Agricultural Sector Banks Credit and its Impact on Economic Performance in Nigeria

Abstract

The study empirically investigated the impact of commercial banks’ credit to the real sector on economic growth of Nigeria, covering the period, 1981-2020. Quarterly data from statistical bulletins of Central Bank of Nigeria and National Bureau of Statistics were used during the study. Autoregressive Distributed Lag (ARDL) approach was adopted for estimation. Economic growth, proxied by gross domestic product, agricultural gross domestic product and industrial gross domestic product were regressed against the explanatory variables (Commercial banks’ credit to agriculture, industry, manufacturing and mining, quarrying and solid minerals; Government expenditure on agriculture; Agricultural credit guarantee loan; Inflation and Lending rates), thus forming three models in the study. Prominent among the findings is that significant relationship exists between Nigeria’s commercial banks’ credit and economic growth. The study further revealed that under most of the models, commercial banks’ credit key explanatory variables were statistically insignificant contrary to apriori expectations. On the basis of these findings, the study therefore concludes that the impact of commercial banks’ credit to the real sector on the economy is mixed and largely insignificant in Nigeria. Based on the findings, the study recommends, that as a means of monitoring commercial banks’ credit to the real sector, funds should be granted to registered agriculturists and industrialists on the basis of evident track records of real sector produce with a view to ensuring that misapplication and misappropriation are drastically reduced if not eradicated.