Guarantee Scheme Fund (ACGSF) and Nigeria Incentivebased Risk-sharing System for Agricultural Lending (NIRSAL etc, to de-risk the agricultural sector. Beyond these lies the unavoidable requirement to invest adequately in agricultural infrastructure