IMPACT OF BANKING SECTOR CONTRIBUTION ON AGRICULTURAL DEVELOPMENT IN NIGERIA

Abstract

This study examined the contributions of the Banking sector to agricultural development in Nigeria from 1990 to 2023. Secondary data sourced from the CBN statistical bulletin 2023 were employed and analysed using the ARDL regression technique. The ARDL model results indicate that agricultural output growth in Nigeria exhibits strong short-run persistence, as evidenced by the significant positive effect of its own lagged values. While commercial bank loans to agriculture (LBLA) show no contemporaneous effect, their third lag has a significant negative impact. In contrast, the Agricultural Credit Guarantee Scheme Fund (LACGSF) exerts a positive and statistically significant influence on output growth both contemporaneously and with a one-period lag. The inflation rate (LINFR) has a mixed effect in the short run, being significantly positive at the second lag and negative at the third. The error-correction term is negative and highly significant, with an adjustment speed of approximately 71%, confirming a strong tendency to return to long-run equilibrium following short-term shocks. In the long-run estimates, inflation retains a statistically significant positive coefficient, while both LBLA and LACGSF have positive but statistically insignificant effects. The observed positive long-run relationship between inflation and agricultural output is likely due to the nominal measurement of output, suggesting that the inflation effect reflects price increases rather than real productivity gains. These observations show limitations in the long-term efficacy of current credit interventions, but they also partially support classical theories of development, which emphasize capital investment.