The Impact of Monetary Policy on Agricultural Development In Nigeria (1970-2010)

Abstract

The need to correct the existing structural distortions in Nigerian agricultural sector and put the economy on the path of sustainable growth is compelling. This raises the question of what monetary policy to adopt to develop the agricultural sector in order to realize the potentials of the sector. The broad objective of this study is to assess the effectiveness of the monetary policies in promoting agricultural development in Nigeria. Secondary data were used in this study. The data were sourced from the publications of Central Bank of Nigeria (CBN) such as CBN statistical bulletin, CBN statements of Accounts and annual reports, as well as Federal Office Statistics (now National Bureau of Statistics) Publications of relevant years. The relevant variables for which data were sourced include: Minimum Re-discount Rate (MRR), Treasury Bill Rate (TBR), broad money supply (M2), agricultural sector output and index of agricultural production at 1990 base year for the period 1970 to 2010. The method of analysis used in this study is the Ordinary Least Square method (OLS) using E-view. The results of the analyses showed that although CBN's monetary policies play crucial role in influencing the level of agricultural productivity in the country, it has not recorded significant progress in terms of providing enabling environment for better performance in the agricultural sector. It is consequently recommended that the Central Bank of Nigeria should introduce more monetary instruments that are flexible enough to meet the ever-growing financial sector in order to attract both domestic and foreign investors; while more stringent punishment should be made for non-compliance to the monetary policies by financial institutions.