The impact of agricultural financing on agricultural output in Nigeria: An empirical analysis

Abstract

This study examined the impact of agricultural financing on agricultural output in Nigeria from 1986 – 2012. The study used secondary data which were sourced from Central Bank of Nigeria (CBN) and National Bureau of Statistics Bulletins. The data were analyzed using vector error correction technique (ECM). The test for stationary was done using the augmented Dickey-fuller test. The result shows that all the variables were integrated of order one I(I). The findings revealed that agricultural financing is statically significant within the period of study (P<0.05). The results also revealed a two-way causation between government spending on agricultural sector and agricultural productivity in Nigeria. It was also revealed that the total value of loan granted to agricultural sector affects the agricultural output. An agricultural raw material import was found to granger-caused government spending. Finally, vector error correction model was specified and estimated. The result of the VECM showed that agricultural financing positively affects the agricultural output of the Nigerian economy in the long-run. Based on these indices, the study recommended that adequate budgetary provision and releases should be made to fund policy initiatives for agriculture and drafting of financing policies that are targeted at some agricultural output.