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THE EFFECT OF COMMERCIAL BANKS’ CREDIT ON AGRICULTURAL PRODUCTION IN NIGERIA
Abstract
This study examined the effect of commercial banks’ credit on agricultural output in Nigeria. Four research hypotheses were formulated to guide and direct the study. The ex-post facto research design was adopted for the study. Data for the study were collected from published articles and the Central Bank of Nigeria Statistical bulletin. To estimate the specified equation, the ordinary least squares regression technique was employed. Based on the results obtained, the following result arose; the estimated results showed that there was a positive and significant relationship between agricultural credit guarantee scheme fund and agricultural production in Nigeria. This means that an increase in agricultural credit guarantee scheme fund could lead to an increase in agricultural production in Nigeria; there was a positive and significant relationship between commercial banks credit to the agricultural sector and agricultural production in Nigeria. This result signified that an increase in commercial banks credit to agricultural sector led to an increase in agricultural production in Nigeria. Again, there was a positive and significant relationship between government expenditure on agriculture and agricultural production in Nigeria and a negative relationship between interest rate and agricultural output also confirmed theoretical postulations. This is because an increase in the rate of interest charged farmers for funds borrowed discouraged many farmers from borrowing and thus less agricultural investment. The study recommended that the positive effect of agricultural credit guarantee scheme fund on agricultural production called for the proper funding of the scheme by the government. To this end, there was the need for the government to continue to guarantee loans lent to farmers as this would encourage the banks to lend more to farmers.
Keywords: commercial bank credit, agricultural sector, agricultural production, interest rate