Relationship between Agricultural Financing and Agricultural Output in Nigeria

This study assessed the relationship between Agricultural Financing and Agricultural Output in Nigeria. The effect was assessed through the relationship between Agricultural Gross Domestic Product (AGDP) and Banks" Credit to Agriculture (BCRA) together with Banks" Lending Rate proxied by Interest Rate (INTR), Foreign Exchange Rate (FREX), and Government Expenditure on Agriculture (GEXA) for the period 2011 – 2021. A very reliable econometric tool (Ordinary Least Square –OLS) regression method and error correction modeling were used to check the impact/level of relationship between the dependent variable and each of the independent variables. That notwithstanding before the model was estimated; the properties of the variables (parameters) were established in terms of stationarity and long-run relationship. The Dickey-Fuller test for stationarity and Johasen co-integration for long-run relationships were conducted and the variables were integrated. The causality among these variables was equally ascertained using the Granger Causality test. Lastly, the Error Correction Mechanism which checks the short-run shock/relationships among variables was also employed. The results of the analysis show that banks’ credit to the agricultural sector was rightly signed and significant (0.06167). This simply meant a positive relationship existed between Banks’ lending and Agricultural output in Nigeria. High-interest rates lower agricultural credit demand by farmers, reducing agricultural output in Nigeria (-0.00577). The study concluded that agricultural financing contributed to the economic performance of Nigeria within the sampled period because of inadequate funding. It was recommended that agricultural financing programs exert more commitment in implementing the policy of granting loans by purpose so that segments of the nation’s agricultural products targeted for improved productivity and output will be achieved