Impact of Agricultural Sector on Sustainable Financial Sector Growth in Nigeria

Abstract

Since Nigeria gained independence, agriculture has been neglected, despite the country’s 70.8 million hectares of agricultural land, out of which only 34 million hectares have currently been cultivated, leaving vast fertile lands unused, because of this it created food insecurity. Hence, the paper investigated the impact of agricultural sector on sustainable financial sector output in Nigeria between 2000 and 2022. The paper adopted the Dynamic Ordinary Least Squares (DOLS) technique, to regress on gross domestic product of the financial sector, with insurance inclusive as the dependent variable while the independent variables include agricultural productivity measured by the output of the agricultural sector (AGPROD), gross credits granted to the agriculture sector (GCA), gross amount distributed to the agricultural credit guaranty scheme (ACGS) and maximum lending rate (MLR). The result reveals that there is a statistical and positive effect of agriculture on sustainable financial sector output in agricultural productivity measured by the output of the agricultural sector (AGPROD). More so, the coefficient of the gross credit granted to agricultural sector (GCA) is positively related to sustainable financial sector output in Nigeria. By implication, a rise in gross credit granted to the agricultural sector (GCA) exerts a positive impact on the output of the financial sector performance in Nigeria. However, the coefficient of the agricultural credit guaranty scheme (ACGS) is positively related to sustainable financial sector output in Nigeria but statistically insignificant. Noticeably, the coefficient of the maximum lending interest rate is negatively and significantly related to sustainable financial sector output in Nigeria. Therefore, the paper concluded that agriculture positively promoted the sustainability of the output in the financial sector in Nigeria. It recommended that the Federal Ministry of Agriculture and CBN should be given top priority in the sector in terms of funds and other resource allocation to stimulate the financial sector’s sustainable output in Nigeria.