The Impact of Financial Inclusion on Crop Production in Nigeria: An Econometric Case Study

This study examined the impact of financial inclusion on crop production in Nigeria, focusing on rural bank deposits, bank loans to agriculture, and the Agricultural Credit Guarantee Scheme Fund (ACGSF). The main objective was to determine the extent to which these financial inclusion indicators influence crop production’s contribution to GDP. The study employed an ex-post facto research design and utilized secondary data from the Central Bank of Nigeria (CBN) Statistical Bulletin. The Autoregressive Distributed Lag (ARDL) model was applied to analyse the long-run and short-run relationships between financial inclusion and crop production. The Bounds test for cointegration confirmed the existence of a long-run equilibrium relationship among the variables. Unit root tests revealed that while ACGSF was stationary at level (I(0)), crop production, rural bank deposits, and bank loans to agriculture were stationary at first difference (I(1)), justifying the ARDL approach. Findings showed that rural bank deposits had a positive but insignificant impact on crop production, indicating that savings mobilization alone did not translate into agricultural investment. Conversely, bank loans to agriculture had a positive and significant impact, suggesting that credit accessibility plays a crucial role in enhancing agricultural productivity. Similarly, the Agricultural Credit Guarantee Scheme Fund (ACGSF) significantly influenced crop production, implying that risk-sharing mechanisms encouraged banks to lend to farmers. The error correction term (-0.2933) confirmed a moderate speed of adjustment towards long-run equilibrium. Based on these findings, the study recommended that the Central Bank of Nigeria (CBN) and Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) strengthen financial literacy programs to improve the productive use of rural bank deposits. The Bank of Agriculture (BOA) should introduce lower interest rates and flexible repayment structures to enhance loan accessibility. Additionally, the Federal Ministry of Agriculture and Rural Development (FMARD) and CBN should expand credit guarantee coverage to further mitigate lending risks. Strengthening these financial mechanisms would ensure sustained crop production growth and economic development in Nigeria.