DEPOSIT MONEY BANKS’ CREDIT AND AGRICULTURAL OUTPUT IN NIGERIA

Abstract

Agriculture is the major source of economic growth, it provides huge number of employments for the society and of most importance, the main source of raw material for food production to the nation. It is imperative to examine the impact of deposit money banks’ credit to Agricultural sector, from 1990 to 2022 due to its importance to economic development. The study applied Johansen cointegration and multiple regression technique. The results from the analysis shows a long run relationship between deposit bank credit on agricultural sector in Nigeria. Similarly, from the estimation result, commercial bank credit to agriculture (CBCA) and agricultural credit guarantee scheme fund (ACGS) were positive and statistically significant. These implies that credits were effectively utilized to improve agricultural sector over the period of study. Lending rate (LR) had a direct relationship with agricultural sector, exhibiting the importance of credit to agricultural sector, but not significant due to high lending rate charges from deposit money banks, thus discouraging borrowings from farmers. Inflation (INF) and farm size (FARZ) had negative impact on agricultural sector, inflation eroding the benefit of large farm land size, the high cost of input for agriculture discourage agricultural performance. The study recommended that attractive lending should be applied to agricultural sector in other to enhance agricultural production and at the long run encourage economic development.