BANK CREDIT NEXUS AGRICULTURAL OUTPUT GROWTH OF NIGERIA USING ARDL APPROACH

Abstract

This study examined the nexus between bank credit and agricultural output
growth of Nigeria. To document this study, Quantitative method was employed
which was hinged on time series data from 1986 to 2021. Key variables
employed include Agricultural output growth rate (AGR), Bank Credit Rate
(BCR), Exchange Rate (EXR) and Interest Rate (INT). Econometric tools such
as unit root test, Autoregressive Distributive Lag (ARDL) and Granger
Causality Test was employed. Findings revealed that AGR and BCR were
stationary at levels except for EXR and INT. More so, the bound test result
revealed that there exists long run relationship among the variables.
Furthermore, the study reveals BCR, INT and AGR are negatively related to
AGR except for EXR. About 54% variation in AGR is accounted by the
explanatory variables whereas the DW-statistic is 1.9 which is approximately
2 signifies no autocorrelation. Additionally, the Error Correction Model
(ECM) coefficient is statistically significant which is CointEq (-1) is -1.02.
This implies that AGR has a speed of adjustment of 102% to return to
equilibrium if there are deviations from BCR, EXR and INT. The study
concluded that the bank credit marginally contributed to agricultural growth
rate under the period considered. The study recommended that CBN through
the deposit money banks should provide substantial credit especially to the
agricultural sector and ensure that the fund is rightly channel for the growth
of agricultural output and the economy at large.