EVALUATING THE LINK BETWEEN COMMERCIAL BANK FINANCING AND AGRICULTURAL PRODUCTIVITY IN NIGERIA

Authors: Dr Dahiru Alhaji Bala Birnin Tsaba, Sani Abubakar Garba & Anas Dayyabu

ABSTRACT

This paper investigates the impact of Commercial Banks’ Loans on agricultural output in Nigeria for the period of 1981 to 2022. The properties of the data were first checked using both descriptive statistic and unit root tests to avoid spurious regression. Based on that, the research has used the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests with trend and intercept. The results of unit root tests found that all the variables are integrated of order one that is I(1) processes.  This justified to conducted cointegration test and the results found absent of cointegration among the variables which paved way to used Vector Autoregressive (VAR) model in order to achieve the objectives of the study. Therefore, based on the results obtained, the study revealed that, Commercial Banks’ Loans to Agriculture has significant impact on agricultural output, while FDI does not have much significant effect on agricultural output in Nigeria. More so, the study showed that. exchange rate also has significant impact on agricultural output in Nigeria From the findings, the study recommends that, government should come up with agricultural policy that allow farmers access to loans especially with low interest rate if not free interest on the loan to the farmers as it is indicates from the findings it has significant impact on agricultural output in Nigeria. More so,  the government through the Central Bank of Nigeria and other regulatory bodies should try as much as possible to minimize the exchange rate volatility or fluctuations and ensure availability of foreign currencies in the country which will in turn will be use to supply all necessary agricultural equipments from abroad. Exchange rate stability will help stabilize the Nigerian currency against other currencies of the world which will in turn create value for the county’s currency

Keywords: agricultural output, Commercial Banks’ Loans, Vector Autoregressive (VAR) model

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