Impact of Commercial Banks’ Credit on Agricultural Productivity in Nigeria (Time Series Analysis 1980 - 2013)

Abstract

This study was carried out to examine the impact of commercial banks’ credits on agricultural productivity in Nigeria. The aim is to determine the relationship between commercial banks credit and agricultural productivity in the Nigeria economy. The statistical tool of analysis is the Ordinary Least Squares (OLS) techniques. However the variables were subjected to the Unit Root Test to ensure stationarity before the application of the OLS. On the whole, three hypotheses were tested; all the alternative hypotheses were validated by the OLS result. The t-calculated of commercial banks credit has a value of 6.28 which is greater than the t-critical of 1.96. This is an indication of positive relationship between commercial banks’ credit and agricultural productivity. The t-calculated of interest rate on commercial banks credit has a value of -9.38 as against 1.96 t-critical. This is an indication of a negative relationship between interest rate and agricultural productivity. While the t-calculated of government spending, as a complimentary variable, has a value of 3.42 as against the 1.96 of t-critical. This, as the case of hypothesis one, is also indication of significant positive relationship between government spending and agricultural productivity in Nigeria. Based on the findings, we recommended that the Agricultural Credit, Guarantee Scheme should improve on their conditions for credit guarantee in order to make agricultural financing attractive to commercial banks. Furthermore, the paper advocates amongst others, that the government should subsidized interest rate to the agricultural sector and stop fuel subsidy as this will provide more benefit to the society than the fuel subsidy.