Credit Financing, Monetary Policy and Performance of the Agricultural Sector of the Nigerian Economy

Abstract

Monetary policy is critical to a county’s economic development and achievement of macroeconomic objectives. The objective and focus of monetary policy may shift from time to time, depending on the country’s level of economic development. Adequate financing and monetary policy become an unavoidable component in every economy sector, including the agricultural sector. The results of the ARDL analysis carried out on the relationship between monetary policy and the performance of agricultural sector of Nigeria economy revealed that credit financing and monetary policy significantly affected agricultural output in Nigeria (Adj. R2 = 0.998; Wald Stat = 4.69; ρ = 0.00). Agricultural credit guarantee scheme had significant weak positive effect on Agricultural output (β = 0.0006, t-test = 15.08, ρ = 0.00); credit to the agricultural sector had an insignificant weak negative effect on Agricultural output (β = -0.03, t = -1.16, ρ = 0.26); exchange rate has a weak positive and significant effect on Agricultural output (β = 39.9, t = 20.27, ρ = 0.00); inflation rate has a strong positive and significant effect on agricultural output (β = 25.5, t = 3.12, ρ = 0.01); real interest rate has a strong positive and significant effect on agricultural output (β = 34.67, t = 2.86, ρ = 0.00). It was evidenced in this study that regulation of credit funding and monetary policy factors would enhance the agricultural productivity, increases food supply and promotes growth in the economy.