EFFECT OF CREDIT ON AGRICULTURAL EXPORTS IN NIGERIA (1980-2018)

Abstract

This study examined the effect of credit on agricultural exports in Nigeria. Time series data spanning the period between 1980 and 2018 were obtained from publications of Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS) and Food and Agriculture Organisation database. Data were analysed using means, coefficient of variation, co-integration analysis and vector error correction mechanism (VECM). Descriptive results revealed a fluctuating trend in the volume of agricultural exports and credit to the agricultural sector with a mean of 351.99 tonnes and ₦80162.45 million respectively over the study period. There was a decreasing trend in the contribution of agricultural exports to GDP in Nigeria over the study period. Co-integration analysis affirmed a long run relationship among the variables. Results of VECM regression analysis revealed a positive relationship between credit to the agricultural sector, exchange rate and volume of agricultural exports in the short run. Exchange rate and inflation rate positively affects volume of agricultural exports, while ratio of export prices to producer prices and interest rate negatively affects volume of agricultural exports in the long run. The study concluded that credit to the agricultural sector, exchange rate, inflation rate, ratio of export prices to producer prices and interest rate are significant determinants of volume of agricultural exports. Hence, increased low interest rate commercial banks credit to the agricultural sector, effective and efficient monetary policies and bridging the gap between producer prices and world prices of agricultural export commodities will stimulate improved agricultural export earnings.