FINANCIAL SECTOR DEVELOPMENT AND AGRICULTURAL OUTPUT IN NIGERIA

This paper investigated the impact of financial sector development on agricultural output from 1981 to 2023 both in the short and the long run. The descriptive statistics and stationarity tests were conducted prior to the long run test using the Johansen co-integration and the Vector Error Correction Model (VECM). The Johansen test showed evidence of long run causality among the variables in the model. The serial correlation and the heteroscedasticity tests were conducted in addition. The result revealed the presence of linkage between lending rate, exchange rate and agricultural output. Loan to private sector and loan to agricultural sector as a proxy of financial sector development positively affected agricultural output in the short run. In the long run, lending rate and loans to private sector were negatively related to agricultural output while loan to agricultural sector had positive effect on output. The positive effect was, however, insignificant in the long run. This implies that in addition to finance and credits, peripheral factors such as insecurity, poor infrastructure, supply chain disruptions and low productivity are pervasive in their influence on agricultural performance to agriculture in Nigeria over the long term. The study recommended that the Central Bank of Nigeria through its monetary policy tools should ensure loans through the deposit banks are made accessible to genuine and credit worthy farmers at the lowest possible cost while addressing the insecurity issue. Keywords: Agricultural output, Exchange rate, Financial sector development, Lending rate, Loan to agricultural sector, Loan to private sector, Vector Error correction model