Commercial Bank Financing and Agricultural Sector Output in Nigeria (1981-2014)

Kareem R.O

Abstract


This research work examined the Effect of Commercial Banks Financing and Agricultural sector output in Nigeria for a period of 34 years (1981-2014). Its focus is to describe the trend of Real Agricultural Domestic Product (RAGDP) and Commercial Bank Loans to Agricultural Sector (CBLA); determine the effect of commercial banks financing and agricultural sector output in Nigeria as well as make policy recommendations based on research findings.

Secondary data were sourced from Central Bank Statistical Bulletin of various years. The Ordinary Lease square technique was used in this research to estimate the effect of commercial banks financing on agricultural sector output. Augmented Dickey Fuller (ADF) test was conducted to determine the properties of the variables used in the study and also to test for stationarity of the variables. The independent variable is commercial bank loan to agriculture and the dependent variable is real agricultural gross domestic product.

The results of the unit root test shows that the variables were stationary at first difference.

The results of descript statistics show slight fluctuating trend in both RAGDP and CBLA. The regression results revealed that R2 is   0.996415 or 99.6%. This implies that about 99.6 percent  of the total variations in real agricultural gross domestic product is explained by the explanatory variable (commercial bank loans to agricultural sector). Thus, findings revealed that there is a positive relationship between commercial bank loan to agriculture and the real agricultural gross domestic product and this is in line with the aprori expectation of the study.

This means that a one percent increase in commercial bank loan to agricultural sector will increase real agricultural gross domestic product by 1.9 percent. The F-ratio of the model showed that model is statistically significant. Thus, we conclude that the commercial bank financing has significant impact on agricultural sector output in Nigeria. The study recommends that the commercial bank should increase loan facilities to the agricultural sector to sustain food production for the teeming population of Nigeria.

 


Keywords


Commercial Bank; Agricultural Sector; Real Gross Domestic Product and Nigeria.

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References


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