Agricultural Credit‐Productivity Nexus: Additional Evidence From Nigeria

ABSTRACT This study examines the relationship between agricultural credit and agricultural productivity in Nigeria over the period 1991 to 2023. With the use of Auto Regressive Distributed Lag (ARDL) and Pairwise Granger Causality Test, empirical results reveal that agricultural credit has a positive and significant impact on agricultural productivity. Based on the two agricultural credit indicators employed (agricultural credit guarantee scheme fund (ACGSF) and banks' loans to agriculture (BLOAN)), both long‐run and short‐run coefficients of AGSF are 0.21% and 1.16%, respectively. Results also show that BLOAN positively impacts agricultural productivity given the long‐run coefficient of 0.15% and 0.18% in the short run. As such, improved agricultural productivity is expected when there is a rise in the volume of credit/loans to agriculture, while a lower level of credit to agriculture could hamper it. Further evidence indicates that any change to ACGSF as well as BLOAN would possibly affect the level of agricultural productivity, as these indicators found to Granger cause agricultural productivity. However, agricultural productivity does not Granger cause agricultural credit, suggesting a unidirectional causality running from agricultural credit to agricultural productivity. It is therefore recommended that developing financial system and credit scheme that will give rise to improved access to credit by the participants in the agricultural sector, particularly smallholder farmers, is crucial.